Nature of a Securities Interest Case Law Overview
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Questions and Answers

What is essential for a party to have an enrichment lien?

  • Loss of property possession due to fraud
  • Agreement to relinquish possession
  • Voluntary relinquishment of possession
  • Possession of the property (correct)

    • Under what condition can a lien be revived after possession is relinquished?

  • If sufficient security is provided by the owner
  • If the lienholder is induced to part with the property by fraud (correct)
  • If the original owner consents to the revival
  • If the lienholder voluntarily relinquishes possession

    • Which of the following statements about the possession of the property is correct regarding a lien?

  • Possession must be retained at all times to maintain a lien. (correct)
  • A party can have a lien if they relinquished possession and incurred expenses.
  • A lien exists even after the voluntary giving up of possession.
  • Possession is not a requirement if the relevant expenditure was incurred.

    • What happens to goods belonging to a third party if the lessor is aware of their ownership?

    <p>They are not subject to the hypothec anymore.</p> Signup and view all the answers

    What may a court order regarding the holder of a lien?

    <p>To surrender possession in exchange for adequate security.</p> Signup and view all the answers

    What happens to a security interest if the obligation it secures has been invalidated but there is still outstanding indebtedness?

    <p>The security interest remains valid and enforceable to the extent of the indebtedness.</p> Signup and view all the answers

    In which case was it established that a co-owner can mortgage their share of a property without the other co-owner's consent?

    <p>Bonheur 76 General Trading v Caribbean Estates</p> Signup and view all the answers

    What type of pledge allows the pledgee to sell the pledged property privately?

    <p>An empowered pledge</p> Signup and view all the answers

    What right does a notarial bondholder acquire over the property under the bond?

    <p>A real right as if the property were pledged</p> Signup and view all the answers

    What is indicated by a special notarial bond over movable goods?

    <p>Possession or control of the goods is unnecessary.</p> Signup and view all the answers

    What happens to a cedent's reversionary interest if their estate goes sequestrated?

    <p>It vests in the insolvent estate.</p> Signup and view all the answers

    In the context of suretyship, what theory could hold a party liable even if they did not fully understand the effect of their signature?

    <p>Reliance theory</p> Signup and view all the answers

    What is the status of a general notarial bond in terms of the owner's rights over the assets?

    <p>Owner retains the right to deal with the assets.</p> Signup and view all the answers

    In which situation is the benefit of excussion applicable?

    <p>When the principal debtor has defaulted</p> Signup and view all the answers

    What does a co-surety need to do to recover contributions from other co-sureties?

    <p>Discharge the principal debt</p> Signup and view all the answers

    Under what condition might a surety obtain performance from the principal debtor?

    <p>If performance is compelling under the law</p> Signup and view all the answers

    What happens to a surety's obligation if the principal debt is discharged?

    <p>It is extinguished unless stated otherwise</p> Signup and view all the answers

    What right does a surety under a continuing guarantee have?

    <p>To terminate liability by notice</p> Signup and view all the answers

    When is a surety released from liability?

    <p>When the creditor breaches a legal obligation</p> Signup and view all the answers

    What does an increase in the principal debtor's indebtedness imply for the surety?

    <p>It does not release the surety if within agreement terms</p> Signup and view all the answers

    What is the implication of a co-surety discharging only part of a debt?

    <p>They cannot recover from any co-sureties</p> Signup and view all the answers

    What happens if a party signs a suretyship without understanding the document but not due to a fair or reasonable mistake?

    <p>They may be held liable under reliance theory.</p> Signup and view all the answers

    In a deed of suretyship involving multiple sureties, how may the parties intend the sureties to be organized?

    <p>They may be treated as joint or individual sureties.</p> Signup and view all the answers

    Which of the following statements regarding suretyships is true?

    <p>A person cannot stand surety for their own debt.</p> Signup and view all the answers

    What effect do explicit provisions have in a deed of suretyship compared to implied provisions?

    <p>Explicit provisions take precedence over implied provisions.</p> Signup and view all the answers

    Can a surety undertake liability for more than the principal debt?

    <p>No, they cannot bind themselves for more than the principal debt.</p> Signup and view all the answers

    Which statement about the surety’s rights is accurate?

    <p>A surety may only raise defenses that directly relate to the principal debtor's obligations.</p> Signup and view all the answers

    In case a principal debtor is ceded, what happens to the surety’s liability?

    <p>Liability is transferred to the cessionary, limited to the principal debt.</p> Signup and view all the answers

    What does not constitute a contract of suretyship?

    <p>A promissor agreeing to perform the same obligation as the principal debt.</p> Signup and view all the answers

    Study Notes

    Nature of a Securities Interest

    • Security covering indebtedness beyond invalid or terminated obligations remains valid and enforceable.
    • The principal obligation exists independently of the extinction of the security interest.

    Mortgage Bond

    • Co-owners can mortgage their undivided share of immovable property without consent from other co-owners.

    Pledge of Movables

    • A pledgee may sell pledged property privately if authorized by the agreement.

    Notarial Bond over Movables

    • Notarial bondholders acquire real rights over hypothecated property as if it were pledged.
    • Holders of special notarial bonds over movable goods have possession-less pledges.

    Public Disclosure

    • Information at the deeds office should allow the public to verify whether assets of a debtor are pledged.

    General Notarial Bond

    • Holders of general notarial bonds do not have a real right; owners can still manage or dispose of the assets.

    Cession in Securitatem Debiti

    • A cedent can transfer a reversionary interest in ceded rights to a third party.
    • Upon satisfying secured debt, the secured interest automatically reverts to the cedent.
    • The case precedent applies if the secured debt is non-existent from the outset.

    Suretyship

    • A signer of a suretyship without understanding its implications may be held liable under reliance theory.
    • A signer will not be liable if the misunderstanding resulted from an iustus error (fair mistake).
    • Multiple sureties in one deed may imply joint or individual suretyships based on intent.
    • Explicit provisions in a suretyship deed take precedence over implied provisions.
    • A debt must be owed by someone other than the principal debtor for suretyship to be valid.
    • Partnerships can bind partners as sureties despite not being separate legal persons.
    • Sureties cannot undertake liability exceeding the principal debt but can be liable for less.
    • Sureties may raise defenses against creditors that principal debtors would have.

    Excursion Rights

    • If it's impossible for creditors to excuss the principal debtor, they may be excused from doing so.
    • Implied agreements may exist for sureties to cover costs associated with a full excursion.
    • Certain instances allow a surety to compel performance by the principal debtor.

    Co-Suretyship Contributions

    • Co-sureties discharging the principal debt can recover contributions from solvent co-sureties.
    • A co-surety must discharge the entire debt to recover a contribution.

    Termination of Suretyship

    • Suretyship obligations can be discharged like other obligations generally.
    • Sureties under continuing guarantees can terminate their liability through notice.
    • Termination of the principal debt extinguishes suretyship obligations unless stated otherwise.

    Creditor Duties

    • Sureties are released if creditors breach obligations and the surety suffers prejudice.
    • An increase in the principal debtor’s amount does not release the surety if consistent with the agreement.

    Lien

    • A party loses the right to an enrichment lien if possession of the property is relinquished.
    • Possession by a lien claimant is essential for the existence of any lien.
    • A lien is extinguished if the possessor voluntarily gives up the property.

    Revocation of Lien

    • Lienholders may revive a lien by regaining possession if induced to part with property due to fraud.

    Security Arrangements

    • Courts may mandate lienholders to surrender possession of property to owners in exchange for adequate security.

    Tacit Hypothec

    • Goods belonging to third parties can be subjected to hypothecs if their conduct implies consent.
    • Awareness of third-party ownership negates inclusion of those goods in the hypothec by the lessor.

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    Merc - Topic 3 Case Laws PDF

    Description

    Explore the essential principles of securities interests through various South African case law including Panamo Properties v Land & Agricultural Development Bank (2015) and Tattersall v Nedcor Bank (1995). Understand how these cases interpret the validity and enforceability of security interests in relation to principal obligations. This quiz aims to deepen your comprehension of the legal implications in property and finance contexts.

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