Business Law BER220: Security Law, Insolvency Law, and Individual Labour Law

Comprehensive vocabulary flashcards covering South African credit security law (suretyship, express and tacit real security), the law of insolvency (sequestration, administration, and ranking of creditors), and individual labour law.

Personal Security

A form of credit security in which a third party binds themselves contractually to perform an obligation if the principal debtor fails to do so, establishing a personal right against that third party.

Real Security

A limited real right that a creditor holds over a specific asset of another to secure the performance of an obligation, affording the creditor a preferent claim to its proceeds upon execution or insolvency.

Suretyship

An accessory contract in which a third party (the surety) binds themselves to the creditor for the proper performance of the whole or part of the debt of another (the principal debtor).

Creditor

A person or institution to whom money or performance is owed, or who has the legal right to claim the performance of an obligation from a debtor.

Surety and Co-Principal Debtor

A surety who has waived the benefits of excussion and division by implication, becoming liable jointly and severally with the principal debtor as soon as the secured debt falls due.

Electronic Suretyship Formalities

Under section $13$ of the Electronic Communications and Transactions Act (ECTA), an electronic suretyship contract is valid only if signed using an advanced electronic signature rather than an ordinary electronic signature.

Beneficium Excussionis (Benefit of Excussion)

A defence permitting a surety to insist that the creditor first claim from and execute against the principal debtor before claiming from the surety.

Beneficium Divisionis (Benefit of Division)

An exception to the general rule of joint and several liability ($in\ solidum$) allowing a co-surety sued for the full amount to demand that the debt be divided pro rata among all solvent co-sureties.

Beneficium Cedendarum Actionum (Benefit of Cession of Actions)

A right entitling a surety who has paid the debt to demand that the creditor cede all existing securities and legal claims held against the principal debtor and co-sureties before or upon payment.

Right of Recourse Against Co-Sureties

The legal right of a surety who pays the full debt (or more than their proportional share) to recover a pro rata contribution from each co-surety, even without a direct contract between them.

Act of Publicity

The external legal act—such as registration of a bond in the Deeds Registry or the physical delivery of an asset—required to convert a personal security agreement into an enforceable limited real right.

Mortgage Bond

A deed registered in the Deeds Office under the Deeds Registries Act that hypothecates immovable property to secure an existing or future monetary obligation.

Kustingsbrief

A special mortgage bond registered by a buyer simultaneously with the transfer of immovable property into their name to secure the unpaid balance of the purchase price.

Covering Bond

A mortgage bond registered to secure fluctuating existing and future debts, where the security runs from the date of registration provided a maximum liability amount is expressly stated.

Pledge

A form of express real security established when a pledgor delivers possession of a corporeal movable asset to a pledgee to hold until the secured obligation is satisfied.

Constitutum Possessorium

A mode of delivery where the transferor retains physical possession of the asset but agrees to hold it on behalf of the transferee; generally impermissible for creating a valid pledge due to lack of publicity.

Special Notarial Bond

A bond hypothecating specifically described corporeal movables registered under the Security by Means of Movable Property Act $57$ of $1993$, creating a deemed pledge without requiring physical delivery of the asset.

General Notarial Bond

A registered notarial bond covering all movable assets of a debtor that creates no real right unless perfected by attachment or voluntary transfer of possession before insolvency.

Security Cession

The transfer of an incorporeal personal right (such as book debts, shares, or an insurance policy) by a cedent to a cessionary to secure an underlying monetary debt.

Pactum Commissorium

An agreement that a secured creditor may automatically retain ownership of the encumbered property if the debtor defaults, which is strictly void and unenforceable under South African law.

Pactum Antichresis

A lawful agreement enabling a creditor to use the secured property and collect its fruits in lieu of interest or in reduction of the principal debt.

Parate Executie

An agreement authorizing a creditor to realize and sell secured property without a court order; invalid for mortgaged immovables but generally permissible for movables subject to judicial review.

Landlord's Tacit Hypothec

A real security right that arises automatically by operation of law over movables on leased premises when rent falls into arrears, securing the outstanding rent.

Rent Interdict

A statutory remedy under sections $31$ and $32$ of the Magistrates' Courts Act that prohibits the removal of movables from leased premises to prevent the landlord's tacit hypothec from lapsing.

Instalment-Agreement Hypothec

A tacit security right under section $84(1)$ of the Insolvency Act whereby a credit seller loses reserved ownership upon the buyer's sequestration but gains a preferent hypothec over the goods.

Debtor-and-Creditor Lien

A contractual right of retention entitling a creditor to hold possession of a debtor's property until compensated for work or services performed on that property, limited to the agreed contract price.

Salvage Lien

An enrichment lien allowing a retentor to keep property until reimbursed for necessary expenses incurred to preserve or maintain the property.

Improvement Lien

An enrichment lien entitling a possessor to retain property until reimbursed for useful expenses, limited to the actual increase in the market value of the property.

Judicial Pledge

A limited real security right that arises over a debtor's movables once they are attached by the sheriff under a warrant of execution; it gives no preference if the debtor is subsequently sequestrated.

Law of Insolvency

The totality of legal rules regulating situations where a debtor cannot pay their debts or where their total liabilities exceed their total assets, resulting in the collective realization of their estate.

Concursus Creditorum

The fundamental legal principle triggered upon the granting of a sequestration order that freezes the debtor's estate, terminates individual execution, and treats all creditors as a collective body.

Liquidated Claim

A monetary claim for an amount that is fixed, determined, and certain by virtue of an agreement, a judgment of the court, or an established calculation.

Nulla Bona Return

A sheriff's official return stating that a debtor failed to point out sufficient disposable property to satisfy a judgment debt upon demand and that no sufficient property was found.

Voluntary Surrender

A High Court procedure governed by sections $3$ to $6$ of the Insolvency Act where a debtor voluntarily surrenders their estate upon proving actual insolvency, adequate free residue, and advantage to creditors.

Compulsory Sequestration

A court application by a creditor holding a liquidated claim of at least $\text{R}100$ to sequestrate a debtor's estate, requiring proof of an act of insolvency or actual insolvency, and reason to believe it advantages creditors.

Rule Nisi

An interim court order issued alongside a provisional sequestration order directing the debtor to appear on a specified return day to show cause why their estate should not be finally sequestrated.

Section 21 Vesting

The automatic statutory vesting of the separate estate of an out-of-community solvent spouse in the Master and trustee upon the sequestration of the insolvent spouse, pending an application for release.

Disposition Not for Value

A disposition of property without reciprocal benefit made under section $26$ of the Insolvency Act, liable to be set aside if the debtor was insolvent immediately after making it.

Voidable Preference

A disposition made within $6$ months before sequestration under section $29$ of the Insolvency Act that prefers one creditor above others, unless made in the ordinary course of business and in good faith.

Undue Preference

A disposition under section $30$ of the Insolvency Act made by a debtor when their liabilities exceeded their assets, executed with the intention of preferring a specific creditor over others.

Free Residue

The portion of an insolvent estate remaining after all encumbered assets have been realized and applied to pay the claims of secured creditors, used to settle statutory preferent and concurrent claims.

Statutory Preferent Creditor

A creditor who holds no real security over a specific asset but possesses a statutory priority under sections $96$ to $102$ of the Insolvency Act to receive payment from the free residue before concurrent creditors.

Concurrent Creditor

An unsecured creditor who ranks behind secured and statutory preferent creditors and receives a pro rata dividend from any remaining free residue of an insolvent estate.

Contribution Under Section 106

The statutory obligation imposed on creditors who proved claims to pay toward administration costs when the free residue is insufficient to satisfy the expenses of sequestration.

Dominant Impression Test

The primary common-law test applied by South African courts to determine employment status by evaluating the totality of the relationship and economic reality rather than contractual labels.

Section 200A Presumption

A statutory presumption in the Labour Relations Act establishing that a worker earning at or below $\text{R}269\,600.90$ per annum is an employee if any one of seven listed factors of control or dependency is proved.

Temporary Employment Service (TES)

A triangular employment arrangement under section $198$ of the LRA where a broker employs a worker to provide services to a client; the client is deemed the sole employer if the work exceeds $3$ months without justification.

Vicarious Liability

The legal doctrine holding an employer strictly liable for the unlawful or wrongful acts committed by an employee while acting within the course and scope of their employment.

Restraint of Trade

A contractual agreement barring an employee from competing or practicing their profession within a specified area and period after termination, enforceable unless shown to be contrary to public policy.