Reference no: EM133352932

Question 1.

A man is granted a loan for his business from his bank. His father agrees to stand surety for this bank loan. The suretyship document named the father as the surety and the bank as the creditor. The father, who stays overseas, did not sign the suretyship agreement, but he verbally agrees to the terms and conditions of the suretyship. The man did not sign the surety document as his name did not appear on this document.

Discuss whether the suretyship can be deemed as valid and enforceable by referring to the formalities of suretyships in terms of the General Law Amendment Act 50 of 1956.

Question 2.

Peter, a very good baker, approached his friend John to go into business with him to provide wedding cakes. After some lengthy discussions one evening, Peter stood up and shook hands with John on the successful establishment of a partnership. John, who does not want to be disclosed as a partner and does not want to be involved in the daily operations of the business, will provide a fixed amount of start-up capital on condition that he receives a certain fixed share of the profits. Peter will be involved full-time as the baker.

1. Identify the type of partnership that was formed and substantiate your answer with information from the scenario.

2. Peter borrows funds from the bank to buy some baking equipment. The partnership falls in arrears with the payments and the bank issues a summons for the repayment of the debt. State what the liability of John, as a partner, will be towards the bank.

3. Explain John's liability towards the losses of the partnership.

4. After a while, John gets "cold feet" and wants to back out of the partnership. He tells Peter that the partnership was not valid as the partnership agreement was not in writing. State and motivate whether John is correct.