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Not a guarantee
31/10/ 2006 The Star ARTICLES OF LAW by BHAG SINGH
IT IS always advisable to document a transaction. This is so because what
has been agreed to is stated in clear and unambiguous terms. Because of
this, considerable peace of mind is afforded if the transaction is reflected
in an exchange of letters and, better still, in a written formal document.
On the other hand, it does not necessarily mean that because the transaction
is evidenced by and reflected in a written document it is a guarantee for
success for whatever is written in it or for any of the parties involved or
whoever holds it.
I am touching on this subject because ever so often a party that has entered
into a transaction and a dispute develops gets worried because the original
stamped copy of the agreement is not available. It may have been lost or
misplaced. Only a photostat copy is available. Does this mean that a party
cannot then enforce its rights?
Just because the original copy of the contract is no longer available it
does not mean that the person who wishes to enforce his rights will not be
able to do so just because the original stamped copy of the contract is not
available.
Where for example a debt is owed, whether the amount is recoverable will
depend on the nature of the debt, how it was created and whether it is still
due. The written document whether in the form of a formal contract or an
exchange of letters is merely evidence of the creation of the debt.
Such a document, apart from being proof of the debt, may also contain
provisions as to how and when the debt is to be paid and what consequences
are to follow in case there is a default and what approach is to be taken in
case of different types of default. For example, if what is involved is a
loan, all the rights of the person who gave the loan will not always be lost
just because the original stamped copy of the loan agreement were
unavailable.
This is because the essence of the matter will not be whether the stamped
copy of the loan agreement is available but whether the loan was given and
whether it had been repaid in full. If the loan or part of what remains
unpaid is in question, the issue would be whether the amount is recoverable.
Whether there are any legal grounds on which the borrower is no longer
liable to pay or repay what is still owed is a different matter. But even if
there is a stamped copy of the original agreement, it does not necessarily
mean that the lender will be entitled to recover the amount stated without
having to look at anything else. This is because the borrower may be able to
show that despite the fact that the loan agreement was duly signed and
stamped, the loan amount was never paid out or released. In other cases, the
borrower may be able to show that the amount borrowed had been repaid.
Wherein then does the significance of the agreement lie? The formal
agreement that is entered into is also relevant as evidence of the other
terms and conditions that have been agreed to. Based on the terms and
conditions, it will be possible to determine what other obligations in terms
of performance were undertaken by the lender and the borrower and whether
these have been breached, and if so, by whom.
Where the original stamped copy of the agreement is not available a
photostat copy or oral evidence can be relied upon show what was agreed to.
If the court is satisfied with the oral testimony and it stands
uncontradicted with other testimony and contemporary documents and other
happenings, the oral testimony based on the unavailable documents will be
just as good, unless there is otherwise contradictory material.
The fact that there is a written document duly executed and stamped is no
certain guarantee of the person making the claim being successful. More
important than the execution and stamping is what is written on the
document. It is the observance of and compliance with these terms that could
make the difference and determine the outcome.
Where the lender has committed himself to lend a certain amount for the
borrower to perform a particular job a decision by the lender to stop making
advances before the job is completed may very well be a breach by the lender
for which the lender may risk being exposed to damages which could even
exceed the amount advanced.
On the other hand, the lender may have reserved to itself a right to stop
making advances and to seek repayment of the amount advanced at any time. If
the borrower has knowingly agreed to this, then the borrower will be so
bound, unfair and unjust as it may be, and the possible disastrous
consequences for the borrower notwithstanding
Notwithstanding a document in writing duly executed and properly stamped,
there may be a release and discharge by one party or the other. If this has
happened, there will be of course no basis to enforce the obligation under
the agreement though it may exist as a term of the contract.
On other occasions the agreement, though proper and complying generally with
legal requirements, creates a situation where the object or consideration of
the agreement may be illegal or contrary to public policy. Such an agreement
would also not be enforceable and any rights otherwise existing on paper
would certainly be lost.
And then it could be that the agreement is in order in all respects. There
may be no grounds to challenge it as being void or voidable or in any other
way being unenforceable. In fact, one of the parties may have fulfilled its
obligation and all that may be due may be the payment that has to be made.
However, it may happen that the party who is entitled to the payment may not
have acted promptly to seek the payment which may have long remained
outstanding. It could very well be that, through the passage of time, the
claim may have become time barred on account of limitations and the payment
therefore no longer be recoverable.
There could also be some specific situations where the transaction is one
which the law requires to be in writing. One such example is a hire purchase
transaction governed by the Hire Purchase Act 1967. In this case Section 4
(2)(a) specifically provides that every hire purchase agreement shall be in
writing. Section 6(1) goes on to say specifically that the Hire Purchase
Agreement that is not in writing shall not be enforceable by the owner.
If such is the case and there is no agreement in writing, then the rights of
the parties would be lost. Hence, the existence of an agreement in writing,
which is duly stamped, after being having executed, is not always and
necessarily the one and only factor which will govern the ability to enforce
one’s rights. |
