What is an Acknowledgement of Debt?
An acknowledgement of debt (AOD) is when a debtor acknowledges his/her debt obligations. The debtor admits that he/she owes a sum of money to the creditor and undertakes to repay the amount on terms agreed upon between the parties involved. An AOD would be of great value should the debtor default and a summons is required.
An AOD is like signing surety for an account.
When an AOD is Required:
- To give an ideal example; if a company has an account with a service provider, but the company is financially unstable and unable to fulfil their payment, an AOD can be signed and liability shifts from the company to an individual. This is like surety, although an AOD cannot be forced.
- If you don’t trust the debtor or there is a history of payments in arrears.
- If the debtor fails to adhere to an agreed amount or date of payment. The AOD will clearly state when, where, how and the amount owing, as well as the appropriate interest rate. This is to ensure that the debtor is fully aware of all terms and conditions, avoiding any confusion.
- An AOD can be signed by more than one individual.
What does an AOD look like?
An AOD will include:
- Debtor’s name and ID number: I, the undersigned, Name Surname- ID:123456789 …
- Creditor’s name and details, as well as the amount owing.
- An agreement that clearly states when, where and how the debtor will be paying for the amount outstanding, as well as an appropriate interest rate.
- The banking details and a reference number will be provided in the document.
- The debtor then needs to fill in their latest address in case a summons needs to be issued in the future.
- Terms and consequences are noted and explained.
- The debtor will be made aware of Section 109 (1) of the Magistrate’s Court Act No 32 of 1944 which provides that the debtor must notify VERMEULEN ATTORNEYS of any change of the work or home address within fourteen (14) days of such change, failing which the debtor can be liable for imprisonment for thirty (30) days, or periodic imprisonment of 720 hours.
- This agreement supersedes any other arrangements that may have been entered into or concluded between the parties in connection with the capital contemplated in this agreement.
- The debtor then signs that they agree to everything laid out in the letter.
BY MY SIGNATURE HERETO I ACKNOWLEDGE HAVING READ AND BEING FULLY ACQUAINTED WITH ALL THE MATERIAL PROVISIONS OF THIS AGREEMENT AND THAT THE MEANING AND CONSEQUENCES THEREOF HAVE BEEN EXPLAINED TO ME.
IMPORTANT: Never sign for an AOD if you don’t feel absolutely certain that it is fair for you to take liability for the account in question.