What it means to waive defences in loan agreements

Trust Maanda
Legal Position
USUALLY when someone borrows money from a financial institution or signs an acknowledgment of debt, there are some clauses that are inserted in the loan agreements or acknowledgment of debt that make it easy for the lender to get its money repaid.
In terms of the law, there are some legal defences that can be raised by the borrower.
In order to make it easy for the lender to recover its money, there is usually inserted in the agreement certain clauses in terms of which the borrower waives or renounces the right to benefit from certain defences.
This means that where the debtor discards the right to use those defences, known as exceptions, the lender will no longer have the duty or burden to prove certain facts.
It is the duty of the one who alleges to prove their facts, but where the debtor waives their right to raise certain defences, the burden of proof shifts from the lender to them.
Usually these defences, whose benefit is for the debtor, are written in Latin. Signer beware!
There are many defences available to a debtor, but whose benefits they can renounce. Where these are renounced, the debtor can not raise them as his defence.
One of the benefits is benefit of excussion. It is called beneficium ordinis seu excussionis et divisionis.
This is where the debtor is a surety for a principal debtor and the lender wants to take legal action against that surety. Where that benefit is not renounced, it means the creditor must first proceed against the principal debtor and exhaust its remedies against the principal debtor, before it can turn to the surety for payment.
Where this benefit is waived, the creditor is entitled to claim payment from the surety without first pursuing and exhausting its remedies against the principal debtor.
These are two defences.
One is for the lender to exhaust its remedies against the debtor before proceeding against the surety.
Secondly, the benefit of divisionis, is a defence by the debtor where they are two or more sureties.
This defence simply means that the lender must divide the amount owed between the sureties so that each pays their proportion of the claim.
Where this has been renounced, the debtor cannot claim that he or she pays only his or her share. The surety cannot raise the defence that he or she is only liable to his or her pro rata share of the debt. He or she should pay the whole debt.
Another benefit that can be renounced is beneficium de duobus vel pluribus reis debendi.
This is a legal exception that is applicable in cases where there are two or more principal debtors who are liable, but not jointly and several, which means each one is liable only for his/her share of the debt.
In that case, if the creditor claims the full amount the debtor from whom the full amount is claimed can raise the defence of this benefit, thereby deny having to pay more than his share of the debt.
Where this benefit is waived by a co-debtor or surety, the creditor is entitled to recover the full debt from such a co-debtor’s surety, without first requiring payment from the other debtor or the principal debtor.
Another exception that can be renounced is exceptio non causa debiti, which is a legal exception at the instance of a debtor, where they can argue that there is no just cause for the debt as the principal obligation does not exist.
While this exception does not preclude the debtor from denying the existence of the principal obligation, it serves to shift the burden of proof so that it is placed on the debtor to prove the absence of a cause of debt.
The other benefit that can be renounced is exceptio errore calculi. “Errore calculi” means error in calculation.
The defence entitles the debtor to raise a defence that there is an error of calculation by the lender. Where this has been renounced, a debtor cannot validly argue that the amount claimed has been incorrectly calculated but bears the onus to prove the error. He cannot insist on the lender revising the calculation of the accounts.
Another exception is exceptio non numeratae pecuniae which is a defence by a debtor that money has not been counted and paid to him.
Where this defence is renounced, the onus is on the debtor to prove that money has not been counted and paid to him. When you sign agreements, you now know that those Latin terms are not just for decoration. They are to make it easy for the lender to get their money back when you default.
Make sure you read and understand everything before you sign. If necessary, seek legal advice.
Trust Maanda is a legal practitioner and a partner at Maunga Maanda And Associates. He writes in his personal capacity. He can be contacted on +263772432646