How many times has it happened to you that a customer or client, especially when the customer or client is a juristic person or sole proprietor, has fallen in arrears with an account? Yes, sometimes a mere phone call or an e-mail does the job and the account, or part thereof, is paid, but more often these days it happens that there is just no answer when one phones or reply when one e-mails. Furthermore, when one then visits their premises to take the matter up in person one finds the premises empty and locked. The debtor merely closed shop moved on and left without settling your account. He, she or it simply disappeared..
In general, most queries and applications received from clients pertain to the collection of monies owing and payable to such clients and it often happens that the facts referred to above are applicable to the query or application. Sometimes the client can be assisted because a few phone calls can result in the location of the debtor in order to serve court documents, but unfortunately it often happens that the debtor cannot be found and that the monies cannot be collected. If the debtor is a close corporation or a company one can still serve the necessary court documents at their registered address which can be obtained by doing a company search, but when the debtor is an individual or a sole proprietor this advantage does not exist and, as Murphy would have it, most of the culprits belong to the latter two groups. The inability to collect outstanding debts due to runaway debtors is furthermore exacerbated by the risk that one’s claim may prescribe if the debtor is not found, and summons not served, within 3 (THREE) years after the debt has become owing and payable. It is unfortunately not possible to serve summons if the whereabouts of a debtor is not known.
Although one cannot prevent debtors from evading payments and disappearing, one can make it easier to serve summons, prevent a claim for an outstanding debt from prescribing and sometimes even to find a debtor again. The aforementioned can be achieved by including a clause in one’s contract with clients or customers which provide for a domicilium citandi et executandi (“domicilium address”), or simply put, an address where all notices and legal documents must be served. In this way one can still serve summons on a fleeing debtor and even obtain judgment against the debtor when the debtor cannot be located. When one includes a clause containing such an address all legal notices, including a summons, must be served at that address and one may, after serving the summons at that address, obtain default judgment against the debtor if the debtor does not defend the claim. The further effect hereof is that one then has a period of 30 (THIRTY) years to enforce the judgment and collect the outstanding monies. The cherry on the cake, however, is that most financial institutions will not grant any credit to an individual or juristic person if such individual or juristic person has a judgment against his, her or its name. It therefore often happens that such debtor has to crawl back to a creditor to, either pay the outstanding monies or, bring a court application for a rescission of the judgement which, unless the debtor has a valid defence, will only be granted if the debtor either paid the full outstanding amount or if the creditor consented thereto.
It is therefore advisable that, if your business provides for the delivery of goods or services to clients or customers on an account, you approach your attorney to assist you in incorporating a clause containing a domicilium address into your contract with your clients or customers.
Andries Stander, attorney at Barnard Incorporated.
Barnard Incorporated is a firm of attorneys situated in Centurion, Pretoria.