This blog was co-authored by Adriaan Lourens, a Candidate Attorney.
In a May 2025 High Court judgment, the court held that, in the absence of a contractual provision expressly requiring written termination, an oral termination of a suretyship agreement is legally valid. This judgment provides useful guidance on the distinction between the formation and cancellation of suretyship agreements, and the importance of clear contractual terms regulating termination.
The bank, as creditor, sought to recover outstanding amounts under three separate loan agreements with the borrower. A director of the borrower had signed a suretyship agreement, binding himself jointly and severally as surety and co-principal debtor for all of the borrower’s present and future indebtedness.
The borrower had defaulted on all of its repayment obligations, leading to the cancellation of all three agreements. The bank then demanded repayment of the outstanding balances.
While the borrower did not oppose the application, the surety contested liability. He argued that he had terminated the suretyship agreement orally after resigning as a director of the borrower and selling his shares in the borrower to another director.
The surety further argued that unless the suretyship agreement prescribes formalities for cancellation, termination may be effected orally. He relied on the absence of a Shifren clause (a non-variation clause requiring amendments to be in writing) in the suretyship agreement. The bank contended that a valid termination had to be in writing and that the surety’s evidence was vague and unreliable.
In its decision, the court drew a clear distinction between the creation, variation and termination of a suretyship agreement. Section 6 of the General Law Amendment Act requires a suretyship agreement to be in writing and signed by or on behalf of the surety for it to be validly concluded. However, the Act is silent on the formalities required for the cancellation or termination of such agreements, indicating that different considerations apply at the point of termination.
This case confirms that, in the absence of a clause requiring written termination, a suretyship agreement may be terminated orally. There are no statutory formalities for the cancellation of a suretyship agreement unless the agreement itself prescribes such formalities. Therefore, unless the suretyship agreement requires written notice for termination, oral termination will be valid.
This case highlights the important distinction between amending and terminating a suretyship agreement, and that statutory or contractual provisions dealing with one do not automatically apply to the other. The judgment clarifies that, although a suretyship must be in writing to be valid, its termination does not require the same formalities unless the agreement explicitly provides otherwise. Accordingly, in cases such as this one, oral termination is legally valid. Parties should be aware of the risks of not including clear written termination provisions in suretyship agreements to avoid uncertainty and potential disputes.
The full judgment can be accessed here: