Mr A (debtor) and Mr B (creditor) enter into a credit agreement
but Mr A defaults on his payments in terms of the agreement and he
receives a letter of demand for immediate payment of the full
amount outstanding. Mr A cannot afford to pay the full amount and
he contacts the creditor in the hope of reaching a settlement. Mr A
and Mr B negotiate a monthly payment plan and the creditor agrees
to delay further legal action. In return, he requires that Mr A
sign a document entitled "Acknowledgement of Debt". Mr A
gladly does so – he has just been given room to breathe,
hasn't he? But what is it that he has signed?
An acknowledgement of debt, commonly referred to as an
"AOD", is a document which contains an unequivocal
admission of liability by the debtor. In it the debtor acknowledges
that he or she owes a particular sum of money to the creditor and
undertakes to repay what is owing.
An AOD requires no more than this in order for it to be legally
valid and binding on the signatory. All other terms that may be
inserted in the document are incidental but generally they will be
designed to protect the interests of the creditor. For instance the
AOD will usually provide that if the debtor fails to pay any one
installments of the debt, the whole amount will immediately become
Thus an AOD is a tool commonly used by creditors when debtors
owe them money because, chief among its strengths, is that it is a
"liquid document", one which proves a debt without any
Accordingly an AOD should enable the creditor to obtain a speedy
judgment against the debtor without having to endure a lengthy
trial in which all the facts relating to the original credit
agreement may have to be proved by the creditor. Judgment can
simply be taken for the full amount reflected in the AOD because
the court is faced with a document in which the debtor has
expressly acknowledged that he owes the money.
Armed with the judgment the creditor may then issue a writ of
execution against the debtor's property to the value of the
judgment debt and may have the debtor's property attached to
satisfy it. All of which arises directly out of the AOD signed by
Although a debtor may not always be in a position to refuse to
sign an AOD, he should always understand the implications of doing
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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