What prescription means
Under the Prescription Act of 1969, a debt is extinguished if the creditor does not enforce it within a set period. Once a debt has prescribed, the debtor can raise prescription as a complete defence, and the claim fails however strong it was on the merits.
In this context "debt" is a wide idea. It covers unpaid invoices and loans, but also claims for damages and most other obligations that one party owes another.
The periods
Thirty years for judgment debts, debts secured by a mortgage bond and taxation debts. Fifteen years for certain debts owed to the State arising from loans or the sale or lease of land. Six years for debts arising from a bill of exchange, another negotiable instrument or a notarial contract. Three years for every other debt.
The three-year period is the one that catches most businesses, because it applies to ordinary commercial claims such as unpaid accounts and breach of contract.
When the clock starts
Prescription starts running as soon as the debt is due. A debt is not treated as due until the creditor knows who the debtor is and the facts from which the debt arises, or could have learned them by taking reasonable care.
That second part matters. Not knowing about a claim only helps if you could not reasonably have found out.
What stops or delays it
Prescription is interrupted when the debtor acknowledges the debt, expressly or by conduct such as a part payment. It is also interrupted by serving a summons or other court process claiming payment. After an acknowledgement, the full period starts running again.
In some situations prescription is delayed rather than interrupted, for example while the creditor is a minor, or while the debtor is outside South Africa. The period is then extended so that it cannot end until a year after the impediment falls away.
Claims against the State
Claims against organs of state have an additional requirement. Written notice of the claim must usually be given within six months of the debt becoming due, before proceedings can be instituted. Missing that notice period can be fatal to an otherwise valid claim.
What to do
If money is owed to you and more than a couple of years have passed, do not wait for the debtor to come round. Get a letter of demand out, and ask whether summons should be issued to interrupt prescription. The cost of acting early is small compared with losing the claim altogether.
