Defaulting On Loan Agreement Instalments: When Does A Creditor's Claim Prescribe?

Acceleration clauses are commonly found in loan agreements that require debtors to make repayment in instalments. A standard acceleration clause provides that if a debtor fails to pay an instalment, the creditor may elect to terminate the loan agreement and demand payment of the full amount owing under the agreement.

The question of prescription in the context of acceleration clauses arose recently in the Supreme Court of Appeal ("SCA") in the case of Standard Bank of South Africa Ltd v Miracle Mile Investments 67 (Pty) Ltd and Another [2016] 3 All SA 487 (SCA). In particular, the SCA was faced with this question: does prescription on the full amount advanced commence running when the creditor elects to enforce the acceleration clause or when the debtor defaults on payment of an instalment?