Acknowledgement of Debt (AOD)
What is an AOD?
An Acknowledgement of Debt is commonly referred to as an “AOD” and is an unequivocal admission of liability by a person (the “Debtor”) that he or she owes another person (the “Creditor”) money.
When do I need this?
The reason one would use an AOD is best illustrated by way of example - Party A (the “Creditor”) provides certain services to Party B (the “Debtor”). The payment terms are 30 days. Due to covid 19 the Debtor’s business is struggling and the Debtor fails to make payment to the Creditor within the time frame provided in the payment terms. The Debtor still wants to pay the Creditor but does not have the funds available at this stage. The Creditor wants to help the Debtor. An AOD can be entered into by and between the Creditor and the Debtor in terms of which they agree to repay the debt over a couple of months. This document can benefit the Creditor in litigation proceedings and can be used as a tool to continue a business relationship.
Do I need a legal expert to assist?
When someone owes you money and you are willing to enter into an AOD, you want to get some kind of security that the Debtor will this time make payment. There are various types of security that can be considered, for example, a surety from a third party or a notarial bond registered over the movable property of the debtor. We recommend that you speak to one of our Contract Experts to ensure that your security is watertight.