A settlement agreement is not governed by the National Credit Act if the underlying dispute is not

The Supreme Court of Appeal found that if the underlying cause of a settlement does not fall within the parameters of the National Credit Act (NCA), then the settlement agreement cannot logically be converted to a credit agreement under the NCA. The underlying cause (in this case the rental agreement) is of vital significance because the compromise (settlement) remains linked to the underlying cause. The express references in the settlement agreement or acknowledgement of debt are significant in linking it to that cause. Where the underlying cause of the settlement agreement does not constitute a credit agreement as envisaged by the NCA, the agreement does not fall within the ambit of the NCA. A purposive interpretation and not a literal interpretation of section 8(4)(f) of the NCA is required. The NCA was not aimed at these settlement agreements but rather at the advancement of money or granting of credit. If the NCA is applied to such settlement agreements it will have a…

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