According to the common law rule of mora interest, the creditor is entitled to charge interest on the outstanding debt from the date of demand until payment is made. The rate of interest is usually determined by either the agreement between the parties or by legislation. In this case, since Sarah did not pay the outstanding amount despite the demand from the attorneys, interest has been accruing on the debt.
The in duplum rule limits the amount of interest that can be charged on a debt. According to this rule, the total amount of interest charged on a debt cannot exceed the initial amount of the debt. However, this rule does not apply if there is an agreement between the parties or if there is specific legislation that allows for interest to be charged beyond the amount of the debt.
In terms of legislative guidelines, the Prescribed Rate of Interest Act sets the maximum rate of interest that can be charged on outstanding debt, unless a different rate is agreed upon between the parties. The National Credit Act also regulates interest rates charged on credit agreements and provides protection for consumers against exorbitant interest rates.
In Sarah's case, the attorneys are within their rights to claim the outstanding amount of R11 500, which includes the initial debt, interest on the debt as well as costs incurred in obtaining the default judgment. It is important for Sarah to review the terms of the agreement with XYZ Panel Beaters to confirm the interest rate charged and to ensure that it complies with both the common law rule of mora interest and legislative guidelines. She may also consider negotiating with the attorneys to attempt to reduce the amount owed and come to a settlement agreement.
Sarah damaged her car when she drove into a pillar in the parking lot of a shopping mall. XYZ Panel Beaters quoted her R10 000 to repair the car. She accepted the quotation and paid a R5000 deposit. The car was repaired and returned to Sarah, and she, despite demand for payment from attorneys for XYZ Panel Beaters, remains in default for payment of the outstanding amount. Since the outstanding amount is a liquidated amount, interest has started to accrue from the date of the letter of demand. Sarah’s failure to pay the outstanding amount has led to the attorneys instituting a claim and obtaining a default judgment against her in the district court of the Magistrate’s Court. According to the attorney’s last letter to Sarah, she now owes R11 500, which includes the judgment debt, interest on the amount as well as costs. Sarah consults with you regarding this latest letter she has received. She wants to know whether it is possible for them to claim this amount of money from her when the initial debt was only R5000.
Instruction: Advise Sarah with reference to the common law rule of mora interest and the in duplum rule and legislative guidelines such as the Prescribed Rate of Interest Act and the National Credit Act that regulate mora interest.
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