Question 2 Mr Madikwe, a millionaire, assisted his cousin by lending him R 2 000 000. Mr Madikwe requested his cousin to provide security by leaving his BMW 320I at his house until he (the cousin) paid back the money he had borrowed. Name and explain the type of security provided by Mr Madikwe's cousin and the consequences thereof. In South African law

Question

Question 2  Mr Madikwe, a millionaire, assisted his cousin by lending him R 2 000 000. Mr Madikwe requested his cousin to provide security by leaving his BMW 320I at his house until he (the cousin) paid back the money he had borrowed.  Name and explain the type of security provided by Mr Madikwe's cousin and the consequences thereof. In South African law

GPT 3.5 · Answer

The type of security provided by Mr Madikwe's cousin is called a Pledge. A pledge is a type of security where the borrower (cousin) gives possession of an asset (BMW 320I) to the lender (Mr Madikwe) as collateral for a debt (the loan). In this case, by leaving his BMW with Mr Madikwe, the cousin is pledging the car as security for the loan of R 2,000,000.

The consequences of this pledge are that if the cousin fails to repay the loan within the agreed upon time period, Mr Madikwe has the right to sell the BMW in order to recover the amount owed to him. The sale of the pledged asset (BMW) would be conducted through a legal process and the proceeds from the sale would be used to settle the debt. If there is any surplus after settling the debt, it will be returned to the cousin. However, if the sale of the BMW does not cover the full amount of the debt, Mr Madikwe may take legal action to recover the remaining balance.