THE VALUE OF AN ACKNOWLEDGEMENT OF DEBT
An AOD is a legal document in which the debtor acknowledges:
- They owe the practice a specified amount of money
- How the debtor will pay the outstanding amount in instalments
- The legal process that will follow in case of non-payment.
An AOD alleviates the practice’s burden of proof in court to prove the basis and amount of the claim.
WHEN TO SIGN AN ACKNOWLEDGEMENT OF DEBT?
An AOD is often required when a medical debtor indicates that they cannot settle an outstanding account with one payment. However, when an expensive and sometimes ongoing medical procedure like orthodontics is provided, it is best practice to let the private or medical aid patient (since funds can run out) sign an AOD.
REQUIREMENTS IN SOUTH AFRICAN LAW
An AOD must be in writing and signed by the debtor, the creditor and two witnesses. Each page should at least be initialled, with the last page containing complete signatures. Since many people don’t think to initial all pages, creating an AOD as a one-page document is preferred. The amount must be specified; otherwise, the AOD will be invalid. Letting people sign open-ended documents that have not been fully completed is no use. Terms and conditions should be attached to ensure the document's proper legal implementation and enforcement.
TYPICAL CLAUSES IN AN ACKNOWLEDGEMENT OF DEBT
The AOD does not need to be a thick legal agreement. The following provisions are typically used in an AOD:
- A complete description of the debtor and creditor. Make sure the address of the debtor is not a postal address since such addresses cannot accept legal service
- A description of the medical procedure(s) and, if applicable, the stock that was/will be used by the practitioner(s). Invoices or estimates can be attached to the AOD to provide this information. Remember to have those attachments also initialled
- The specific amount owed is preferably written in letters and numbers to avoid confusion
- The interest rate if any
- Repayment clauses like the following:
- The debtor will pay the outstanding amount in instalments until the total amount is settled
- The full balance would become due and payable if the debtor fails to pay the instalments on the agreed time
- The practice can then demand immediate payment of the full outstanding amount together with interest and legal costs on an attorney and own client scale
- The debtor gives consent to judgement in favour of the practice for the outstanding amount, including legal costs
- The practice will proceed with a request for judgement should the debtor fail to pay the outstanding account after the issue of the final demand.
- Additional general terms and conditions like the following:
- The AOD represents the entire agreement between the parties and that only written amendments signed by the parties will change the terms
- The debtor chooses the address they provide as their domicilium citandi et executandi (the address where legal notices can be served)
- The Debtor abandons the benefits of legal exception of no value received, revision of account, mistakes in calculating the outstanding amount, and no reason for the obligation to repay the outstanding amount
- The Debtor agrees that they are fully aware of and understand all the terms and conditions in the AOD at its commencement.
The AOD has enormous value and can easily be a one-page document. It will significantly assist the practice in limiting debts written off due to poor debt management. Ensure personnel are properly trained to get all the correct information, sign the AOD, and keep it safe for future reference.