AOD – An unequivocal admission of liability
An Acknowledgment of Debt according to Blacks Law Dictionary, 8th Edition is a written document stating the recognition by a debtor of the existence of a debt commonly referred to as an “AOD”.
The said acknowledgment is an “agreement” which embodies an arrangement or understanding between or among two or more parties which purports to establish a legally binding relationship in law.
An “AOD” is primarily an admission of a debt by the creditor in certain sums, inclusive of interest, fees and other charges due and / or agreed by both parties. The document would reflect how the debtor undertakes to repay the sums owed, the number of instalments and / or provides a time period to have liquidated the entire debt. A cautionary clause (known as an acceleration clause) in the “AOD” usually provides that if the debtor fails to pay any one instalment the whole amount will immediately become due and payable and he will also be responsible for legal costs.
Instead of instituting legal action a creditor often gets a debtor to sign an “AOD” to facilitate repayment and to confirm its liability. An “AOD” is an agreement which is valid and enforceable as is any other contract in law. For instance it must not be entered into under duress because of a threat of any kind by the other party which would render it voidable at the instance of the party so induced.
Further, section 9 (1) (a) (iv) of the Prescription Act, provides that the running of prescription shall be interrupted by an express or tacit acknowledgement of liability by the debtor. This means that legal proceedings are not barred by prescription and if there is a default by the debtor legal proceedings can be instituted up to six (6) years from the date of the default.
In conclusion, the legal principle embodied in the maxim caveat subscriptor denotes that there is a presumption that a person who appended his signature to a document was aware of its contents and intended to be bound thereby. An AOD is referred to as a “liquid document” which proves a debt without any extraneous or outside evidence to support it. An AOD should enable a creditor to obtain a speedy judgment against a debtor without having to endure a long trial in which all the facts relating to the original money lending agreement may have to be proved by the creditor.