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Recovering Your Debts in Nigeria (Part III)

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3. NEGOTIATED SETTLEMENTS



In most debtor/creditor situations, the debtor simply does not have the lump sum he has incurred to pay back. A negotiated settlement may therefore be the best option. Negotiated settlements may be of any of the following forms.




  1. ACCORD AND SATISFACTION:



    Here the creditor enters into an agreement with the debtor to accept some other consideration as full and final payment for the sum owed, in other words the accord is the agreement by which the obligation is discharged and the satisfaction is the consideration which makes the agreement operable. This other consideration can be anything for example, the creditor may accept a percentage of the original sum owed, or even a parcel of land, and the effect of this is that the debt is discharged once the agreement has been executed.



    At this point, the creditor must be careful with the wording of such an agreement, a distinction must be made as to what actually discharges the debt, is it the agreement entered into or the fulfillment of the obligations stated therein? A creditor must ensure the agreement is couched in such a way to ensure that the debtor is discharged only upon performance of the agreement, if not the debtor will be discharged once an agreement is entered into and the creditor has only a claim for breach of accord.



    This option makes economic sense when you consider the time value of money, if any of the above options where to be followed by the time the process is exhausted the value of the money would have dropped, it is therefore a wiser choice economically speaking, however the creditor must forego his original sum which would most times be based on projections and calculations of a profit.

     

  2.  PAYMENT BY INSTALLMENTS:



    This is another form of negotiated settlements where the creditor agrees to allow the debtor purge himself of his debts through payments of a certain amount over a period of time. With this option the creditor, guarantees the refund of the original amount being owed, however this option does not take into consideration the time value of money. By the time the payments are made in full, the value of the money would most certainly have depreciated. Also should the debtor default the creditor is bound by the agreement and can sue only for the breach of agreement and not the original sum.

     

  3. FOREBEARANCE TO SUE:



    This is an arrangement where a creditor enters into an agreement with the debtor, whereby he relinquishes his right to sue for the money being owed him either absolutely, or for a period of time, in return for the debtor doing some act. This act will depend on what the parties decide. if no time is specified, the law construes such agreement as one to forebear for a reasonable time. The creditor is at liberty here to decide what exactly he will require and therein lies the strength of this option, as there may be some advantage to the creditor, which the debtor can easily secure. A creditor who decides to follow this option should ensure that the forbearance is not absolute but for a period of time, this is to access the debtor properly and observe whether he will fulfill his side of the agreement.



PART PAYMENT:



This is where a creditor accepts an offer from a debtor to pay part of the total sum due, In law such part-payment cannot discharge the original amount owed.. Exceptions to this principle exist however where the claim is for can unliquidated sum or if the total amount due is disputed by the debtor. Also where the creditor accepts part-payment of the whole sum from a third party, the debtor is discharged from paying the whole sum. Where the request for part-payment is from the creditor, before the debt becomes due it will amount to a discharge of the whole debt or where the creditor requests for payment at a place other than that agreed to for payment or in another currency, or where he accepts a chattel with the part-payment, all these will amount to a discharge of the whole amount.



A major advantage of this option is that it puts something, in the hands of the creditor as soon as possible, this also makes economic sense when one considers the time value of money. Also as long as the offer is from the debtor, the creditor still has a legal right to press for his remaining sum. However, a drawback of this option is that the creditor will have to give up his original sum, especially in cases where he makes the offer.



CONCLUSION



As stated earlier, there is no way to prevent debt situations in its entirety, the creditor must however learn to manage such situations, when they arise, the option to follow will always depend on the peculiarities of the particular case. However, taking into cognizance the Nigerian Environment obtaining judicial or extra-judicial relief is not always as practical in reality as we have come to believe from the text books, the Nigerian factor must always be considered in every situation. The most pertinent issue in any situation however is that the creditor secures the money he is being owed and the means of going about this will determine how successful or not he becomes. In this regard, of all the above mentioned options, a negotiated settlement should be a creditors first option when faced with an unwilling debtor.



Click Here for Part 2







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