Q&A – 12 May 2014
Personal loan deduction in terminal benefits
I resigned from my employment few weeks ago. During my employment I had taken a loan on condition that I will ensure repayment in three years but I resigned before the three years. My employer has retained some of my terminal benefits for loan repayment. He insists and showed me a clause in the loan agreement which says that “the loan shall fall due upon termination of the contract of employment and the employer is entitled to deduct terminal benefits for realization of the loan.” Is this allowed under our laws? I feel that this is improper as I can still pay the loan for the remaining duration.
FI, DSM
Perhaps for clarity purposes, you should understand from the outset that under Section 28 of the Employment and Labour Relation Act, No 6 of 2004 (“ELRA”) an employer is entitled to deduct employees remunerations. Although there are number of conditions to be fulfilled for such purposes, in your case the requirement will be satisfied if there is a consent in writing (See Section 28(1)(b) of ELRA). We are made to understand that such consent is in place in your case. The fact that you signed a loan agreement, there is an express term that the loan shall fall due upon termination of the contract of employment, and that the employer is entitled to deduct terminal benefits for realization of the loan, confirms our conclusion. Many employers dish out loans without such conditions which unfortunately becomes a sticky point when an employee resigns or is terminated before the loan is repaid. Infact, we act for many employers and always recommend that this clause be expressly provided for in the loan agreement.
As a matter of practicability, put yourselves in the shoes of the employer. How would you expect to recover such a
loan in a situation where you do not have security and not sure of the borrower’s fixed abode? There is no doubt that the loan was advanced to you by virtue of your service to your employer and the fact that you are no longer there allows the employer to demand payment. Your lawyers can guide you further.
Witness memory problem
I have received a summons to testify in a civil case. My testimony is going to be based on a number of agreements, and although I am acquainted with them, I cannot recall each and very term. I have started cramming the agreements in preparation but that is taking me long and with my age, I am not able to remember everything. This is causing me real stress as I am a key witness. What should I do? Is there an easy way of cramming the agreements?
YR, Arusha
Law always presupposes existence of society and its people. The law when enacted ensured to accommodate realities and in this case the law takes note that witnesses are mortal and may forget facts.
The Evidence Act is relevant here since it governs how testimony is to be made and what qualifies as evidence in Courts of law. In refreshing memories and production of evidence, the law allows a witness under examination, to refresh her/him memory by referring to any writing made by herself/himself at the time of transaction. The law further allows refreshment of memory even by using photocopies under the permission of the Court.
Hence you need not go into a classroom type atmosphere and start cramming the agreements. You can ask to refer to the agreement and a copy will be given to you to refresh your memory.
You however need to be acquainted with the facts since your role is to assist the Court in adducing true and relevant facts which will help the court to do justice. Your lawyer can guide you further.
Spousal consent during separation
I approached a bank for a loan and was asked if I am married. I informed them that I was but have been separated for almost four years now. The bank has agreed to grant me a loan on condition I mortgage my house as security. However the bank requires a spousal consent from my wife. The bank doesn’t want to understand that my wife and I are separated. I really need this loan- what should I do?
KJ, Moshi
The law of Marriage recognizes that although a landed property maybe under the name of one spouse, the other spouse may have contributed to the acquisition, maintenance and/or securing of that property although the interest(s) of the other spouse may not be registered. There is a famous case in which the Court was of the view that even domestic services offered by a housewife are considered as contribution in acquisition and maintenance of the family properties.
The Land Act requires financial institutions to demand spousal consent prior to taking matrimonial property as security in order to protect the interest of the other spouse. The Marriage Act recognizes that spouses maybe separated either by Court or by family arrangements. However separation is not divorce and during separation there is no distribution of matrimonial assets meaning that your wife’s interest, if any, in the matrimonial home are still intact.
Unless you divorce, there is no legal way to go around this unless you locate your wife and obtain her consent for you to mortgage the property. If she has no interest in the property, we don’t see why she would refuse to sign the spouse consent. The other way around this is to locate another security like chattels or third party mortgages by other persons. Your attorney can guide you further.