Court ruled that respondent honours agreement - Why? | Legal Articles


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Court ruled that respondent honours agreement - Why?

Waiving the benefit of a suspensive condition

A matter arose in which the applicant (Aerterno Investments 216 (Pty) Ltd) succeeded with an application for an order declaring an agreement of sale of immovable property to be valid and binding in circumstances whereas the respondent (Ramashala 20011 JDR 0657 (GNP)) alleged that the agreement had lapsed discussion of the judgement follows.

The respondent sold a property for R4 million on 17th June 2007. The signatory to the agreement on behalf of the purchaser signed “as trustee for a company to be formed or nominated” and subsequently nominated the applicant to take transfer of a property.

The agreement was subject to the condition that the applicant shall succeed in raising a loan for the full purchase price within 30 days from 17 June 2007. However, failing to do so would result in the agreement lapsing.

The applicant showed that Standard Bank advised them in writing on 11th July 2007 that its application for a loan of R2.8 million had been approved.

The directors of the applicant then passed a resolution accepting the nomination, thus authorising the signatory to act as its representative waiving the benefit of the suspensive condition.

One of the directors of the applicant (Pelser) also agreed to advance the shortfall of R1.2 million plus the costs of transfer to the applicant. A letter was issued by Standard Bank on 24 October 2007 confirming Pelser’s affordability to honour the loan to the applicant.

On 16 June 2017, a day before the date on which the suspensive condition had to be fulfilled the applicant's attorney (Uys) called the respondent to discuss the matter in some detail.

However it was unclear whether Uys advised the respondent in clear terms that the applicant had waived the benefit of the suspensive condition.

Two days after this the applicant's attorney wrote a letter to the respondent recording that a loan of 2.8 million had been granted, that the applicant had waived the benefit of the suspensive condition and that the applicant was ready to proceed with the agreement, issue guarantees for the full purchase price and pay the costs.

Repudiation of the Agreement

The respondent advised Uys telephonically of his intention not to proceed with the sale and that the applicant regarded his statement as repudiation which the applicant did not accept.

In response to certain aspects raised by the respondent in his answering affidavit Preller J commented saying that regard should be had to the fact that the wording of the suspensive condition did not require the loan to be granted by a bank.

All that was required was that the applicant should succeed in raising a loan.

However, the applicant did not communicate its waiver or the fact that he had secured an additional loan to the respondent in writing, but that this failure was of no importance. The agreement required any notice “referred to in this agreement” to be in writing, but neither of the two absent notices were required contractually.

Another point that was raised was fact that the letter confirming Pelser’s affordability was well out of its time and so was not relevant. The letter merely purported on the financial standing of Pelser, and had nothing to do with the fulfillment of a suspensive condition.

Two issues were identified by Preller J:

  • Whether the dispute condition in the contract and being for fall; and if not,
  • Whether the purchaser had waived the benefit thereof and whether it was entitled to do so.

Regarding the first question raised, when a suspensive condition with limited time is included in a contract, the time limit is usually intended to be for the benefit of the seller, while a condition requiring a loan to be obtained is usually for the benefit of the purchaser.

With regards to the second question, based on the current accepted position at the time, if the person affected is made aware of one’s intention to waive, that person is entitled to act upon that decision, and so the rights regarding the party who decided to waive the terms of the contract are gone.

This is also the case if said person doesn’t communicate the intention of the waiver however it is clear in their conduct, which is inconsistent with the enforcement of the right, or if they show an intention of surrendering and so the rights afforded also taken away.

The legally acceptable position of the matter thus shows that the applicant was entitled to waive the right solely given to them provided that the applicant/s communicated the waiver before the expiry of the fulfillment period.

In casu it was common cause that the full purchase price had been secured by loans, and the respondent was advised verbally.

Also, before the expiry of the performing period that alone had been granted the purchase price and costs were available and the required guarantees could be issued.

These facts resulted in the surrender of the right to walk away from the agreement and the respondent was made aware of this.

The respondent was then ordered to furnish such information and documents and to sign all necessary documents required to effect transfer of the property to the applicant and was ordered to pay all the costs of the application.

Van Deventer & Van Deventer Incorporated - Property Lawyers Sandton

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