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This article focuses on the challenges
posed by the misconceptions of the nature
and effect of suspensive conditions. We also
discuss non-compliance with those
conditions, legal defences, ad hoc examples
thereof and the general requirements for
valid contracts specifically in respect of
contracts of sale of immovable property.
Requirements for valid contracts
- Consensus. The parties must reach
conscious agreement, with a genuine
concurrent intention.
- Contractual capacity. The parties
must be legally capable of concluding a
binding contract. They must be over the
age of 18 years and of sound mind or not
insolvent.
- Legality. The contract must be legal
and may not contradict any statutory or
common law rule.
- Possibility of performance. The
performance must be determinable and
possible at the time of conclusion.
- Formalities. The contract must abide
by any formalities set by law or by the
parties themselves. For example, in
terms of Section 2 of the Alienation of
Land Act 68 of 1981, all contracts of
sale of immovable property must be in
writing and signed by both parties.
All the above requirements must be
fulfilled in addition to any suspensive
condition for a legally enforceable contract
to come into existence.
Doctrine of fictional fulfilment
and waiver of the suspensive condition
As previously stated, in addition to the
requirements for legally enforceable
contracts in terms of common law, any
suspensive conditions contained in the
contract must first be fulfilled. Simply
put, if a contract is breached, it cannot be
enforced if the requirements being were not
met and suspensive conditions were not
fulfilled. As a result, damages often cannot
be claimed.
In terms of this common law principle,
where a party wilfully prevents a suspensive
condition from being fulfilled, the
aggrieved party may rely on the doctrine of
fictional fulfilment to remedy the
situation. This means that the defaulting
party will have to perform his obligations
just as if the contract had never been
subject to a suspensive condition at all. If
he does not perform his obligations, he may
be liable for damages resulting from his
breach of contract. A number of cases have
relied on this theory, including the case of
Du Plessis & Smith NNO v Goldco Motor &
Cycle Supplies.
In some instances the purchaser can waive
the suspensive condition, eliminating the
need to fulfil it and the contract is
legally valid and enforceable.
The above was illustrated in Abraham
Willem Adriaan Coetzee v Anna Catharina Van
Der Walt, Free State High Court - case
number: 2589/2004.
Facts:
In this case, on 27 June 2003, the
parties to the contract entered into a Deed
of Sale of a fixed property. A dispute
developed between the parties, with the
respondent alleging that the contract has
lapsed. The applicant disputed the
allegation and launched an instant
application in which he sought ancillary
relief and an order declaring the contract
to be valid and the contract was also made
subject to suspensive conditions, which was
the payment of a deposit.
It is common cause that no deposit, let
alone the full purchase price, was paid into
the trust account of the transferring
attorney.
Judgement:
In the judgement the court made reference
to MIA v d J L Properties (Waltloo) (Pty)
ltd and another, in which it was held that
the suspensive condition protected the
purchaser and that he could waive it. It was
further held that by raising a bond for less
than the stipulated amount, and opting to
provide guarantees for the full purchase
price, the purchaser had waived the
protection of the suspensive condition.
The issue of waiver of a suspensive
condition was also considered in Westmore v
Crestanello and others.
The court held that the real difference
between these two cases lies in the question
of when a purchaser should waive the
protection; and who is meant to be protected
by the suspensive condition in question.
In the Westmore case the court held that
the purchaser must waive the protection of
the suspensive condition the cut-off date of
the condition. In the MIA case it was held
that, where a suspensive condition is not
waived, the contract lapsed when the
condition expired. , The court also held
that “whatever happened thereafter was, to
use a phrase borrowed from Shakespeare,
“much ado about nothing” and could not
“breathe new life into the corpse”.
This means that no contract comes into
existence where the suspensive condition is
not waived and not fulfilled. No remedy can
be invoked for a breach of contract that
never existed.
The trustee acting for a trust to
be formed (legality)
Under sections 4 and 6 of the Trust
Property Control Act 57 of 1988, a trustee
can only conclude agreements on behalf of
the trust after the trust has been
registered; and only after the trustees have
been authorised to conclude those agreements
in writing by the Master of the High Court
by the issuance of letters of authority.
This means that and agreement will be
null and void and cannot be ratified as it
lacks legality if it is entered into by a
person who is trustee of a trust yet to be
formed; or by a trustee of a trust which is
formed but who does not hold letters of
authority. However, the agreement may
falsely pose as a suspensive condition
similar to pre-incorporation contracts found
in company law.
Conclusion
Contracts of sale of immovable property
are not as simple as using an offer to
purchase drafted by an agent. They should
ideally be undertaken by your attorney or at
least reviewed before signature.
Tel:+27 (0) 21 425 5604
Email : enquiries@schoemanlaw.co.za
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