The Context and Effect of Expired Suspensive Conditions in Property Sale Agreements
Buying a house is one of the best feelings anyone can ever experience in life. Maybe it is one’s first immovable property after signing for a new job, a house intended for lease to tenants for extra income every month, or even a house by the beach front to spend retirement. In any of these situations and alike, being a house owner invites a feeling of status and security.
It is imperative therefore that in the process of buying a house, parties be diligent so as not to suffer inconvenience due to legal and technical blemishes. Purchase and Sale Agreements of immovable property are amongst some with the strictest requirements. For example Section 2 (1) of the Alienation of Land Act 68 of 1981 provides that in the sale of immovable property, the agreement MUST be in writing, without which it will be of no force and/or effect. This is a complete departure from other types of agreements whereby even a verbal contract can be accepted as valid to the extent that there is proof on a balance of probabilities that it exists.
This article will briefly discuss the context and effect of lapsed suspensive conditions in Property Sale Agreements.
Suspensive conditions in Property Sale Agreements are events that must happen in future in order for the agreement to come into force. The most common ones are clauses where it is provided that the Purchaser must secure a financial guarantee (bond) within a specific time, which financial guarantee will serve as settlement for the purchase price of the immovable property. The effect of this condition is that the agreement will come into force in the event that the Purchaser secures a bond from a financial institution, within the given time.
Should the Purchaser secure a bond within the specified time then the transaction will proceed without any hurdles on that aspect, but in the event that the bond is secured outside the agreed time, what then becomes of the Purchase and Sale Agreement?
In various decided cases it has been held that suspensive conditions which have not been fulfilled within their given time frames have the effect of terminating the agreement. The rationale behind this is that since the coming into force of the agreement is dependent upon the fulfilment of a condition or the taking place of an event, then upon such event not taking place or condition being fulfilled then ultimately no agreement came into force and effect.
In McPherson v Khanyise Capital (Pty) Ltd and Others (2009) ZAGPHC 57 (27 February 2009) the Court held that the Seller could not extend the time frame for the Purchaser to pay the agreed amount after the period given in the agreement has lapsed. In this case it had been agreed that the Purchaser shall pay R2 500 000 within 60 days, but failed to do so within the given time.
In an earlier case of Mekwa Nominees v Roberts (1) 1985 (2) SA 498 (W) the Court held that a lapsed suspensive condition cannot be waived and therefore for parties to do so could not resuscitate the contract.
In summary the following apply with regards to expired suspensive conditions in Property Sale Agreements;
- A suspensive condition cannot be waived or extended after its lapse;
- An agreement which has become ineffective due to the lapse of a suspensive condition, cannot be revived;
- A new agreement with the same terms and extended suspensive conditions can be entered into by the parties if they so wish.
The above principles were held in the case of Fairoaks Investment Holding (Pty) Ltd and Another v Oliver and Others 2008 (4) SA 302 (SCA). It is therefore advised that where parties foresee a reason to believe that a suspensive condition may not be achieved within the given time frame, they have the option to extend or waive the condition before its expiration, by concluding an addendum to this effect.
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