| A recent Supreme Court of Appeal decision should be sending
a warning signal to all who believe that in a property purchase agreement
they may be able to avoid the primary obligation of paying the full amount
within the stipulated period, says Tony Clarke, MD of Rawson Properties.
In the case referred to the appellants, a married couple, the registered
owners of a KZN commercial property, had signed an agreement with the respondent
in terms of which he would purchase the property from them and be given
immediate occupation of it.
The appellants alleged that the respondent failed to pay the full purchase
price (R500,000) within the stipulated period (24 months from the date
of signing). This, they claimed, entitled them to cancel the sale agreement.
However the Durban Court refused this cancellation application on the
grounds that the agreement had apparently been revived "by both parties'
conduct". The reasons for this decision were complicated. The respondent
had agreed to settle certain of the appellants' debts (at the stage they
were under severe financial strain) and to take over the full municipal
rates and taxes on the building they had agreed to purchase. The respondent
apparently agreed to pay monthly instalments of at least R20,000.
Although the court decision does not give full details here, it appears
that many payments were made and that a few months after the cancellation
period a sum of R428,912 had, in fact, been handed over, albeit not within
the contract period.
The appellants alleged that by not paying in full within the stipulated
period the respondent was in breach of the contract, which could accordingly
be cancelled.
The respondent claimed, however, to have continued to make payments after
the notice of cancellation. These, it seems, totalled R75,000 and were
supplemented by a further payment of R30,000 to help the appellants' daughter
to buy a home.
The respondent claimed that by accepting these payments the appellants
had effectively revived the sale agreement and set aside its cancellation
order. He also claimed that the appellants' letter placing him "in
mora" did not mention the breach of contract and that this amounted
to a waiving of the appellants' right to cancel the sale. This view was
upheld in the original court decision by the Durban Court, but has now
been reversed by the Supreme Court of Appeal.
The Supreme Court of Appeal, for its part, pointed out that precedents
from previous cases of this kind relying on verbal agreements had led
the courts to stipulate that "a fresh meeting and concurrence of
minds" were necessary in these cases: both parties, ruled the Supreme
Court of Appeal, must have met and agreed on the new deal - and it could
find no evidence that this had in fact happened. Furthermore, a lengthy
eight month delay by the respondent in filing his original answering affidavit
to the appellants' final demand and threat of cancellation had definitely
weakened his case.
The Supreme Court of Appeal therefore accepted that the respondent, in
failing to meet the full terms of the original contract, had breached
this contract and that this was just cause for a cancellation of the sale
agreement - no matter what sums had already been paid over. The original
ruling accepting the respondent's arguments was, therefore, overthrown
and the respondent was ordered to pay the appellants' full legal costs
and to vacate the property.
Clarke said that it was not clear from the court record whether the respondent
would be able to recover some or all of the substantial sums already paid
out - quite possibly, he said, they would be forfeited in terms of the
original agreement. The case, he commented, serves as a dire warning that
hard and fast sales agreements cannot be easily avoided or fudged and
that the court, in the final analysis, will stick to the letter of the
law, no matter how ameliorating subsequent verbal agreements or circumstances
may prove to be.
"One can understand the Durban Court's original decision in view
of the vast sums already paid out and the separate though related debts
that had apparently been met by the purchaser, but the maxim of the law
that the sanctity of the original contract has always to be maintained
has been upheld. By not meeting his obligations within the agreed time,
the respondent made himself vulnerable and may have to pay very dearly
for this."
Sellers and purchasers of residential property, added Clarke, are unlikely
to find themselves in quite such complicated deals as that which pertained
in this case, but they must accept that in view of this and other recent
court decisions any failure to meet obligations is likely to prove very
expensive, money paid in being forfeited.
Furthermore it is of utmost importance that any change in, or revival
of, an agreement after the expiration of an obligation not met, must be
put in writing and signed by all parties.
|
Newsletter:
25 May 2012 2012 to 1 June 2012 - Dullstroom, Mpumalanga, South Africa
