“In war and litigation, both sides suffer” (old Roman proverb)
Here’s yet another reminder from our courts on how important it is – if you want to avoid the trials of litigation - for you to have your property sale agreement drawn up professionally. One thing it must do, as the case in question clearly shows, is record the terms of your agreement precisely and without any room for argument.
The High Court case of Phepeng and Another v Estate Late Ame Combrinck and Others (792/2017)  ZAFSHC 54 revolved around a “bond clause” in a sale agreement. A bond clause is a standard protection for any buyer who needs finance in order to pay the purchase price. It’s a “suspensive” clause that means the sale agreement only becomes enforceable if and when it is fulfilled.
The bond clause and the better offer
One clause, two interpretations
It boiled down to this – the seller and the buyers had each interpreted the obligations imposed by the bond clause differently. The buyers thought they had fulfilled the suspensive condition, the seller thought they hadn’t.
A hard lesson for the seller
The Court disagreed, holding that on the particular wording of this particular clause, it was enough for the buyers to obtain a loan offer from a bank. They could receive the offer and accept it without having to give the bank’s loan documentation to the seller. They could waive the protection given to them by the clause’s other requirements. In other words, they were entitled to regard the bank’s loan offer to them as fulfilment of the condition, and the sale agreement is valid and enforceable. Accordingly the seller must transfer the property to the original buyer at the lower price and will now have to suffer the consequences of breaching her contract with the “new” buyer.
As a seller, if you want certainty on whether or not your buyer really has obtained bond finance within the set time limit, make sure that your bond clause clearly and unequivocally requires the buyer to lodge with you proof that the bank has granted the loan.
More broadly, whether you are a buyer or a seller, the last thing you need is to have to go through the expense, stress and waste of time that litigation will inevitably subject you to. So have your lawyers draw up the sale agreement for you: or at the very least have them check it out before you sign anything!
Jack Crook, Director at DotNews, is well known to law firms as the author of LawDotNews since 2005. Jack’s legal qualifications (LLB Lond and LLB Rhod) are supplemented by many years of practical experience in law, in marketing his own firm, and in helping other small and medium sized professional firms to prosper by using simple, low-cost, effective marketing strategies.
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