Our panel often receives questions about suspensive conditions linked to property sales.
These conditions affect not only the buyers and sellers but also the estate agent involved in the sale and, very often, third-party buyers and sellers who are waiting on fulfilment of a deal on which their own property transaction depends.
This week we take a look at a set of facts presented by someone who appears to be a principal and is concerned about the actions of another agent within his organisation.
He tells us that this agent regarded a sale agreement where the bond had been successfully granted, but the deposit unpaid, as a fully concluded sale. He is, however, concerned about whether the unpaid deposit affects the validity of the sale or not.
According to Grant Berndt from Abdo & Abdo Attorneys in East London there are two main classes of conditions that may be attached to any contract: suspensive and resolutive.
“When a contract is subject to a suspensive condition, it only comes into full effect when the condition is met. The operation of the contract is suspended until the condition is fulfilled or, in some cases, waived.”
Berndt says a common example of this would be that the purchaser must qualify for a bond of a certain amount and/or sell his own property.
“If one or both of these conditions are not met within a specified timeframe, the contract simply never becomes fully operative.”
Certain provisions may, however, be effective from signature and could, for example, prescribe that the seller take certain steps towards fulfilling the conditions, says Berndt.
“A resolutive condition, on the other hand, brings a contract to an end retroactively if the condition is fulfilled.”
Berndt says it is almost as if the contract were never concluded at all, save that restitution of performance may be required of the buyer.
“An example of this would be an offer to purchase for a sectional title scheme that is not yet registered. If this registration does not take place on or before an agreed upon date, the agreement will simply come to an end.”
In most instances the payment of a deposit is not phrased as a suspensive condition, says Brian Kinnear, principal of Fresh Lifestyle Properties in East London.
“If the deposit is not paid timeously, the purchaser may be in breach and the seller may put him or her on terms to perform.”
Should the purchaser fail to perform, Kinnear says the seller may have the choice of taking action for specific performance or cancelling the sale, and possibly claiming damages.
“This is different from the bond clause where the agreement is conditional on the purchaser obtaining the bond in time.”
What this means, says Kinnear, is that the sale is “hanging in the air” until the purchaser actually obtains the required bond.
“Should this not happen, the agreement lapses automatically and cannot be revived. There is no breach and the seller cannot place the purchaser on terms to perform, as there is simply no longer a contract under which to perform.”
Kinnear says the reader may therefore rest assured that his agent is quite right in concluding that a valid sale has taken place.
“The fact that the payment of a deposit still has to take place does not, in this instance, point to the contrary.”
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