Legal Talk – Sale of Land

Sale of Land

Three cases which dealt with the sale of land were reported in the material under review for this month's column.

First Case - Blank pages:

The first of these cases was that of Just Names Properties 11 CC and Another v Fourie and Others 2007 (3) SA 1 (W). The first and second defendants (the sellers) entered into an agreement of sale to sell immovable property to the plaintiff (the buyer). The plaintiff bought the property with a view to developing a shopping centre on the property, from which a supermarket would be operated. The fourth and fifth defendants (who were members of the third defendant, a close corporation) themselves owned several supermarkets and shopping centres and, in order to prevent the first plaintiff from establishing a supermarket in competition with theirs, had the close corporation purchase the same property, which was then transferred into the name of the close corporation.

The plaintiff then instituted action for the transfer of the property (which had been sold to the close corporation after having initially been sold to the plaintiff) into its name. The sellers raised the defence that, at the time of signature of the agreement, a certain page 3 of the deed of sale was blank and the agreement was invalid for want of compliance with the provisions of s 2(1) of the Alienation of Land Act 68 of 1981 (the Act). They alleged that at the time of the conclusion of the contract the parties had not yet reached consensus on the terms relating to the payment of occupational interest by the plaintiff. The plaintiff's representative then suggested that they (the sellers) sign two blank pages and that he (ie, the plaintiff buyer's representative) would later insert the terms agreed upon, which he did.

The crisp question was whether signature on a blank page in a contract for the sale of land gave rise to invalidity of the agreement.

Jajbhay J held that s 2 of the Act required that all material terms of the agreement be reduced to writing for it to be valid. A term was material if the parties intended a particular aspect of their relationship to be governed by a special provision - agreed upon by themselves rather than by the naturalia or the general principles of contract. As to the question whether the agreement had to be reduced to writing prior to signature, the court held that s 2 did not prescribe a particular procedure for the execution of a deed of alienation.

Where the terms of the contract were required by statute to be embodied in a document and signed by a particular party as a manifestation of his assent to such terms, the later insertion of these terms, after signature on a blank piece of paper could not constitute compliance.

The court held that, on the evidence, the term relating to occupational interest was obviously of great importance to the sellers: They even insisted that the original clause be deleted. In the circumstances, it was imperative that they had sight of the term incorporated into the agreement before appending their respective signatures to it. (In the present case, they signed the two blank pieces of paper and the term was only inserted later.)

The court accordingly held that the agreement entered into between the plaintiff and the sellers was invalid for want of compliance with the provisions of s 2(1) of the Act. The plaintiff's action was dismissed with costs.

Second Case - 'Cooling-off period':

The second of the cases which dealt with the sale of land turned on the interpretation of the provisions contained in s 2(2A) of the Alienation of Land Act 68 of 1981 (the Act). Section 2(2A) provides that a deed of alienation 'shall contain the right of a purchaser or prospective purchaser to revoke the offer or terminate the deed of alienation in terms of s 29A [of the Act]'. What is the effect where a deed of sale of land does not provide for such right of the purchaser? This was the crisp question before the court in Gowar Investments (Pty) Ltd v Section 3, Dolphin Coast Medical Centre and Another 2007 (3) SA 100 (SCA). Combrinck JA held that the agreement was not void, but voidable at the instance of the purchaser. The effect of this judgment is that the seller of immovable property must ensure that the deed of sale includes a clause which provides for the right of the purchaser as stipulated by s 2(2A) of the Act. The absence of such a clause might result in the termination of the agreement by the other party (ie, the purchaser).

Note: The Gowar Investments case brought welcome uniformity to an area of the law where there were conflicting judgments in earlier provincial/ local divisions of the High Court. In Sayers v Khan 2002 (5) SA 688 (C) the court held that a deed of alienation which does not reflect the right of the purchaser to revoke or terminate the agreement is void. In Section Three Dolphin Coast Medical Centre CC and Another v Gowar Investments (Pty) Ltd 2006 (2) SA 15 (D) (which was the decision handed down in the court a quo to the Supreme Court of Appeal decision in the Gowar case) the court held that non-compliance with the provisions of s 2(2A) of the Act will result in the contract of sale being voidable at the instance of the purchaser.

Third Case - Time for delivery of bank guarantee:

The parties in Chestnut Hill Investments 150 (Pty) Ltd v 169 Stamford Hill Road [2007] 2 All SA 71 (D) had entered into a contract of sale in terms of which the respondent (seller) had sold certain immovable property to the applicant (buyer). The buyer sought an order declaring the sale agreement to be still in force, and to be valid and binding between the parties. However, the seller contended that it had validly cancelled the agreement.

The agreement did not provide for the time within which the guarantee had to be furnished by the buyer. The seller gave the buyer three days' notice to provide the guarantee. The buyer failed to comply with this demand. The seller then cancelled the agreement. The crux of the present matter turned on the question whether the seller was entitled to cancel the agreement.

Southwood AJ held that where the form of the guarantee was not expressly laid down in the agreement, it had to be one to secure the fulfillment of the applicant's obligation to pay the purchase price against transfer of the property.

The date on which the buyer is obliged to provide a banker's guarantee depends on the date on which the seller will be able to lodge the documents required for transfer with the Registrar of Deeds.

The seller does not require the banker's guarantee until he is ready to lodge.

Thus, in the absence of a contrary provision in the agreement, the seller is not entitled to demand that the buyer should provide a banker's guarantee on a date earlier than that on which the seller proposes to lodge with the Registrar of Deeds the documents required for transfer.

The seller's attorneys were ready to lodge the transfer by 5 January 2004, upon receipt of the guarantee. It then demanded that the guarantee be provided by the buyer within three days.

The three-day period was a reasonable period considering the simplicity of the procedure for obtaining the guarantee. The seller was thus in breach of its contractual obligations; it was placed in mora by the notice sent to it by the seller; and the seller thus had the right to cancel the contract.

First published by: De Rebus - The SA Attorneys Journal


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