Division: The Supreme Court of Appeal
Case No: 430/02
Date of hearing: 14 November 2003
Date of delivery: 27 November 2003
Coram: Scott, Mthiyane JJA, Southwood AJA
On 5 August 2001 the respondent signed a written offer to purchase from the appellant stand no 716, Bedfordview Extension 115, for a purchase price of R1 300 000. The offer, which was accepted on 6 August 2001, was subject to a bond or bonds of R1 180 000 being obtained by the purchaser within 30 days of acceptance of the offer. The "Offer to Purchase" consists of a standard estate agent's printed form. It also has an additional page (clause 21), which reads as follows:
Should the PTY LTD NEW HEIGHTS not be able to take transfer and or ratify this agreement I LIJANE MAQELEPO HEREBY holds (sic) myself surety and co-principal debtor for all the obligations of this offer towards the seller and irrevocably hereby undertake to take transfer in my own name.
The respondent signed the offer to purchase as purchaser without qualifying his signature.
The document was thus completed in two stages with Lijane Maqelepo as the initial purchaser. Then they attempted to make NEW HEIGHTS(PTY) LTD the purchaser with the insertion of the words "on behalf of the above co" after the respondent's name as purchaser and by inserting clause 21.
Respondent launched an application in the Witwatersrand Local Division (WLD) when he called upon appellant to pass transfer, and appellant repudiated it, contending that as "New Heights" did not exist, the agreement was null and void and that respondent was no more than a surety. Relief was granted as Goldstein J found that the clear intention of the parties was that the respondent would be the purchaser.
Appellant appealed, arguing that an agreement signed on behalf of a non-existent principal is invalid. In Southwood AJA's view, this argument ignores the context in which clause 21 is used in the agreement as a whole. Further, a court should not lightly hold that an agreement is invalid.
Despite been inelegantly worded and obviously not the work of a "lawyer or linguistic precisian" the entire document shows that the parties clearly contemplated that in the event of the company failing to ratify the agreement, the respondent would be bound to perform all the obligations of the purchaser and would take transfer of the property in his own name.
This agreement, however is inconsistent with the obligations of a surety in two crucial aspects:
* A surety cannot be liable unless there is a principal debtor who becomes liable; and
* A surety is liable for the debt or obligations of another.
Further, the agreement that the respondent would take transfer of the property into his own name is also inconsistent with the position of the surety because if called upon to perform, the agreement between the purchaser will remain in force and the seller will be obliged to transfer the property into the name of the purchaser, not that of the surety.
Based on the construction of clause 21 therefore, the word "surety" was used inappropriately and was inconsistent with the parties' true intention, which was that both the appellant and the respondent regarded the respondent, and not the company, as the purchaser of the property.
The appeal was therefore dismissed with costs.