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Manna

29 March 2007

A case note from Millers in which the validity of a deed of sale which was accepted AFTER the offer had lapsed was decided upon for possibly the first time in South African law.

EP Manna v JM Lotter CPD 9708/04 - Reportable - Judgement handed down on 8 March 2007 - Per; Griessel, J

Mrs Lotter, a Welsh citizen, placed her property in Sedgefield on the market via a local estate agent in October 2003. The estate agent found a willing buyer who signed an offer to purchase on 6 November 2003. Clause 10 of the offer stated that the offer was "irrevocable and expires at noon on the 8th November 2003 and on acceptance shall become a binding Agreement of Sale irrespective of whether the Purchaser has been notified of such acceptance or not…".

The estate agent faxed the offer to the seller on 9 November 2003. The seller then signed the offer and faxed it back to the agent on 12 November 2003.

The conveyancer dealing with the transfer then tried to reach the seller to sign the necessary documentation, but to no avail. The seller simply refused to sign the documents and wouldn't answer any calls or respond to any messages.

The buyer then launched an application in the Cape High Court to compel the seller (which was served in Wales after an application for edictal citation) to sign the necessary documents, so that transfer could be registered.

The seller opposed the application on three alternative grounds:

1. That the Court had no jurisdiction as the Applicant had failed to attach the property, to confirm jurisdiction. This line of defence was dismissed on the grounds that a High Court automatically assumes jurisdiction over any dispute regarding immovable property that falls within its jurisdiction. Hence, an application to confirm jurisdiction was unnecessary under the circumstances as this property fell within the jurisdiction of the CPD.

2. That the buyer had failed to obtain the necessary bond approval timeously. In terms of the Agreement, the sale was made "subject to the suspensive condition that the purchaser obtains approval to the granting of a loan against security of the property for an amount of not less than R485 000.00 from a bank, building society or financial institution within 21 days of acceptance of this offer" and if this loan was not approved within that time, "the period of approval shall automatically be extended for a period of 14 (fourteen) days." The buyer's bank only approved a 75% loan. However, it is trite law that a bond clause is to the benefit of the buyer and capable of unilateral waiver, provided such waiver takes place before the date for fulfilment of the condition - in this case it would be within 35 days of acceptance, i.e., by no later than 17 December 2003. On 27 November 2003 the bank notified the buyer, who on the same day advised the conveyancer that he would make alternative arrangements for the balance and wished to proceed with the transaction, whereafter he signed all the necessary transfer documents and paid the required conveyancer's costs. As such, the buyer undoubtedly indicated his waiver of the benefit.

3. That because she accepted the offer after it had already lapsed, there was in fact no binding agreement - i.e., that you cannot accept an offer that no longer exists.

The Court immediately drew the following distinction in his judgement: If an offer is accepted by a seller before the time to accept it has lapsed, then the buyer, who made the offer, is undoubtedly bound to the agreement. But what is the situation where the seller accepts the offer, after it has lapsed, and the buyer then still wants to proceed? Can the seller then escape the agreement by relying on the fact that the offer lapsed before she accepted it?

As there appear to be no precedents in South African case law, the Court took cognisance of the views expressed by the learned authors Christie; Khan; Kerr and De Wet and van Dyk, as well as the foreign authorities they relied on in their publications, in Germany, Italy, USA and Holland. In most instances the favourite argument was that late acceptance amounts to a "counter offer". However in this instance the immediate problem was that, due to the strict requirements laid down by section 2(1) of the Alienation of Land Act 68 of 1981, such a "counter offer" would require a written acceptance - mere acceptance by conduct was insufficient.

In the present matter the buyer never formally accepted the "counter offer" in writing. The reason for this was that the buyer only became aware of the seller's alleged "counter offer" in her Answering Affidavit (having remained silent after signing the offer two years earlier) and as such he was never aware that he "should" have formally accepted it in writing. Nevertheless, the Court rejected this theory in any event, because in its view this scenario specifically illustrated the artificiality of such a construction.

Another view expressed by the learned authors and which was accepted by the Court, was that the best way to approach this type of scenario would be to regard the expiry date as a stipulation that was inserted solely for the benefit of the buyer, which benefit he could elect to waive.

As such, the buyer would then be entitled to accept (or reject) the "irregular" acceptance of his initial offer. Naturally, this election of the buyer would have to be communicated to the seller within a reasonable time, depending on the circumstances. In this case the buyer, upon receipt of the signed offer to purchase, immediately proceeded with doing whatever he needed to from his side, to give effect to the agreement.

On this basis then, the court held that, notwithstanding a late acceptance of the offer, the fact that the buyer had elected to proceed indicated his willingness to accept the "irregular" acceptance anyway, and as such the agreement remained valid and binding. The seller was ordered to pay the applicant's costs and to sign all necessary documents within a specified time, failing which the Sheriff was authorised to sign in her stead.

Website: millers.co.za

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