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Wednesday, April 1, 2009
By the book

In light of the recent economic down-turn, sellers of immovable property can expect to find themselves facing not only failed bond applications but also a number of technical reasons for purchasers to renege on what would appear ‘signed and sealed’ deals.  An agreement for the alienation of land, other than a sale of land by public auction, must comply with s2(1) of the Alienation of Land Act, 1981. A deed of alienation must be signed by the parties or by their agents acting on their written authority. However, the Act does not indicate when signature must occur. Common law principles of contract apply.

This was settled by the recent Supreme Court of Appeal judgment in Just Names Properties 11 CC and another v Fourie and others [2008] 2 All SA 487 (SCA) in which it was held that a written document containing all the material terms must precede signature in order to comply with the terms of s2(1) of the Act.
In November 2002, the Fouries and the close corporation represented by Baladakis entered into a written agreement in terms of which the property was sold for a purchase price of R 1, 8 million.
The agreement was signed and initialled by Baladakis and then sent to the Fouries for signature. As the Fouries were dissatisfied with one particular clause, the agent representing the close corporation suggested to the Fouries that they initial two blank pages and the agent would subsequently insert on those pages the revised, agreed provisions. The Fouries agreed to this suggestion and the agreement was amended by the agent before being sent to Baladakis. On receiving the amended agreement Baladakis initialled the pages.  The completed agreement, signed by both parties, was returned to the Fouries the next day. The amended clause was in a different font to the remainder of the agreement.
Unknown to Baladakis, the Fouries and a third party subsequently entered into a written deed of sale in terms of which the Fouries sold the property to the third party for R1,9 million. The property was transferred into the name of the third party and, simultaneously, a mortgage bond was registered over the property.
The close corporation sought an order setting aside the transfer and the mortgage bond, and transferring the property to it. The Fouries raised in defence, that the agreement was invalid because of non-compliance with s2(1) of the Act.
The close corporation submitted that the agreement complied with s2(1) of the Act, because the amendment amounted to a counter-offer made by the Fouries as offerors, which was accepted by the close corporation as offeree. The close corporation further submitted that it did not matter that the document was incomplete at the time of signature by the offeror as long as it was completed in accordance with the offerors’ intentions at the time of acceptance by the offeree.
The court rejected the counter-offer argument, as it found no support in the evidence. A counter offer arises when the original offer is rejected in whole or in part and not as a result of negotiations or a mere request to modify a term. Baladakis had instructed the agent to change the clause and therefore remained the offeror. The court decided that the Act required the offer to be complete when the Fouries accepted and signed it, or at least it had to be signed by them in its completed form before they released it for delivery to the other party. The first sale agreement did not comply with the requirements of s2(1) of the Act and was accordingly void and of no force and effect.
It is clear that all material terms of the sale agreement must be reduced to writing and precede signature. It must be kept in mind that a court will allow for the situation were a party signs the document and thereafter, by its own hand or through its agent, completes the document by filling in the material terms before delivering it to the other party.
In the present circumstances, where purchasers of immovable property are treading on dangerous ground – be sure to sell by the book. By Deniro Pillay, Candidate Attorney and Tessa Henderson, Associate, of Deneys Reitz’s

Copyright © Insurance Times and Investments® Vol:22.4 1st April, 2009
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