DOES ACCEPTANCE OF AN OFFER TO PURCHASE HAVE TO BE COMMUNICATED TO A PURCHASER? THE LATEST CASE ON THE SUBJECT CASTS DOUBT!
The judgement in the matter of Terry and Terry v Solfafa and Others, which judgement was delivered in the Bloemfontein High Court on 29th of August 2019, has recently come across my desk.
In the matter, Mr and Mrs Terry were seeking an order compelling Ms Solfafa to transfer a property which they had bought into their name. Ms Solfafa raised three defenses to the claim.
Firstly, she argued that because Mr and Mrs Terry were married in community of property, and because only Mr Terry had signed the deed of sale, the agreement was invalid. It did not take the judge long to dismiss this argument. The Matrimonial Property Act leaves no doubt that either spouse who is married in community of property can bind the joint estate to purchase immovable property on their own. It is only when immovable property is sold (or mortgaged) that the written consent of both spouses is required.
Secondly, she argued that because the agreement was subject to the “successful sale” of the Terry’s property, and because it had not been transferred by the due date, the agreement had lapsed for want of fulfillment of this suspensive condition. Once again, the judge found against her and interpreted the term “successful sale” in this contract to mean simply the signing of a deed of sale, not the registration of transfer.
Thirdly, she argued that after signing the deed of sale, and before the acceptance of the offer had been communicated to the purchasers, she revoked her acceptance. On this point the judge found that her signature to the deed of sale alone was sufficient to bring about a binding deed of sale, despite the fact that her acceptance had not yet been communicated to the purchasers.
It was this last point that caught my interest. This is because our common law on the point is clear, and is against the learned judge. In terms of our common law, the general principle is that a contract only comes into being once acceptance of the offer has been communicated to the offeror. The reason for this is obvious. A person needs to know when they are bound by a contract. If they do not know they might do something which will prevent them from being able to perform in terms of the contract (like buy another house). Also, obligations in the contract might fall due for performance, and if a person does not know that they have obligations to perform they could easily fall into breach and become liable for damages.
There will obviously be some exceptions to this rule, for example, some deeds of sale specifically provide for communication of acceptance of the offer to be made to the estate agent. These exceptions should however only come about when the contract specifically provides for this or when circumstances clearly dictate.
In our case, the judge referred to a previous case which had decided that when an offer is made in writing, it will be easier to infer, “in the absence of any indication to the contrary”, that for the contract to arise, the acceptance required was no more than a signature.
The judge then leaped to the conclusion that Ms Solfafa’s signature to the offer to purchase was sufficient to bring about a binding deed of sale here.
While I have not read the contract in this case, and with respect to the judge, I found his reasoning to be weak. Nevertheless, it is a judgement of the High Court, and it will therefore have persuasive value in other cases on this point that might arise in the future. For this reason, I believe is important to check the wording of your deed of sale to ensure that there is no room for doubt.
We suggest that your deed of sale (or offer to purchase) should specifically provide that the contract will only come into existence once the seller’s acceptance has been communicated to the purchaser or the estate agent. This will make things clear, it will protect all of the parties, and it will ensure that there will be no dispute on the point in the future.
If you need help in amending your contract, or if you are not sure what to do, do not hesitate to contact one of our attorneys for guidance.
Miltons Matsemela Inc.