“Words are loaded pistols.” (Jean-Paul Sartre)
In June 2018 a couple agreed to buy a house
for R1.95 million. The sale was subject to two conditions: that they sell
another property within ninety days and obtain a bond for the full purchase
price.
The other property was sold, but the bank
approved a bond for less than the amount required. The agreement allowed the
seller to accept the lower bond and regard the condition as fulfilled. It was
common cause that both conditions had been met and that the sale was
unconditional.
The transfer then ran into trouble. While
the documents were being prepared, the Deeds Office established that one of the
buyers was an unrehabilitated insolvent. The bank withdrew the bond.
The seller did not cancel at that point.
She agreed to a memorandum giving the buyers several ways to resolve the
problem. They could apply for the buyer’s rehabilitation, seek a bond in the
other buyer’s name, or wait until the end of May 2019, when he would have been
rehabilitated. None of these options were pursued.
In April 2019 one of the buyers emailed the
conveyancer. He said there was no point applying for another bond until an
alleged defect had been addressed. He wanted the seller to repair it or agree
to a lower price, after which the buyers would apply for the bond. If she would
not consider this, they would have to look at other options.
The seller treated the email as a
repudiation, accepted it, and cancelled the sale.
Asking is allowed. Insisting is the problem
Repudiation occurs when one party, without
lawful grounds, shows through words or conduct that they no longer intend to
perform the contract. The other party may then insist that the contract be
honoured or accept the repudiation and cancel.
The buyers were entitled to ask whether the
seller would repair the alleged defect or consider a lower price. She was
equally entitled to refuse. Unless both sides agreed to an amendment, the
signed agreement remained binding.
This email went further than a request. It
made the bond application dependent on the seller repairing the defect or
accepting a lower price. The buyers were not offering to proceed under the
existing agreement while discussing a possible change. They were saying that
they would proceed only on different terms.
The Court accepted that the buyers may
still have wanted the property. That did not decide the matter because
repudiation is judged objectively. The question was how a reasonable person in
the seller’s position would understand the email, not what its writer privately
intended.
A reasonable reader would have understood
that the buyers were no longer prepared to perform under the agreement as it
stood. The High Court therefore found that the seller had validly cancelled the
sale.
What did the cancellation cost the buyers?
The agreement allowed the seller to keep
the money already paid if the sale was cancelled in these circumstances. This
is sometimes referred to as rouwkoop. The Magistrates’ Court had ordered
that the money be returned, but the High Court reversed that order.
The buyers also became liable under the
estate agent’s commission clause because the sale had been cancelled due to
their conduct. A further financial judgment was granted against them, together
with interest and legal costs.
One email had therefore cost the buyers the
sale, the money already paid, and a substantial additional amount (almost
R150,000.00).
How can you ask for a change safely?
Make it clear that you are proposing an
amendment rather than refusing to honour the existing agreement.
Asking, “Would the seller consider reducing
the price?” opens a negotiation. Saying, “We will not proceed unless the price
is reduced,” may allow the seller to cancel. No particular wording guarantees
safety because the communication will be read as a whole and in the context of
the parties’ conduct.
Deal with the price, finance, defects, and
other material terms before signing wherever possible. If a problem arises
after the agreement becomes binding, obtain legal advice before sending a
message that could be understood as a refusal to perform.
Buying or selling property, or stuck in
a transfer that has gone wrong? Speak to us before you put anything in writing.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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