1 October 2009 by

The Case of the Reluctant Purchaser

It is a common practice, when immovable property is sold by public auction, that so-called "Conditions of Sale" will be circulated by the auctioneer prior to the auction commencing and that have to be signed by the successful bidder at the auction. Usually, these conditions contain a clause to the effect that the successful bidder purchases the property provisionally, subject to acceptance of the offer by the seller within a given period of time after the auction.

Successful bidders who sign such conditions of sale are advised to carefully consider and, if necessary, seek legal advice on their legal effect, particularly the question of when and under what circumstances a binding agreement of sale comes into existence.

The recent decision of the Supreme Court of Appeal in the matter of Withok Small Farms (Pty) Ltd and Others v Amber Sunrise Properties 5 (Pty) Ltd 2009 (2) SA 504 (SCA) in which the court was called on to decide when a binding agreement of sale had been concluded is a case in point.

The "purchaser" had been the highest bidder for certain immovable property at a public auction, whose bid had been accepted by the auctioneers. On conclusion of the auction, the purchaser had signed the conditions of sale as had the auctioneer's representative.

On a date within seven days of the date of the purchaser's signature, the seller's representative had completed the latter's details on the conditions and had confirmed the sale in writing by signing the conditions of sale as required by clause 1.

The confirmation of the sale was not, however, communicated to the purchaser within the time period contemplated by clause 1 and the purchaser only received notice of the confirmation some time later.

The purchaser subsequently applied to court for an order declaring the agreement to be of no force and effect and for repayment of the deposit that it had paid to the auctioneers, contending that no binding agreement had come into existence.

The Judge hearing the application held that no agreement of sale was concluded at the time of the auction and that the only consequence of the agreement concluded at that stage was to bind the purchaser to its bid for a period of seven days. The Court held that the reference in the conditions of sale to the "confirmation" of the sale had to be construed as a reference to the acceptance of an offer and proceeded to determine whether the provisions of the conditions of sale expressly or impliedly indicated a mode of acceptance other than that required by common law, namely, that it had to be communicated to the offeror. The Court found that there was insufficient evidence to indicate that the common law rule was not to apply and, as the seller's acceptance had not been communicated to the purchaser within the seven day period, the purchaser had to succeed.

On appeal, the Supreme Court of Appeal, while agreeing with the lower court that on a proper construction the reference in the conditions of sale to the confirmation of the sale had to be construed as a reference to the acceptance of the offer, found that in each case it is necessary to consider the terms of the offer to determine the mode of acceptance required. Where the offer takes the form of a written contract signed by the offeror, the inference will more readily arise in the absence of any indication to the contrary that the mode of acceptance required is no more than the offeree's signature and particularly where provision is made in the written contract for the offeree to specify the date on which he or she signs the contract.

The Court held that once completed and signed by the sellers, the document would have served as a recordal of the date and place of the "confirmation".

As the seller had signed the conditions of sale within the seven day period referred to in clause 1, the Court found that a valid agreement of sale had come into existence on that date.

Joe Whittle,
Director, Dispute Resolution: Litigation and Arbitration

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