Suspensive conditions in contracts of sale of immovable property
When a contract is subject to a suspensive condition, the contract comes into effect only if the condition is met. On a practical level, this can entail a future event such as a deposit payment, securing a loan or even conditions such as graduating from university to receive a bonus payment.
Suspensive conditions are commonly encountered in contracts for the sale of immovable property (e.g. deposit requests). They are often misunderstood, which can result in little recourse.
According to Mia v Verimark Holdings (Pty) Ltd (522/08)  ZASCA 99 (18 September 2009):
“The conclusion of a contract subject to a suspensive condition creates ‘a very real and definite contractual relationship’ between the parties. Pending fulfilment of the suspensive condition the eligible content of the contract is suspended. On fulfilment of the condition the contract becomes of full force and effect and
enforceable by the parties in accordance with its terms. No action lies to compel a party to fulfil a suspensive condition. If it is not fulfilled the contract falls away and no claim for damages flows from its failure. In the absence of a stipulation to the contrary in the contract itself, the only exception to that is where the one party has designedly prevented the fulfilment of the condition. In that event, unless the circumstances show an absence of dolus (intent) on the part of that party, the condition will be deemed to be fulfilled as against that party and a claim for damages for breach of the contract is possible.”
In other words, the fulfilment of a suspensive condition is a pre-requisite for a contract to come into force and effect. Similar to the fulfilment of a suspensive condition, in addition to any condition for the creation of a contract, there are a number of requirements that must be fulfilled.
It is endeavoured to focus on the challenges posed by the misconceptions of the nature and effect of suspensive conditions, as well as the non-compliance with those conditions, legal defences, ad hoc examples thereof and the general requirements for valid contracts specifically in respect of contracts of sale of immovable property.
Requirements for valid contracts
(i) Consensus. The parties must reach conscious agreement, with a genuine concurrent intention.
(ii) Contractual capacity. The parties must be legally capable of concluding a binding contract. They must be over the age of 18 years and of sound mind or not insolvent.
(iii) Legality. The contract must be legal and may not contradict any statutory or common law rule.
(iv) Possibility of performance. The performance must be determinable and possible at the time of conclusion.
(v) Formalities. The contract must abide by any formalities set by law or by the parties themselves. For example, in terms of Section 2 of the Alienation of Land Act 68 of 1981, all contracts of sale of immovable property must be in writing and signed by both parties. All the above requirements must be fulfilled in addition to any suspensive condition for a legally enforceable contract to come into existence.
The Court held in this case that the Defendant had not established that the Plaintiffs had waived the suspensive condition, thus the sale agreement had lapsed and the Plaintiffs were entitled to the return of the deposit with interest
Another case one must take cognisance of is ELOFF & ANOTHER v DEKKER  JOL 21331 (C)
The Plaintiffs (mother and daughter) purchased immovable property in Gordon’s Bay. The sale agreement was suspensive upon the Plaintiffs obtaining a bond approval on a specific date.
The Plaintiffs bond was approved but for a lesser amount than was required. The Plaintiffs were thus of the view that the sale agreement had lapsed and requested repayment of their deposit paid.
The Seller admitted that the bond had not been approved in the correct amount but alleged that the Plaintiffs had accepted the lesser bond that was granted and that the Plaintiffs had thus waived the suspensive condition relating to the bond.
The Seller was thus of the view that the sale agreement was valid and binding.
The Seller thus rejected the Purchasers’ request for the repayment of the deposit and the matter proceeded to court.
What the court held
The Court confirmed the principle that a mortgage bond clause in a sale agreement is for the exclusive benefit of the purchaser.
The Court further confirmed the principle that a purchaser may unilaterally waive the benefit of the suspensive condition relating to the obtaining of the bond, provided the waiver takes place before the date for the fulfilment of the suspensive condition.
The Court held that there was a presumption against waiver and that a waiver must be clear and unequivocal.
The Court held in this case that the Defendant had not established that the Plaintiffs had waived the suspensive condition, thus the sale agreement had lapsed and the Plaintiffs were entitled to the return of the deposit with interest.
Where an agreement for the sale of immovable property contains a suspensive condition to the effect that the Purchaser must obtain a mortgage bond:
- the agreement is suspended until the bond is approved;
- if the bond is not approved by the due date and in the correct amount, the sale agreement will lapse;
- if the purchaser obtains a lesser bond and wishes to accept that bond, the purchaser can unilaterally waive the bond condition, provided that such waiver takes place before the end of the time period for the obtaining of the bond;
- the purchaser’s waiver must be clear and unequivocal (the waiver should be done in writing);
- the waiver may be contained in an addendum and signed by both seller and purchaser, should the seller be agreeable. The addendum must be signed before the end of the time period for the obtaining of the bond;
- any extensions to the bond suspensive condition period must be contained in an addendum signed by seller and purchaser.
Doctrine of fictional fulfilment and waiver of the suspensive condition
As previously stated, in addition to the requirements for legally enforceable contracts in terms of common law, any suspensive conditions contained in the contract must first be fulfilled. Simply put, if a contract is breached, it cannot be enforced if the requirements being were not met and suspensive conditions were not fulfilled. As a result, damages often cannot be claimed.
In terms of this common law principle, where a party wilfully prevents a suspensive condition from being fulfilled, the aggrieved party may rely on the doctrine of fictional fulfilment to remedy the situation. This means that the defaulting party will have to perform his obligations just as if the contract had never been subject to a suspensive condition at all. If he does not perform his obligations, he may be liable for damages resulting from his breach of contract. A number of cases have relied on this theory, including the case of Du Plessis & Smith NNO v Goldco Motor & Cycle Supplies.2008 SCA 372.
Waiver of Suspensive Condition
In some instances, the purchaser can waive the suspensive condition, eliminating the need to fulfil it and the contract is legally valid and enforceable. The above was illustrated in Abraham Willem Adriaan Coetzee v Anna Catharina Van der Walt, Free State High Court – case number: 2589/2004.
In this case, on 27 June 2003, the parties to the contract entered into a Deed of Sale of a fixed property. A dispute developed between the parties, with the respondent alleging that the contract has lapsed. The applicant disputed the allegation and launched an instant application in which he sought ancillary relief and an order declaring the contract to be valid and the contract was also made subject to suspensive conditions, which was the payment of a deposit.
It is common cause that no deposit, let alone the full purchase price, was paid into the trust account of the transferring attorney.
What the court held:
In the judgement the court made reference to MIA v d J L Properties (Waltloo) (Pty) Ltd and Another 2000 (4) SA 220 TPD., in which it was held that the suspensive condition protected the purchaser and that he could waive it. It was further held that by raising a bond for less than the stipulated amount, and opting to provide guarantees for the full purchase price, the purchaser had waived the protection of the suspensive condition.
The issue of waiver of a suspensive condition was also considered in Westmore v Crestanello and others 1995 (2) SA 733 WLD. The court held that the real difference between these two cases lies in the question of when a purchaser should waive the protection; and who is meant to be protected by the suspensive condition in question.
In the Westmore- case the court held that the purchaser must waive the protection of the suspensive condition the cut-off date of the condition. In the MIA case it was held that, where a suspensive condition is not waived, the contract lapsed when the condition expired. The court also held that “whatever happened thereafter was, to use a phrase borrowed from Shakespeare, “much ado about nothing” and could not “breathe new life into the corpse”.
This means that no contract comes into existence where the suspensive condition is not waived and not fulfilled. No remedy can be invoked for a breach of contract that never existed.
Contracts of sale of immovable property are intricate and need to be perused carefully to determine the validity thereof.