It is common in offers to purchase (“OTPs”) in respect of immovable property for conditional clauses to be included. These conditional clauses frequently deal with the raising of the capital necessary to pay the purchase price.
Our law requires that any acquisition of immovable property must be in writing and signed by both the seller and the purchaser or duly authorised representatives of such persons. Further, the terms and conditions of the OTP must express the intention of the parties in sufficient detail to ensure that that the OTP is enforceable.
These important terms deal with issues such as the description of the property, the purchase price, the payment of the purchase price and so on.
The Inclusion of Conditional Clauses
Where there is a conditional clause, effectively the requirement of certainty as to the meaning of the conditional clause also applies.
So, for instance, the conditional clause would need to state its purpose in a manner which is able to be interpreted and understood by the parties. Where a conditional clause deals with the raising of finance, this would generally mean that its contents would carefully define the nature of the finance to be raised and the date by which such finance should be raised.
Our case law is clear that when a conditional clause fails to be met in accordance with its own terms, then the OTP itself lapses and ceases to exist.
In addition, the OTP cannot be revived by way of an addendum or by way of some other form of ancillary letter or partial agreement.
In short, an OTP which has ceased to exist (because a conditional clause of such OTP has not been complied with in accordance with its own terms), has to be replaced by a new OTP.
It is essential therefore that sellers and purchasers alike, and property practitioners, are aware that when a conditional clause is inserted into an OTP that non-compliance with such conditional clause automatically renders the OTP invalid and of no further legal consequence: there is nothing in law to be revived. A new OTP must be entered into by all the parties and signed by all the parties.
This principle was established once again in the Supreme Court of Appeal case Maria Luisa Palma Codevilla v Paula Jane Kennedy-Smith NO and Others (494/2023) [2024] ZASCA 136 (10 October 2024). Notwithstanding that all the parties involved intended to revive the OTP, (which had lapsed through failure of a conditional clause) by way of an Addendum which was signed by all the parties concerned, Schippers JA held in a majority judgment that the Addendum was incapable of reviving an OTP which itself no longer existed in law.