Protecting Your Property Sale : When Addendums Fall Short
This article discusses a court case about whether a property sale agreement can be brought back to life after a key condition wasn't met on time.
The Case: What Happened?
A buyer made an Offer to Purchase (OTP) a property in Cape Town. This offer had a suspensive condition: the sale depended on the buyer getting a approved by a specific date (February 14, 2020). If the loan wasn't approved by then, the agreement would fall apart, unless the seller agreed in writing to extend the deadline.
The buyer faced delays getting the loan. So, on February 11, 2020, they signed a first addendum (an official change to the original agreement) extending the home loan approval deadline to February 19, 2020. However, the buyer still couldn't get the funds, and the OTP, even with the extension, lapsed (became invalid) on February 19.
Despite this, the seller and buyer signed a second addendum on February 20, 2020, trying to set new terms for the sale and get the necessary funds. The buyer eventually paid a large sum of money, and the home loan was approved.
Later, due to financial difficulties, the buyers tried to cancel the agreement. The person who had helped the buyers with the funds then tried to get their money back, arguing the agreement had become invalid and couldn't be revived by the second addendum. The seller, however, insisted the contract was still valid.
What are Suspensive Conditions and Addendums?
- Suspensive Condition: Imagine you agree to buy a car, but only if you get a loan from the bank. That "if you get a loan" is a suspensive condition. If you don't get the loan, the deal is off. In property sales, it often means the sale is only final if the buyer gets a home loan approved. If the condition isn't met by the deadline, the agreement usually becomes void.
- Addendum: This is like an extra page added to an existing contract to change or add something. It doesn't replace the original contract but works with it. For example, it can change payment dates or extend deadlines. Both parties must sign it to make it legally binding.
The Court's Decision
The case went all the way to the Supreme Court of Appeal (SCA) - Maria Luisa Palma Codevilla v Paula Jane Kennedy-Smith NO and Others (494/2023) [2024] ZASCA 136. The main question was: Can an agreement that has already become invalid because a suspensive condition wasn't met on time be brought back to life by a later addendum?
The SCA's majority decision was no. They explained that once a suspensive condition isn't met by the agreed deadline, the agreement automatically lapses and becomes unenforceable. You can't simply use an addendum signed after it has lapsed to revive it. It's like trying to restart a game after it's already over.
The court said that the second addendum couldn't make the expired contract valid again. Therefore, the appeal was successful, and the buyer's representative got their R1,950,000 back.
Key Takeaway
This case highlights how important it is to meet all conditions in a contract by their deadlines. If a suspensive condition isn't met on time, the agreement often becomes invalid. If that happens, you usually can't just fix it with an addendum; you might need to draw up a completely new agreement instead.