A BOND CLAUSE DEADLINE WHOOSHES BY AND A SALE DIES – CAN YOU REVIVE IT?
“I love deadlines. I love the whooshing noise they make as they go by.” (Douglas Adams in The Salmon of Doubt)”
Contracts often contain suspensive conditions, a common example being the bond clause in a property sale agreement. The standard bond clause provides that the buyer must obtain a bond by a set deadline, and everyone’s rights and obligations under the agreement are suspended until the bond is granted. If the bond isn’t granted by the deadline, there is no sale.
In practice, the buyer often struggles to meet the set deadline and asks for an extension. If that happens to you, be sure to structure the extension correctly and to get it done and dusted before the deadline expires.
Parties often think “oops, we both missed the deadline, but no worries, we want the sale to succeed so all we need do is agree to revive the agreement.” But that’s a fatal mistake, because if a suspensive condition fails, the contract dies and all your attempts to bring it back to life – usually by way of an addendum or an extension of the time limit – are doomed to fail. You will need a brand new contract if both of you still want to proceed.
Let’s illustrate this point with a Supreme Court of Appeal (SCA) decision in which the parties attempted to revive their agreement after the bond clause had already failed.
A deadline passes and a R5m house sale dies
In February 2020 (i.e. shortly before the economic shock of the pandemic), the buyers of a R5.15m house paid the agreed deposit on time but couldn’t raise the required bond of R4.95m before the deadline set out in the bond clause. A first addendum to the sale gave them another few days, and that addendum was valid because both parties signed it before the deadline expired.
But then the parties made a fatal mistake. Only after the extended deadline had whooshed merrily past did they sign a second addendum, agreeing to extend the date again and thus, they both believed, saving the sale.
The buyers now did more than just get a bond – they paid R1.95m in cash and provided bank guarantees for the rest. And they did all that before the second deadline expired, so all seemed well with the sale. Until Covid struck. That left the buyers with financial problems, so they tried to exit the sale and get their money back. “No deal,” said the seller, “the agreement is still valid and enforceable, you have to take transfer.”
Off to court went the buyers, eventually ending up in the SCA, which held the sale to be void and ordered the seller to refund them their R1.95m. The Court couldn’t have been clearer in ruling that when a suspensive condition (like a bond clause) isn’t fulfilled, the whole contract becomes unenforceable. This despite the fact that both buyer and seller clearly intended to proceed with the sale and thought they were validly reviving it with their second addendum.
Our law is clear – when a sale agreement has already lapsed, there is nothing you can do to revive it. Only a new agreement could have saved the sale, and the Court, on the facts, rejected the seller’s attempts to convince it that the second addendum was actually a new agreement. It was, said the Court, just an invalid attempt to revive a dead contract.
Here’s what to do to keep that sale alive and well
Every situation will be unique, but at the very least follow these three principles
- Failed suspensive conditions (in particular bond clauses) are notorious sources of dispute when property sellers and buyers come to blows. Make sure yours is clearly worded and reflects exactly what you have agreed to. A professionally drawn sale agreement tailored to your needs really is a no- brainer here
- Keep an eye on those deadlines! If you need to extend one, do so before it expires with a full, clear and signed addendumm
- If you happen to miss the boat there, a whole new agreement is essential. It may well incorporate the same terms and conditions as the original (updated where applicable of course) but nothing less than a brand new deed of sale will pass muster
As always, sign nothing until your attorney has checked it for you.
A THOUGHT FOR MANDELA MONTH – HOW DOES UBUNTU IMPACT YOUR LEGAL RIGHTS?
“In Africa there is a concept known as ‘ubuntu’ – the profound sense that we are human only through the humanity of others.” (Nelson Mandela)
International Nelson Mandela Day is celebrated worldwide on 18 July every year, but in South Africa the whole of July is Mandela Month.
What better time to talk about the concept of “ubuntu”, which emphasises our interconnectedness and interdependence, and embraces values like fairness, compassion, respect and dignity?
How does ubuntu influence your legal rights?
Our courts have often considered, and sometimes applied, the principles of ubuntu in a wide variety of legal contexts. The “it’s unfair and unjust!” defence pops up regularly (often when discussing whether something is “contrary to public policy”) in disputes of all kinds. Asset sales, property sales, leases, neighbours’ disputes, evictions, workplace litigation, franchise agreements, criminal sentencing cases, civil claims, defamation claims, trust disputes and so on – the list truly is endless.
For example, in 2023 the High Court refused to order the eviction of a group of tenants, despite the fact that they were in breach of their leases, on the basis that the eviction would render them homeless and thus the application for eviction was “completely devoid of any empathy for the [tenants’] living conditions. There is,” the court stressed, “in fact, no ubuntu at all.”
When is a contract unenforceable for being contrary to ubuntu?
When it comes to contracts, we have wide freedom to contract as we please, and people entering into agreements need to know with reasonable certainty that the law will help them enforce compliance with those agreements. Those principles have led our courts to confirm that the fundamental principle of “agreements must be honoured” or “you are bound by what you agree to” still underpins our law.
As the Constitutional Court has put it, “a court may not refuse to enforce contractual terms on the basis that the enforcement would, in its subjective view, be unfair, unreasonable or unduly harsh … It is only where a contractual term, or its enforcement, is so unfair, unreasonable or unjust that it is contrary to public policy that a court may refuse to enforce it.
In practical terms, this means that as a general rule our courts will enforce agreements entered into freely and voluntarily. But they can still be persuaded to hold a contract void and unenforceable if satisfied that it is against public policy, a concept that is measured objectively and informed by constitutional values such as ubuntu. A good example is a 2013 High Court refusal to enforce an acceleration clause in a loan agreement because of its draconian implications – it would have allowed the lender to call up in full a debt of R7.6m after the borrower had failed, through a miscalculation, to pay just R86,57 in default interest.
Every case will be decided on its own facts and merits. That inevitably opens up grey areas, which in turn provide fertile ground for uncertainty, dispute, and litigation. So, although in practice our courts lean strongly in favour of enforcing agreements as they stand, rather be safe than sorry – the more closely your contracts of all types adhere to principles of fairness and justice, the less likely you are to see them challenged in court.
Speak to us if you are uncertain whether or not your contracts and other documentation will pass muster if measured against ubuntu.
WHAT IS THE NORMAL RETIREMENT AGE? IT’S COMPLICATED, AS THE PLUMBERS TALE PROVES
“When cognitive capacities are the focus, the 70s are the new 50s.” (IMF)
Fake news articles suggesting that South Africa was implementing a new standard retirement age policy, supposedly from 30 May this year, recently went viral on social media. Convincingly structured to look realistic, the articles suggested that 65 is the new universal standard retirement age for all employees across all sectors.
What the law actually says
- Age discrimination is “automatically unfair”, and any employer found to be guilty of it by unlawfully forcing an employee to retire early faces a compensation order of up to 24 months’ remuneration (double the normal award for a run-of-the-mill unfair dismissal), re- instatement or re-employment
- There is, however, an escape clause there for employers: “A dismissal based on age is fair if the employee has reached the normal or agreed retirement age for persons employed in that capacity.”
- Even where a dismissal itself is fair, you must still follow a fair process in implementing it – more on that below
It is an important topic, with increasing numbers of employees wanting to (or needing to) work into their 70s. A recent Labour Court ruling showing those principles in action is well worth taking note of.
The plumber forced to retire at 60
An artisan plumber with 12 years of service had his employment terminated when he turned 60.
He asked the Labour Court to declare his dismissal automatically unfair as other employees had been allowed to work until they were 65. What’s more, he denied ever agreeing to retire at 60.
The employer countered that it had a two- tier retirement policy which obliged employees with more physically demanding jobs (site workers such as artisan plumbers) to retire at 60 whilst supervisory and administrative personnel (such as foremen and office staff) only had to retire at 65.
On the facts, the Court declared the dismissal to have been fair, finding that the evidence pointed to the employee being subject to a retirement age of 60 because:
• The employer’s retirement policy was in line with the rules of the applicable Building Industry Pension Scheme
• Although no signed copy of his full employment contract could be found, the employer did produce a standard annexure to such a contract, confirming retirement at 60 and “probably” signed by him (he denied signing it but agreed the signature looked like his)
• A number of his fellow plumbers had also been retired at 60 (he attended their retirement functions), and other cases of retirement at age 65 cited by him related to employees in the “65 tier” – that is in supervisory or administrative positions
• Another plumber’s contract was produced, with the retirement provision in place
Bottom line: the employee hadn’t proved that his retirement at the applicable retirement age of 60 was an automatically unfair dismissal, and the Court held his dismissal to be fair.
How to ensure that an age-related dismissal is fair
First prize is to specify an agreed retirement age in all your employment contracts, ideally from day one. If you want to add a retirement clause later, or to change anything about an existing clause, be sure to do so by negotiation and agreement, not unilaterally. And be sure to keep the original, fully-signed contract safe and accessible (unlike the employer in this case who had to rely on a scan of just the annexure to the contract).
Alternatively, be ready to prove that there is a “normal or agreed retirement age” for employees employed in the same capacity.
The dismissal must be genuinely based on the employee having reached retirement age and cannot, for example, be a disguised retrenchment or a dismissal for some other reason.
It’s crucial that you follow a fair process. Open communication, reasonable notice, and applying the rules consistently to all employees could be critical here.
PRIVATE PROSECUTION: NEIGHBOURS AT WAR
“I charge you by the law.” (William Shakespeare in The Merchant of Venice)
Victims of crime are entitled to see the perpetrators brought to justice. Feeling that the justice system has failed you can cause significant psychological harm and feelings of victimisation.
So, what happens if you believe that you are the victim of a crime, which you duly report to the police – only to be told that the NPA (National Prosecuting Authority) has declined to prosecute?
You could of course console yourself with the thought that “well, at least I tried” and walk away unfazed. But if you feel strongly enough about it, you are not without legal remedy – in appropriate cases you could be advised to go the private prosecution route.
A significant SCA (Supreme Court of Appeal) judgment last year provides an excellent example of just such a case.
Neighbours at war in an upmarket suburb
The scene here is Kloof Road in Cape Town’s Bantry Bay, renowned for its prime location on the Atlantic Seaboard, luxurious houses, and panoramic sea views.
The protagonists are next-door neighbours, whose acrimonious relationship and long history of disputes was founded in the one owner’s renovations, and the other’s strenuous objections to them. Who will eventually win that particular battle remains for another court to determine, but in the course of these disputes the one owner, a senior attorney, accessed his neighbour’s confidential credit records using a colleague’s login details.
This tactic backfired when the neighbour laid criminal charges against her adversary, saying that he had unlawfully and covertly accessed her personal and private information without the required authority or consent. She later added charges of fraud and defeating or obstructing the administration of justice, alleging that during the consequent investigation he had variously and falsely claimed firstly to have not accessed her data, then to have had her consent, then to have acted as her attorney, and lastly to have accessed her records inadvertently.
The media’s reporting of this high-profile spat created what the Court later described as a “public spectacle”, and the trial courts will have to wade through a web of hotly- contested and conflicting evidence in their search for the truth.
But for now, our interest lies in the fact that the NPA declined to prosecute on any of these charges. Undeterred, the neighbour initiated a private prosecution, a move hotly contested by her opponent all the way up to the SCA.
What must you prove to launch a private prosecution?
The SCA, in ultimately allowing the neighbour to proceed, set out our law on the matter.
The starting point is always the NPA issuing a certificate nolle prosequi (a Latin term meaning that the State declines to prosecute), for it is that certificate which opens the door to you to have a go at it yourself. As a side note here, legislation specific to the SPCA, SARS and a few other specialised entities allows them to prosecute specified matters without a nolle prosequi certificate – but the rest of us need one.
Once you’ve got your nolle prosequi certificate you must prove that:
- You have an interest in the issue of the trial
- Your interest is substantial and peculiar to you
- Your interest arises from some injury individually suffered by you
- Your injury was suffered as a consequence of the commission of the alleged offence
In deciding whether or not to grant your application, the court will also consider whether private prosecution would offend public policy. If you are shown to be acting maliciously, vindictively, vexatiously, or without foundation, your application will fail.
Essentially, the Court performs a balancing act between your right to have your dispute resolved by application of the law and decided in a fair public hearing before a court, and the accused person’s right not to be subjected to unfounded and vexatious private prosecution.
In this case, the Court allowed the private prosecution to continue, commenting that the accused would now have the opportunity to vindicate his innocence at trial.
Think before you leap
Before you charge blithely down this route, bear in mind that private prosecution carries, in the Court’s words, “enormous financial risk”. So be very confident of your prospects of success and bear in mind that:
• Even if you win it’s a costly exercise, because you are now paying your own legal team and a private prosecutor out of your own pocket rather than relying on state officials to do the job for you
• If you lose and the trial court finds your prosecution to be unfounded and vexatious (a real risk after the NPA declined to proceed), you risk punitive costs and compensatory orders. If the accused can prove you acted without reasonable cause and with malice, you could also be liable for damages in a separate civil claim for malicious prosecution
Considering a private prosecution? We will assist you to weigh up the pros and cons.
