In property transactions, it’s common for an Offer to Purchase to include suspensive
conditions. These clauses suspend the contract’s operation until specific conditions are met.
For example:
- A purchaser might need a mortgage bond to finance the property.
- A purchaser might need to sell their current property to proceed with the new purchase.
Typically, the Offer to Purchase specifies a deadline by which these conditions must be
fulfilled. But what happens when that deadline approaches—or worse, passes—without
fulfillment? Should you draft an Addendum or a Reinstatement Agreement to “revive” the
contract?
The Supreme Court of Appeal recently addressed this question in Maria Luisa Palma Codevilla
v Paula Jane Kennedy-Smith NO and Others (494/2023) [2024] ZASCA 136.
The Legal Question:
The core issue, in this case, was whether an agreement for the purchase and sale of immovable property could be revived after a suspensive condition had lapsed.
South African law is clear on suspensive conditions:
- If the condition is fulfilled, the contract becomes enforceable.
- If it is not fulfilled, the contract lapses and becomes unenforceable.
In this case, the original Agreement of Sale required the purchaser to obtain a mortgage bond
by 14 February 2020. When this condition was not met, the parties entered into two
addendums:
- First Addendum: Extended the deadline to 19 February 2020, but the bond was still not obtained.
- Second Addendum: Dated 20 February 2020, it outlined new terms, including approval for two smaller mortgage bonds and a bank guarantee for the remaining amount by 25 February 2020.
The parties believed the second addendum would “revive” the Offer to Purchase even though it was signed after the Offer to Purchase had lapsed on the 19th.
Majority vs. Minority Judgments.
The Supreme Court of Appeal delivered a split judgment on the matter:
- Minority Judgment:
The minority argued that the intentions of the parties were clear. Despite the lapse of the
suspensive condition, the second addendum could effectively revive the original Offer to
Purchase on the same terms and conditions.
- Majority Judgment:
The majority disagreed. They held that once the suspensive condition lapsed, the original Offer
to Purchase was invalidated. Since no new agreement was entered into, the second addendum
could not “revive” the lapsed contract. The court found that:- Extending the deadline for a suspensive condition after it lapses requires a new
agreement. - The parties’ failure to appreciate this distinction rendered the Offer to Purchase
and its addendums are invalid.
- Extending the deadline for a suspensive condition after it lapses requires a new
The court ultimately ruled in favor of the appellant, with costs awarded to them.
Key Takeaways.
- Understand Suspensive Conditions: These clauses are binding and enforceable only if the conditions are fulfilled by the specified deadline.
- Avoid Missteps with Addendums: If a suspensive condition lapses, simply drafting an addendum to extend the deadline is insufficient. A completely new agreement must be concluded to revive the contract.
- Seek Legal Guidance: Property transactions involve nuanced legal principles. Professional advice can ensure that contracts remain enforceable and reflect the parties’ intentions.
In conclusion, when facing unfulfilled suspensive conditions, drafting an Addendum may seem
like a quick fix, but it is not always the correct solution. To avoid invalidating the agreement,
always ensure that a proper Reinstatement Agreement—or a new Offer to Purchase—is drawn
up in compliance with the law.