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Beware of poorly worded “Bond Clauses”

Park 2000 Development (Pty) Ltd v Page (905/2010) [2011] ZASCA 208 (29 November 2011)

This recent court case dealt with the “bond clause” and suspensive conditions in a deed of sale relating to the sale of land. In this case the deed of sale contained a suspensive condition to the effect that the sale was subject to the purchaser obtaining a loan (bond) by a certain date. The purchaser did not obtain the bond by the stipulated date. However, the clause in the agreement which contained the suspensive condition (relating to the obtaining of the bond by the purchaser) was poorly worded and this created uncertainty regarding the meaning of the clause.

The purchaser claimed that, even though the bond had not been granted by the stipulated date, the agreement was binding and he was entitled to transfer of the property into his name.

The court stated that the condition was clearly a suspensive condition which made the sale subject to the purchaser obtaining a bond by a certain date. It confirmed the principle that a sale lapsed if a suspensive condition was not fulfilled by the stipulated date and that the sale agreement could not be enforced by the seller or the purchaser. In this case, as the purchaser had failed to obtain the bond by the stipulated date, the sale had lapsed and the purchaser was not entitled to transfer of the property.

This case serves as yet another lesson to persons drafting contracts (and sellers and purchasers who sign contracts) to ensure that the wording of the contract is clear and unambiguous. Our law is clear on the nature and effect of suspensive conditions and the consequences of the non-fulfillment of such conditions. However, poor drafting (wording) of such contracts often leads to expensive litigation.

At Wilson McWilliams Inc we provide expert, professional advice on the drafting of contracts and the sale and transfer of property.


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3 Responses to Beware of poorly worded “Bond Clauses”

  • Dear Rob
    I have had one similar to this transaction where a bond was a suspensive condition.

    However when it was clear that the purchaser was not going to be awarded a bond within the time stipulated, paid cash in full with transfer costs.The conveyancing attorney was not available to accept the change in plan, which she acknowledges.

    She now refuses to do the transaction, as she says that the suspensive condition of a bond was not met.

    Little more complication is that the executor of the estate haso died after accepting the offer. The monies are still in her traust account since Nov 2011.
    Your input and advise would be greatly appreciated. Best regards
    Alon

    • Hi Alon. It seems that this query went missing somehow. Queries from the website are supposed to come to me and not Rob. I would need to establish all the facts before I can give final advise, but it appears from the above facts that the purchaser may have waived the suspensive condition. Suspensive conditions imposed for the benefit of one of the contracting parties(such as a “bond clause”) can be unilaterally waived by that party(in this case the purchaser)provided the waiver takes place before the date by which the suspensive condition must be fulfilled (which it appears may have been the case). It is possible that there is a binding agreement between the parties. I’m not sure what you mean when you say that ” The conveyancing attorney was not available to accept the change in plan….”

      Regards
      Sloan Wilson

      • Hi Sloane
        Thank you for your valued reply and advise thus far.
        The facts of the matter are that i took an offer on a property some time back, that had a suspensive cluase that finance had to be approved by a financial institution by a certain date.

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