The transfer of immovable property is governed and regulated by South African legislation in order to protect all parties to the transaction. One of the ways the transfer of property is regulated is through the Offer to Purchase document (also referred to as a Sale Agreement). As such, it is important to understand how signing an Offer to Purchase affects you and what it means to be legally bound by the terms in the agreement.
An Offer to Purchase document is drawn up (often by an Estate Agent or Conveyancer in consultation with a seller) in order to stipulate the details of the sale agreement. Having such a document in writing ensures that there is no uncertainty about the property being sold, its conditions and any other important elements, and helps facilitate a smooth transfer. This document is signed by the prospective buyer making an offer, and then signed by the seller if the offer is accepted.
Once both the buyer and seller have signed the Offer to Purchase, it becomes a legal binding contract and both parties are required to fulfill their responsibilities as laid out in the agreement. Cancelling such an agreement is then only possible should there be a basis in law for doing so.
Cancellation would be possible in the following 2 instances. The first of these is cancelling the contract based on a clause contained in the agreement. While the contents of Offer to Purchase documents are quite standard, it is possible to adjust these and include clauses that take into account particular situations, conditions or requirements as agreed by the buyer and seller of a property.
As such, the agreement can contain clauses that stipulate under which circumstances either party is allowed to cancel the contract. If it is possible to show that cancelling the contract is in accordance with such a clause, there would be no consequences for cancelling the contract and the entire agreement would no longer be binding on either party.
An Offer to Purchase can also include a suspensive clause or condition. Only once a suspensive condition has been fulfilled, will the contract come into force. A commonly included suspensive clause will state that the agreement is dependent on the buyer’s bond being approved. This protects the buyer from being liable for the purchase price without the backing of finance.
The second way in which one can cancel the contract is cancelling it based on a party’s breach of contract. This means that if one party to the agreement acted in a way that contravened the agreement, the other party may lawfully cancel the contract. They may also, depending on the situation and the timeframe within which it is done, claim damages from the party who was in breach of the contract. In the event of one party committing a breach, the aggrieved party may, as an alternative to cancelling the agreement, insist that the sale go through and be finalized as specified by the terms of the agreement. This might, however, entail approaching the courts for an order to this effect.
With this basic understanding in mind, in most situations there are many details and nuances that need to be taken into consideration. As such, it is always best practice to seek legal advice before cancelling a contract to ensure it is done in accordance with the relevant terms, and based on merit.