The validity of written sales agreements

This case and the Alienation of Land Act emphasise the need for written and signed sale agreements, as informal oral agreements lack legal validity.

July 10, 2023

This case is about a dispute over a written agreement to sell a piece of land. The question was whether the agreement was valid or not. The agreement was made between the liquidators (referred to as “the Seller”) and a company named Curro (known as “the Purchaser”).

The land being sold included some empty plots, one of which had a private road that provided access to other erven. The Purchaser intended to buy the land, subdivide it and develop it into residential erven.

Upon conclusion of the sale agreement, it was discovered that mistakes had been made in the agreement: the measurement of the road was recorded incorrectly, and the number assigned to the road was also wrong. The Purchaser failed to pay the deposit required, so the agreement was cancelled.

On 14 November 2016, the parties concluded a fresh sale agreement, the terms of which stated that the Sellers were to receive prompt payment of the whole purchase price and passing of ownership by 16 January 2017. However, there were still mistakes in respect of the Erf road number. The measurement was correct, but the number was wrong. The Purchaser breached the agreement again by not paying the deposit on time, but they eventually paid it. However, the transfer attorneys couldn’t complete the registration process by the agreed-upon date.

The Purchaser then discovered that part of the road extended into a neighbouring Nature Park, and they wanted that part of the road to be excluded from the sale. They also suggested subdividing the land. They had discussions about this, but nothing was put in writing, and the property was not subdivided over the following years.

After almost three years, the Seller asked the Purchaser to sign the transfer documents.  The Purchaser refused, claiming that the sale was never valid from the beginning. The Purchaser cancelled the agreement and the Seller went to court to get a ruling that would allow them to sell the land to someone else.

The court decided that the agreement was invalid because there was no agreement between the parties about the subject matter of the sale. The Seller wanted to sell the entire property, but the Purchaser didn’t want to buy the part that extended into the Nature Park. The court said that both parties initially intended to buy and sell the entire property, but the Purchaser changed their mind later.

The court referred to the Alienation of Land Act, which states that all important terms of a sale agreement must be written down and signed by both parties. In this case, the court considered the subdivision of the property to be an important term that affected the rights and obligations of the parties. Since it was not included in the agreement, the court concluded that the agreement was null and void.

Therefore, based on this case and the Alienation of Land Act, it’s important to have all the important terms of a sale agreement written down and signed by both parties. Informal oral agreements are not considered valid.

Written by Joy Carvalho

Moderated and approved by Clive Smith

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