Breach Clause silent on Status of Deposit at Failure to Procure Bank Guarantee

Law and Courts II

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The applicant paid the deposit but failed to secure an acceptable bank guarantee for the balance - the fact that he elected to not obtain a bond but rather a short-term loan was not relevant. The respondent contended for the position that procuring the bank guarantee for the balance of the purchase price for the immovable property was a ‘term’ of the agreement between the parties while the applicant’s case was that it became impossible for the applicant to obtain the bank guarantee and that the agreement was ‘conditional’. The respondent argued for retention of the applicant's deposit however tendered no ground. The learned Judge approached Common Law and at the Law of Depositum it was stated the applicant enjoyed accrual of interest from the deposit. There was no counter for the threatening correspondence urging applicant's specific performance and the respondent did not follow up. The Act 34 of 2005 (the ‘NCA’) dealt with the right to refuse a quotation and the honourable Court linked the property guarantee, which was to provide for the balance of payment [and not to serve as security] to the NCA when assessing the precise nature of the clause which permits for the balance of the purchase price to be obtained by way of a bank guarantee. It was held that a clause making a contract subject to an event over which one party does not have complete control, in the absence of any indication to the contrary, falls to be interpreted as a condition and not as a term and the deposit was to be restored.
The respondent, duly appointed executor of a deceased estate, on opposed motion applied for an order for the return of a deposit paid by the applicant in connection with the purchase of certain immovable property by the applicant from the respondent. The respondent was vested with control of both immovable and the movable property, in and to the estate and the parties entered into an offer to purchase, so as to regulate the terms and conditions for the disposal of the immovable property and disposal of certain movable property, the latter at an agreed price of R1 million. The purchase price for the immovable property totalled R17 million of which R9 million was a deposit and the balance of R8 million on registration of transfer. A written agreement was entered into and '[T]he Purchaser shall within 21 (Twenty one) days of acceptance of this Offer to Purchase provide the Sellers attorneys with an acceptable bank guarantee in respect of payment of the balance of the purchase price’. The relevant portion of the agreement relevant to the purchase of the property was contained under the heading of the ‘suspensive conditions’, indicated as follows: ‘This offer is subject to ... [T]he parties concluding an Agreement of Sale in respect of the movable property simultaneously with the conclusion of this Agreement’.

Company Law Expertise

Vide - Royal Energy Management Services (Pty) Ltd v D F Carse N.O. [2021] ZAWCHC 241. Company Law Today comments - The newly promulgated Property Practitioner Act 22 of 2019 and its Regulation No. 34 in South Africa, having regard for deposit monies paid and where a bank provided no further guarantee for the balance of the purchase price - '[N]o estate agent may include or cause to be included or accept the benefit of, any clause in a mandate or in a contract of sale or lease of immovable property, providing for payment to him by the Seller or Lessor of immovable property of any remuneration, commission, benefit or gain arising from or connected with a contract of sale or lease regardless of whether the purchaser or lessee is financially able to fulfil his obligations in terms of the said contract'. In other words, no monies or expenses may be set-off, the deposit must be returned.



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