Don’t think twice about a lapsed offer as basis for new sale final judgment

On the 9th of December 2014, Jubi Properties (Pty) Ltd submitted a written offer to purchase (the Offer) a property owned by Boyce. The Offer was irrevocable until 17h00 on 12 December, thereafter it would lapse. However, the offer was not accepted within the stipulated time frame.

The parties met again on 14 December (2014) and negotiated and agreed to change the Offer through a handwritten document referred to as the ‘heads of agreement’. Initially they intended to draft a fresh agreement, however they did not.

At the meeting held on the 14th, they also decided to backdate the agreement to the 12 December 2014. According to Jubi, this was due to the parties’ common concern that if the agreement reflected acceptance on 14 of December Jubi would be accepting a lapsed offer. Hence in order to avoid any confusion, they backdated it.

Some details of the agreement stated

  1. a) The purchaser was identified as ‘Jubi Properties and/or a nominee’;
  2. b) The Offer contained a suspensive condition that Jubi would furnish Boyce with a letter of satisfaction regarding its due diligence inspection within 10 days, failing which the agreement would lapse;
  3. c) A non-refundable deposit of R400 000 was payable within 48 hours after the due diligence acceptance letter.

The due diligence was completed by 24 December (2014). Jubi advised Boyce of the satisfaction of the due diligence requirement and the parties gave effect to the agreement on the basis that it had been rendered unconditional, through the payment of the deposit.

Jubi properties then sought to exercise its right to appoint a nominee and chose a third party company to be the purchaser. It sought to cancel the agreement and to enter into a new deal. Nothing followed from this and Jubi remained the intended transferee.

In March 2016, Boyce’s attorneys advised Jubi that the agreement had lapsed due to nonfulfillment of the suspensive condition, or had been canceled pursuant to Jubi’s alleged repudiation of the agreement. The lapse of the agreement allegedly arose from the failure to comply with the due diligence within ten days after 12 December 2014.

The letter of satisfaction was furnished only on 24 December, the provision was not complied with and the agreement lapsed. The repudiation, Boyce further argued, related to Jubi’s (alleged) statement that it did not have sufficient funds, evidenced by it seeking to avoid the levy of double transfer duty on the transaction.

The critical issue for determination was the date upon which the ten day period for the performance of the due diligence and delivery of the letter of satisfaction commenced. The Offer provided expressly that it would lapse if not accepted by 17h00 on 12 December 2014. The Offer was not accepted hence it lapsed automatically.

The final verdict took into consideration that the fact that the parties chose to utilize the terms of the Offer that had lapsed in establishing their agreement on 14 December 2014, was irrelevant to the fact that the agreement came into existence on the 14th OF December 2014. A term of a contract cannot come into existence or commence operation prior to the establishment of the