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Buying or selling property? Tips on contracts from Friedman Scheckter

By Anneli van Heerden, LL.B; LL.M; Candidate Attorney at Friedman Scheckter - Jan 25, 2019
Buying or selling property? Tips on contracts from Friedman Scheckter

Buyers and sellers of immovable property often rely on “pre-printed” standardized offers to purchase which, once signed by both parties, become a binding agreement for the sale of immovable property.

These contracts are so standard that the parties often do not read all the terms of the contract or simply give it a cursory glance before signing it.

This could give rise to one of two equally undesirable situations: firstly, a contracting party may think that terms that were discussed between the parties are included as terms in the written contract or, secondly, a contracting party may be held liable in terms of clauses he did not even know were included in the contract in the first place.

Most contracts do not need to be reduced to writing in order for to be valid, and most verbal contracts are legally binding in terms of our law.

The same, however, cannot be said of contracts for the sale of immovable property. These contracts are regulated by the Alienation of Land Act, which requires all contracts of this nature to be in writing and signed by both parties.

For most people, buying a house is the single most expensive contract they will ever enter into. It makes sense therefore that the law seeks to create certainty in these transactions by requiring the contract to be written and signed.

'Only a written contract is enforceable' -  Friedman Scheckter

Implicit in this requirement, is that all the terms of the contract must be reduced to writing.

Attorneys are often faced with the unenviable task of having to inform a client that certain terms that they have verbally agreed to, are unenforceable.

Whether the contracting party is of a trusting nature, and simply relied on the good faith of the other party or whether a particular clause was omitted by mistake really makes no difference.

Anything that is not included in the written contract is unenforceable, but the parties may still be held liable to the written portion of the contract.

Consider a situation where an unscrupulous seller verbally undertakes, for instance, to replace the carpets and paint the walls of a house that has been severely damaged by tenants, only to accept payment and effect transfer of the property without complying with this undertaking.

The Seller is only obliged to do what he has to do in terms of the written contract and the purchaser would have to go the complicated and costly court route to apply for rectification of the agreement to enforce the seller’s verbal promise to re-carpet and paint.

No doubt, the legal costs would exceed the cost of the promised improvements so economy would dictate that the buyer would have to bear the brunt and pay full price for the property – without the new carpets and paint job.

'Read and understand the contract' -  Friedman Scheckter

On the other hand, the contract may include certain terms that a contracting party is completely unaware of, as they either did not read the contract or did not understand all the terms at the time of signing it.

A primary rule of our contract law is that the person who signs a contract is deemed to know and understand what he put his signature to. This includes the terms that were not read before signing the contract.

For instance, where a contracting party signs a contract to purchase a unit in a sectional title development, the contract will typically stipulate that the purchaser undertakes to abide by the rules of the Body Corporate.

Let’s assume that the rules of the Body Corporate included a clause limiting the number of pets owners are allowed to keep on the property. Having read neither the contract nor the rules of the Body Corporate, a purchaser may be completely unaware of the fact that he is not allowed to move into the unit with all of his seven dogs and cats.

In such a situation, a valid contract of sale has been entered into, and the purchaser will be held to his end of the bargain, even though he was completely ignorant of the term relating to his pets.

On the other side of the coin, a purchaser who is ignorant of the duties imposed by the contract may inadvertently breach the terms thereof, enabling a seller to cancel the contract and claim damages from him.

By way of example, standard contracts for the sale of immovable property often include a clause prescribing a method of payment of the purchase price.

Generally, such a clause will state that, within fourteen days of signature, the purchaser must provide bank guarantees for the payment of the purchase price.

'The seller can cancel the contract and claim damages from the purchaser' 

When the conveyancer appointed to effect the transfer calls on the purchaser to make payment, he is told that the purchaser’s funds are invested on a thirty days’ notice deposit, and that the purchaser cannot comply with the payment arrangements contained in the contract.

The seller is then entitled not only to cancel the contract, but to claim damages from the purchaser as well. Damages under these circumstances typically include legal fees and estate agent agent’s commission.

Circumstances as these are unfortunately not uncommon. Similar situations arose even as far back as the Roman times, from where the our legal principle originated that that contracting parties are bound to the terms of the written agreement, regardless of whether or not they actually read it before signing. Caveat subscriptorliterally means “let the signer beware”.

Contracts for the sale of immovable property, in particular, can be a minefield and is the domain of experts. It makes sense to seek expert advice before signing it.

The consultation fee is a small price to pay when compared to the disastrous situation that can ensue when you sign a contract without being fully aware of what you are agreeing to.

For more information or for help, contact Friedman Scheckter on 041 395 8400 or visit them at 75 2nd Ave, Newton Park, Port Elizabeth. Visit them online at friedmanscheckter.co.za today.

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