A reader who seemingly had reached a deal to purchase a property wants to know what his options are after the seller disputed that they had come to an agreement.
He had been eyeing the property for some time and, with the seller appearing to be in financial difficulty, the reader took his chance to try to secure the deal.
With time being of the essence, he was not properly prepared for the purchase.
He had planned to acquire the property under a separate entity – either a company or trust – but at the time of dealing with the seller neither had yet been registered.
Also problematic is the fact that he and the seller ostensibly agreed to a transaction based on a handshake. Any agreed terms were done orally, including the purchase price.
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The reader set about beginning the process of registration of the entity to finalise the deal and for transfer to take place. However, the seller then disputed that an agreement had been reached.
The reader suspected that the seller’s financial position had been alleviated to some extent and some remorse about the deal had set in.
Two immediate potential issues present themselves.
The Alienation of Land Act provides that no alienation of land shall be of any effect unless it is contained in a deed of alienation signed by the parties or by their agents acting on their written authority.
Thus, an agreement for the sale of a fixed property should be in writing to be valid.
The next potential issue is that relating to the identity of the purchaser.
It is not the reader who intended to ultimately purchase the property but rather a trust or company yet to be established.
A contractual provision in favour of a third party is known as a stipulatio alteri and is quite acceptable in most instances.
Assuming there is no issue in this instance, that particular stipulation may provide the reader with some relief considering the apparent invalidity due to a failure to comply with the provisions of the Alienation of Land Act.
In the 2018 Supreme Court of Appeal judgment of Loggenberg NO & others v Maree, the court was faced with a similar scenario.
It took a straightforward approach in its determination of the matter by stating that a typical stipulatio alteri is a contract concluded between A and B for the benefit of a third party (C).
By accepting the benefit, C becomes a party to that contract, so that it is A and C who are bound to each other.
Such a contract has been recognised as enforceable in relation to a company not yet formed.
This means that nothing depends on the fact that the trust was not in existence when the oral agreement was concluded.
The court added that once the trust was established, by accepting the benefit of the oral agreement it could obtain the right contracted for the transfer of the property.
The court said since the oral agreement could be construed as something other than a sale it would not be prohibited by the Alienation of Land Act.
If the facts are supported by this judgment, the reader could possibly argue that an agreement existed whereby the entity subsequently established was able to argue that it is accepting the benefit granted to it.
This could compel the conclusion of an agreement of sale between the seller and the entity, where such agreement is valid under legislation.
As this could be a tricky factual scenario to prove, the reader should take legal advice as to the evidentiary weight and whether a claim could successfully be proved in court if it were to go that far.
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