Property Law

Notes on Agreements

GENERAL

These notes are not intended to be comprehensive, and care must be exercised in adopting them to specific circumstances. Please do not hesitate to telephone ROB MENZIES at Rob Menzies & Associates should you have a query. Although every attempt is made to ensure these notes are accurate, legislative changes and new Case Law may impact on the accuracy of these notes. No responsibility can be attached to Rob Menzies & Associates, its partners or employees, for any errors or omissions that may appear in these notes.

An Agreement of Sale of land (including Sectional Title and Share Block) shall not be of any force or effect unless it is contained in a written Deed of Alienation signed by the parties thereto or by their agents acting on their written authority. Until the Agreement of Sale is signed by the Seller and the Purchaser, or by their agents under their written authority, no rights or duties of any nature can be created. The agent is only entitled to his commission once the sale has been signed by both parties.
Similarly, no amendment to an Agreement of Sale shall be of any force or effect unless it is contained in a written document (Addendum), and signed by the parties thereto or by their agents acting on their written authority.
It is possible to agree verbally to the cancellation of an Agreement of Sale of land, but it is naturally better to incorporate any cancellation in writing as well.
The Appellate Division in the case of:-

NEETHLING vs KLOPPER EN ANDERE - 1967 (4) S.A - 459 - A.D.

held that a revival of a contract of sale of land, which contract had been terminated, by waiver of the rights which arise from the termination of the contract, does not have to be in writing and signed by the parties or their agents acting on their written authority. This is an exception which should not concern you in day to day practice.
Generally, because of the requirement that the Agreement be in writing, it follows that all the material terms of the sale contract should be clear from the contract and it should not be necessary to refer to verbal discussions or agreements or other matters not clearly set out in the Agreement. In certain limited circumstances, it is possible to seek an order from the Court that an Agreement be rectified to reflect the true intention of the parties. However, you should always ensure that an Agreement is clear and unambiguous and contains all the terms and conditions which the parties agreed to.
Therefore, for example, the names of the Purchaser and Seller should be clearly set out. If possible, their full names should be given. Initials of Christian names is acceptable but not desirable. If it is a Corporate Body such as a Company or Close Corporation (subject to what is said below regarding Trustees of Companies or Close Corporations to be formed, and nominees), the full name of the Company or Close Corporation should be stated and if possible, although not essentially, the registration number should also be given. It is always desirable to give the full title deed description of the property and the street address and the extent. The manner of payment of the purchase price must be given. The date of vacant occupation and possession must be given, and not subject to later agreement. Please remember that an agreement that the parties will agree to something in the future such as the date of occupation, may render the Agreement null and void.
The parties can always agree to amend their agreement by entering into a written agreement and signed.
We say that land or a Sectional Title Unit is "registerable" if it is capable of being registered as the subject of a separate title deed in the Deeds Registry in that the requirements of any Law relating to such registration have been complied with. Most of the land and Sectional Title Units which you deal with in practice will be "registerable". If it is registerable, then to describe it even by its physical address would be sufficient. However, this is no excuse for you not obtaining the full title deed description, and in borderline cases, your failure to do so could mean that the sale will be void. We often find that the land is not "registerable" where it still has to be subdivided, or where the Sectional Title Register has not been opened. In the case of subdivisions, a Surveyors Diagram should be annexed, and if this does not have clear and precise boundaries (where it is a sketch diagram) then the property will have to be described to the last centimeter, and when in doubt, the decision of the Surveyor should be referred to in the Agreement as being the expert who will determine the boundaries. As far as Sectional Title is concerned, if the Sectional Title Register has not been opened, the description of the Section requires careful drafting (preferably by an Attorney).

THE AGREEMENT

We are dealing with an Agreement of Purchase and Sale of a property and not the purchase and sale of shares and loan accounts in a Company or members interest and loan accounts in a Close Corporation.

THE PARTIES

MARRIAGES IN COMMUNITY OF PROPERTY.
1. The Matrimonial Property Act No. 88 of 1984 came into effect on the 1st November 1984. Prior to the 1st November 1984, the common law governing marriages in community of property was that the Husband was the sole administrator of the joint estate. This is no longer the position, and the husband and wife are co-administrators of the joint estate.
2. With effect from the 1st November 1984, no spouse shall, without the written consent of the other spouse enter into a contract for the sale of land, mortgaging, or dealing in other real rights of immovable property, without the written consent of the other spouse. The practical effect of this is that in a marriage in community of property, both spouses must sign the Agreement. If one alone signs, then it is possible for the other spouse to give his or her consent, but the consent must be witnesses by two competent witnesses. It is better to get both spouses to sign in the presence of two witnesses who should also sign. The sale will not come into effect until both spouses have signed or the other has given his or her written consent.
3. For Deeds Office purposes, whether the marriage in community of property was entered into before or after the 1st November 1984, the property is registered in the names of both spouses.
MARRIAGES OUT OF COMMUNITY OF PROPERTY BY ANTENUPTIAL CONTRACT.
1. The Matrimonial Property Act introduced the "Accrual System" which briefly provides that upon the termination of the marriage by death or divorce, the property which has accrued during the marriage shall be divided equally between the parties. This option was possible after the 1st November 1984. The parties can elect to be married by the old Antenuptial Contract system which briefly states that what is mine remains mine and what is yours remains yours, and what you accumulate during your marriage belongs to that individual party.
2. In the case of all marriages out of community of property by virtue of an Antenuptial Contract, the marital power of the husband is excluded and therefore the wife has full contractual powers in the same way as her husband has. She can sign all documents without the assistance of her husband.
MARRIAGES GOVERNED BY A FOREIGN LAW.
1. The Law of a Country where the husband was domiciled at the date of his marriage, governs the property rights of the parties, and not necessarily the Law where the marriage takes place. Therefore, if the husband was at the date of the marriage domiciled in South Africa, and he marries in a foreign country, the Laws of South Africa would apply to the proprietary consequences of the marriage, and therefore he would be married in community of property (unless the parties enter into an Antenuptial Contract). Similarly, if a man domiciled in England marries in South Africa, the Laws of England will apply. The parties are domiciled in the Country which the husband regards as his permanent home.
2. As each foreign country has their own Laws governing the proprietary consequences of the marriage, and those Laws change from time to time, it is extremely difficult to ascertain what the Laws of that foreign country are. For example, we may not know whether the marriage is in or out of community of property or whether the one spouse need be assisted by the other. Even if we know, it is sometimes extremely difficult to prove. The general rule is therefore that one spouse should sign and the other assist, by also signing.

Marriages of previously disadvantaged persons.

Such parties, married prior to 1st December 1989, are married out of community of property, unless they declared at the time of the marriage that they wished to be married in community of property. The marriage certificate has to be examined. On or after 1st December 1989, such parties are married in community of property unless they enter into an Antenuptial contract.

Unmarried parties, whether widows divorcees or never married, are described as unmarried and if over eighteen years of age have full contractual capacity.

If a party is married by Islamic Law, each is described as: ……………….. married, which marriage is governed by Islamic rights. They each have full contractual rights.

Persons reach the age of majority on reaching the age of 18. It is normally not a good idea to register property in the name of a minor. Even if assisted by his/her parent or guardian, banks will not grant bonds to minors.

COMPANIES AND CLOSE CORPORATIONS

These cause the most problems and should be dealt with carefully. Remember we are not dealing with the sale of shares and loan accounts in the case of a Company and members interests and loan accounts in the case of a Close Corporation. We are dealing with the case where the Company or Close Corporation is either the Purchaser or the Seller. This note does not deal with the question of Companies and Close Corporations in detail.
A Company or Close Corporation (the juristic body) has a separate juristic personality to its shareholders or members, and normally is capable of owning land, and purchasing and selling land.
Provided you are satisfied that the signatory is in fact a Director of a Company or member of a Close Corporation, that person can sign for the Company or Close Corporation, provided you have no reason to believe that he does not have the power to sign. You do not have to satisfy yourself that the purchase or sale of the property is within the powers of the Company in terms of its Memorandum and Articles of Association, because in terms of Section 36 of the Companies Act, no act of a Company shall be void by reason only of the fact that the Company was without capacity or power so to act, or because the Directors had no authority to perform that act on behalf of the Company (unless you had reason to know otherwise). A similar provision is contained in Section 54 of the Close Corporation Act. When in doubt as to whether the person signing has the necessary authority to sign, obtain a copy of the Resolution of Directors or Members.

TRUSTEE FOR A COMPANY OR CLOSE CORPORATION TO BE FORMED.

(It often happens that a client wishes to register the property in the name of a Company or Close Corporation. There are many reasons for this. The transfer duty is now 8% (the subject of VAT is not dealt with here).
If a Company has already been formed, then the Company will be the Purchaser.
If the Company has not been formed, or it is possible that an existing Company or Close Corporation will be used but its identity is unknown, then the Purchaser will be described as:-

"A.N. Jones in his capacity as Trustee for a Company or Close Corporation to be formed or already formed".
Once the Company or Close Corporation is formed, or an existing Company or Close Corporation is found, then the contract is ratified and the property is transferred into the name of that Company or Close Corporation.

OR NOMINEE

Avoid "nominee" sales if at all possible. SARS may require double transfer duty.
CHAIN SALES or "SUBJECT TO SALES".
Sales where the Purchaser requires funds from the proceeds of the sale of his property as the whole or part of the purchase price.
It must be emphasised that most chain sales proceed without undue problems. Those problems that do arise are ironed out by the Conveyancers during the course of the transfer, and the Agent often is not aware that there has been a problem.
It is not always possible to draft Clauses that will give absolute protection to both parties, as the interests of the Seller are not the same as the interests of the Purchaser.

THE SELLER'S INTERESTS

He wants to know that once the Purchaser's property has been sold and the subjective conditions met, that the transfer will proceed expeditiously and that there will be no doubt that the sale will proceed and that he will be paid. He does not want delays and uncertainty.

The PURCHASER'S INTERESTS

A certain portion, or the whole of the purchase price can only come from the sale of his property. He, with the assistance of the Agent, will (presumably) take every precaution to find a willing and able Purchaser for the purchase of his property. As careful as you try to be, you may come across a Purchaser who is a chancer or genuine unforeseen circumstances arise which either delay or torpedo the sale. The sale of the Purchaser's property may be dealt with by another Estate Agency.
From the Purchaser's point of view, he wants to provide that the funds will only become available from the proceeds of the sale of his property. He wants to provide that if the sale of his property falls through for any reason, he will be able to cancel the Agreement and escape any claim for damages and commission. The answer is not to provide for a time limit. If for example, you provide that the sale of the Purchaser's property must be registered within three months, failing which the Agreement will become null and void, you can imagine the chaos if the transfer comes through a few days late. By putting in a time limit you would scare away both the Seller and the Purchaser. One possible solution is to provide that the occupational interest will increase, after the lapse of a certain time period.
i.e. Occupational interest of R1 000-00 per month to be increased to R1 500-00 per month from the 1st October 1995.
This will take care of any monetary loss that the Seller may suffer if the prior transactions are delayed. However, this Clause may also impact negatively on the sale, as you are highlighting the possibility of a delay.

DECEASED ESTATES

Two situations should be distinguished:-

Where the Purchaser or Seller die after having signed an Agreement of Sale. It is often erroneously thought that in this case the estate of the deceased Purchaser or Seller must be wound up before transfer can be effected. If the estate of the deceased is not insolvent, or if there are no other complications, the Executor of the deceased will step into the shoes of the deceased and sign the necessary documents of transfer. Before he can do this, the preliminary estate documents (Death Notice, Inventory, Acceptance of Trust as Executor) have to be completed and the Estate reported to the Master of the Supreme Court. The Master will then appoint an Executor to the Estate. The Executor will then sign the necessary documents of transfer, including a Section 42 of the Administration of Estates questionnaire, and submit the Power of Attorney and the questionnaire to the Master for endorsement (approval). There need not be undue delay.
Where the deceased has already died, and the Executor is selling the Estate property for one reason or another. You, as an Estate Agent, will normally be instructed by the Executor to sell the property, or the property may even be listed on MLS. In this event, the Seller is:-

EXECUTOR OF THE ESTATE LATE JOHN JONES.
(SIGNED ALFRED SMITH)

All the residual beneficiaries of the Estate (not beneficiaries who receive special bequests) must consent to the sale if they are majors i.e. 18 years or over. In the case of a minor, or if beneficiaries cannot agree, then the Master of the Supreme Court must give his consent in terms of Section 47 of the Administration of Estates Act. SEE ANNEXURES 14 and 15.

Where the deceased was married in community of property during his lifetime, then the surviving spouse and the Executor (if the surviving spouse is not also the Executor) must sign the Agreement.