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Can a seller extend his bond due date at his own volition?

Written by  Smith Tabata Buchanan Boyes
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Can a seller extend his bond due date at his own volition? Can a seller extend his bond due date at his own volition?

In the recent judgment of Riverspray Lifestyle Estate (Pty) Ltd v Auby, the Court held that the agreement of sale between the parties was void because the bond was not obtained within the period stipulated in the agreement. However, of specific interest was the reminder that where parties to an agreement include a provision that the seller may extend the bond due date at his own volition, for any period of time, without notice or permission from the purchaser, such provision was void: allowing one party only to exclusively determine whether an obligation was complied with renders the term void for vagueness. 

The facts were briefly that Auby entered into an agreement with Riverspray Lifestyle Estates in terms of which he bought a unit in a sectional title scheme which would be known as Riverspray.  The scheme was still to be erected. The purchase price was R675 000 and a deposit of R15 000 was payable within three days of signature of the agreement by the purchaser.

The agreement provided, amongst other things, that: “This agreement is subject to the purchaser obtaining mortgage bond finance from a financial institution in the amount of R735 000… Such bond to be approved in principle within 21 … days of signature of this agreement by the purchaser, or in any extended period which the seller at its absolute discretion may allow without permission of the purchaser”. A further clause provided that: “Should an amount be inserted at clause … regarding the obtainment of a mortgage bond, then the agreement shall be subject to a mortgage bond of the said amount being granted to the purchaser on normal terms and conditions as laid down by a commercial bank on security of the property or any other acceptable security”.

Auby did not get a bond within the 21 day period as stipulated. When he was advised by the bank that his bond application was unsuccessful, Riverspray’s consultants managed to secure a bond in the amount of R607 500. Because this amount was less than the bond amount in the agreement, Auby signed an addendum which acknowledged the shortfall and in which he undertook to deliver a guarantee or submit a cash payment to make up the shortfall.

Sometime later Auby resiled from the agreement, claiming that it was invalid. Riverspray thereupon approached the Court for an order directing Auby to comply with his obligations in terms of the agreement and to do the necessary to take transfer of the property in his name.

The Court found in favour of Auby, holding that:

  • It was clear that the suspensive condition was not fulfilled because Auby did not manage to get a bond for R735 000 in the stipulated period and the agreement had to fail.
  • In addition, the Court noted that the clauses that purported to allow the seller to extend the bond due date indefinitely and without notice to the purchaser, were void. The reason was that it was a “general principle of our law of obligations that, when it depends entirely on the will of a party to an alleged contract to determine the extent of the prestation of either party, the purported contract is void for vagueness.”

As such, no valid agreement of sale ever came into existence. Sellers and purchasers - therefore do not include any provision in an agreement that allows the other party the exclusive right to determine whether there was compliance with the provisions of the agreement, as such an agreement could be considered void.

Smith Tabata Buchanan Boyes

Smith Tabata Buchanan Boyes

Smith Tabata Buchanan Boyes