Most sales of immovable property are concluded subject to one or more suspensive conditions. One of the legal definitions of a suspensive condition is that it is a condition which suspends the operation or effect of one or more of the obligations under a contract until the condition is fulfilled. In other words it makes the contract dependant upon the occurrence of a determined future event, for example Purchaser obtaining a loan. Very few people can afford to purchase their home for cash and the two most common suspensive conditions which are contained in Deeds of Sale/Offers to Purchase are that the sale is subject to the Purchaser obtaining a loan from a financial institution (a bond) or alternatively that the sale is subject to the sale of the Purchaser’s property.
The legal consequences of including a suspensive condition in a contract are that the contract does not become finally binding on the parties until the suspensive condition is fulfilled. However, even though a contract which is subject to a suspensive condition is not immediately finally binding on the parties, a binding contractual relationship does come into existence between the parties as soon as the contract is signed in the sense that neither of the parties can resile from the agreement whilst the contract is subject to the suspensive condition. If the suspensive condition is timeously fulfilled then the contract becomes finally binding on the parties. If the suspensive condition is not timeously fulfilled then the contract lapses and no binding agreement comes into existence between the parties.
If for example a Deed of Sale relating to the sale of a property is subject to the Purchaser being granted a bond by a certain date and the bond is granted prior to that date then the agreement immediately becomes finally binding on the parties. If, however, the bond is not granted by that date, the agreement lapses on that date and is not binding on the parties. When a suspensive condition is inserted in a contract it is extremely important to insert the date by which the suspensive condition must be fulfilled. If no date is inserted the legal position is that the suspensive condition must be fulfilled within a reasonable period. This normally leads to uncertainty as it is often difficult to determine what a reasonable period is under the circumstances.
When a Purchaser who is purchasing property intends paying the purchase price or part thereof from the proceeds of the sale of his existing property it is absolutely essential to insert a condition in the Deed of Sale to the effect that the sale is subject to the sale of the Purchaser’s property and furthermore that the purchase price or part thereof will be paid from the proceeds of the sale of the Purchaser’s property. If the Purchaser has already sold his property but has not yet received payment of the purchase price then it is equally important to record in the Deed of Sale that the Purchaser’s property has been sold and that the purchase price of the property that he is purchasing will be paid from the proceeds of the sale of his property. If suitable clauses are not inserted the Purchaser could be severely prejudiced in that the Seller could insist on payment of the purchase price before the Purchaser is in a position to make payment.