CAN AN OFFER TO PURCHASE JUST BE CANCELLED?

21 Oct 2015

In managing the sales division of a property company, one will sometimes come across a case where there is blatant repudiation, that is the unwillingness of either party to perform their contractual obligations in order to conclude the deal. In such instances, the process of establishing what the Law of Contract is can be a vast, complex one.

Hulbert says an offer to purchase a property is governed by the Law of Contract, and courts will tend to honour the spirit of the contract.
This is according to Shan Hulbert, sales manager of Knight Frank Residential SA, who says some examples of repudiation could be denial of the existence of the contract, contesting the terms of the contract, refusal to perform to the contract, planning to rescind the contract when rescission is not justified, notification by one of the parties that he or she cannot perform, or refusal to perform in full.

Hulbert says it can happen that, after the agent spends time on marketing the property and counselling the sellers on correct pricing, and then concluding a sale with the buyer for more than they originally offered, the seller refuses to sign the transfer documents, or the buyer does not produce the necessary guarantees.

An offer to purchase a property is governed by the Law of Contract, and courts will tend to honour the spirit of the contract. In most cases, the law will be against those who cancel without a legal reason to do so.

Where the problem lies is the time and costs involved when someone does go against their contract and wants to opt out, she says.

Hulbert says what has to be established is whether there is any remedy in terms of the contract and how this will affect the parties concerned. The person who is in breach is said to be ‘in mora’, 'in delay or in default'. Legal action can follow, but this will inevitably be expensive and time consuming as courts are often backlogged and lawyer fees will add up to significant amounts.

“Ultimately, the risk of repudiation should be avoided by ensuring that diligence is practised throughout the sales process. The signing of the contract is the crux of a transaction and proper education of all the parties concerned is crucial.”

She says the best way to avoid any complication is by being vigilant in drawing up and concluding the contract, educating everyone on the nature and importance of their contract and securing a deposit from the buyer which acts as security.