What are suspensive conditions?

The attorneys at Gerhard Lourens Incorporated are often confronted with the following scenario: A client, who is the owner of a fixed property, receives a signed offer to purchase the said fixed property for the advertised selling price.

The client did not expect to “sell” the fixed property so fast and is over the moon. Is it time to celebrate yet? Take note of the suspensive conditions!

What is a suspensive condition?

A suspensive condition, as the name suggests, suspends the operation of a contract for a period of time until a certain specified condition is fulfilled. Therefore only on fulfilment of the specified condition does the contract come into full force and effect and do the contract terms become enforceable by the seller and the purchaser against each other. If the condition is not fulfilled within the specified time period the contract normally falls away in its entirety and no claim for damages exist.

An example of a suspensive condition is the popular “Mortgage Bond”-clause whereby the contract is made subject to the purchaser obtaining a loan from a bank or other financial institution, for a specific amount (usually the purchase price), within a specified time period, and against security of a first mortgage bond to be registered over the fixed property.

In the above example it can be said that only once the loan is granted to- and accepted by the purchaser, there is fulfilment of the suspensive condition and only then does the specific contract terms become enforceable.

Another example of a suspensive condition is when the purchaser signs an offer to purchase, but that the said contract is subject to him selling his own property first. The offer to purchase is therefore made subject to the purchaser receiving and accepting an offer to purchase, from a third party, for his own property and, if so stated, after the subsequent successful registration of transfer thereof as this will be when the funds become available.

In the second example above it can be said that only once the purchaser receives and accepts a bona fide written offer to purchase for his property and/or the successful registration of transfer thereof, there is fulfilment of the suspensive condition and only then does the specific contract terms become enforceable.

If the suspensive condition is not fulfilled within the specified time period, it can be said that the contract never comes into existence, and the seller is free to market and sell the fixed property to a third party. However pending the fulfilment of any suspensive condition, neither party can withdraw from the contract nor may the seller sell the property to a third party.

Also bear in mind that a party cannot be compelled to fulfil a suspensive condition. Once the time period for fulfilment thereof expires, the contract simply falls away.

In conclusion, there may be more to an offer to purchase than meets the eye and one should seek the expert advice of a conveyancer or an attorney specialising in property law concerning these sometimes confusing suspensive conditions before one accepts such an offer. Only then will one determine if the offer is subject to any suspensive conditions and in so doing avoid premature celebrations. If you have any queries on this subject or any other property related queries please contact our office on 013 755 2080 for a consultation.

  AUTHOR
Lowvelder

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