(C) CONDITIONAL SALES

As already indicated, the ordinary rules of common law regarding the passing of ownership and risk / benefit may be modified if the parties agree to certain conditions. In this section the more usual types of substantive conditional sales will be discussed.

Classification of conditions The contracting parties may include in their agreement any provisions that they wish, subject to the limitations hereinafter laid down. These may suspend the operation, or cause the dissolution of the contract, until or upon the happening of an uncertain future eventThe first class are suspensive, and the second resolutive Whether a condition is suspensive or resolutive is a matter of construction the courts will look beyond the ipse dixit of the parties and interpret the words as they stand (Psalm 15 (Pty) Ltd v Cottontail Homes (Pty) Ltd) The following prerequisites must exist for a condition to be operative: (i) The coming into force/dissolution of the contract must be made to depend upon the occurrence or non-occurrence of an uncertain future event; (ii) It must not be impossible, illegal or immoral; (iii) It must not be subversive of the essentials of the contract
Psalm 15 (Pty) Ltd v Cottontail Homes (Pty) Ltd) Facts o An agreement of sale of stands (or lots) which was expressly concluded "in anticipation of the proclamation" of a township intended to be laid out by the seller, provided in clause 6 that "the purchaser agrees to accept transfer of the said property subject to the establishment and to such conditions of title of the township as may be laid down by the Administrator in approving of such establishment and to the conditions contained or referred to in the title deeds". o Clause 7 provided that "the sale hereby made is suspensive and subject to the due proclamation of the township. Should for any reason whatsoever, and whether attributable to the fault of the seller or not, the township be not so proclaimed this sale shall be regarded as null and void ab initio and the seller shall refund to the purchaser all amounts paid by the latter, free of interest, and neither party shall have any further claim against the other". o The agreement was concluded on 11 December 1969 and the payments stipulated for were paid by the purchaser. On 19 February 1970 the Administrator granted the application for the establishment of the township subject to certain conditions, one of which reads (para 5 (1)): "No erf other than reserved erven shall be sold, transferred or built upon prior to transfer until the local authority has issued a certificate that" certain requirements had been satisfied. On 25 August 1972 the township was proclaimed. o The purchaser had applied for a declaratory order that: the agreement was null and void on the grounds (1) that the agreement was subject to a suspensive condition; (2) that this condition was fulfilled on the proclamation of the township; (3) that the agreement thereupon became a completed contract of purchase and sale but (4) because the agreement was not one in respect of a reserved erf, para 5 (1) was applicable and simultaneously with the issue of the proclamation had the effect of rendering the agreement null and void for want of compliance with the requirements of para 5 (1). o The Court a quo upheld ground (4) and declared the sale null and void. This is an appeal. Law and Application o The court found that clause 6 created a suspensive condition.

It would be unrealistic to attribute to the Administrator when he imposed para 5 (1) an intention that transfer of erven otherwise than in accordance with such condition were to be regarded as null and void ab initio . o Since para 5 (1) spoke in terms of futurity (i.e., as from the date of proclamation), that the import of the injunction was that henceforth no agreement whereby an erf in the township was sold, shall be entered into unless the stated requirements were met: What was necessarily visualized thereby was a consensus occurring subsequently to the coming into effect of the condition and, having regard to the law relating to sales of fixed property, what must also have been visualized was that such consensus would be expressed in a written agreement signed by the parties after proclamation. o Therefore the relevant condition of establishment did not justify the conclusion that proclamation of the township, at a time when the requirement of para 5 (1) had not yet been met, had the effect of nullifying the agreement which such proclamation had perfected, and destroying the contractual rights and obligations of the parties themselves. Conclusion o Finding for appellant

As opposed to terms As noted above, conditions proper affect the operation, or bring about the dissolution of the contract. On the other hand terms only modify the ordinary effect of the contract. For example, the parties might agree to a term that the ordinary rule of risk will be varied

Suspensive conditions The legal effect of suspensive conditions in the law of sale is a matter of some controversy. The general principles that apply to suspensively conditional contracts in a general sense do not apply to the special contract of sale.

Point A

Point B

Enter contract (therefore there is consensus)

Condition fulfilled (therefore contract is executed)

The Principle

Situation of parties? What is going on between the abeyance o Is there a contract of sale? o Does it come into being at point A or point B?

General

Odendaalsrus Municipality v New Nigel Estate Gold Mining Co Ltd

The contract (in the modern sense, now that all contracts are consensual) is binding immediately upon its conclusion; what may be suspended by a condition is the resultant obligation or its exigible content. Therefore there is a binding contract right at the outset and performance of obligations only occurs later, thus what is suspended is the resultant obligation of performance

The problem is that in sale, the converse occurs and this presents an anomaly The contract only comes into force at point B Because sales are performed straight away there cannot be a contract of sale yet According to De Villiers CJ, an inchoate form of contract exists at A (there is a relationship between the parties) but it is not binding until B

BUT SALE: The case of Corondimas v Badat accepted De Villiers view, holding that the appellant had entered an inchoate agreement, creating a contractual relationship but no contract of sale. Note that this judgment has rendered the Pegging Act unworkable, causing the legislation to have no application. This judgment was heavily criticised

Corondimas v Badat Facts o Appellants (sellers) entered into an agreement with respondent (purchaser) for the sale of land in Durban. Respondent was Asiatic and appellants were Europeans o Appellants, who were partners in equal undivided shares of two immovable properties, gave authority to a firm to sell the properties in a letter. Appellants obtained an order of court authorising the deletion of the Anti-Asiatic clause from the title deeds and respondent obtained authority in terms of the Pegging Act to acquire the two properties from the appellants. o Later appellants repudiated and refused to perform their contract in a declaration. This declaration was excepted to as bad in law, and disclosing no cause of action in that respondent, an Asiatic, bases his claim upon an agreement entered into by him with defendants, Europeans, in terms of which respondent acquired or purported to acquire property in the municipal area of Durban, such agreement having been entered into without the authority of a permit issued in terms of the Pegging Act, and therefore being null and void. o The court a quo held that the agreement was not one in terms of which respondent acquired or purported to acquire the land in question, and therefore dismissed the exception with costs. o The purpose of the Pegging Act is to impose restrictions with regard to the acquisition and occupation of land in the Province of Natal and provided (in s5(1)) that No European shall, except under the authority of a permit issued under s7, enter into any agreement with an Asiatic in terms of which any party to the agreement acquires or purports to acquire any land in any area in respect of which the provisions of this section apply. Subsection 2 provided that Any agreement entered into after the commencement of this Act between a European and an Asiatic, otherwise than under the authority of such a permit, shall be null and void. Issue o Whether an agreement of sale, which is entered into subject to permission being given under the pegging Act is an agreement which is null and void on the ground that it is an agreement whereby a party to it acquires or purports to acquire land.

Law and Application o Such an agreement is clearly subject to a true suspensive condition. It is an agreement to buy and sell if the Minister grants a permit to the parties to enter into it. o According to Provident Land Trust v Union Government, when a contract of sale is subject to a true suspensive condition, there exists no contract of sale unless and until the condition is fulfilled i.e. the prohibited contract (e.g., a contract of sale), which is declared null and void by s5(2) of the Act unless the Minister consents to it, cannot come into existence unless and until that condition is fulfilled. o Until that moment, in the case of a sale subject to a true suspensive condition, such as this is, it is entirely uncertain whether or not a contract of sale will come into existence at some future time. Until that moment there is certainly a legal relationship, contractual maybe existing between the parties, which may ripen into a contract of sale, but; in the particular case in which the coming into existence of a contract of sale is made, by agreement between the parties, to depend upon consent to it having been given by the Minister, that relationship is not one which is forbidden by the Act or declared by it to be of no force and effect. o It is not forbidden, because, unless and until the Minister gives his consent no contract "whereby one party acquires or purports to acquire land" comes into existence and so soon as he has given his consent, thereby bringing into existence a contract of that nature, the condition required by the Act for its validity (viz., the consent of the Minister) has been fulfilled. o The position which would arise, if the suspensive condition does not relate to the consent of the Minister and no consent is given, is not raised in the present case, but in that event a contract of sale would come into existence if the condition is fulfilled, and, if the condition is fulfilled, the contract which comes into existence must necessarily be an illegal contract because the Minister has not consented to it. Conclusion o Appeal dismissed

It took until 1981 for another case to come to AD on same problem:

Soja v Tuckers Land and Development Corporation

Facts o The parties entered an agreement whereby Tuckers sold to Soja 100 erven of a proposed township for R233 200, payable in instalments. The sale was suspensive in that the approval of the Administrator was required and at the date of contracting, this approval had not yet materialised. o The agreement stated that once approval had been given, and provided that Soja had paid the purchase price, ownership would be transferred to Soja. o Therefore it was only the obligation to give transfer and the corresponding right to receive it that were suspended until the proclamation of the township. o Tuckers sued Soja for the balance of payment alleged to be due and payable under a written agreement between the parties. Soja resisted the claim, alleging a lawful cancellation of the agreement or that it was null and void o The court a quo held in favour of Tuckers, and Soja now appeals on the ground that the agreement was prohibited by s57A of the Transvaal Town-planning and Townships Ordinance and was therefore invalid and void. Law and Application o Because of the suspensive condition in the agreement the parties do not enter into any contract for the sale of the erven until that condition is fulfilled; and, when that happens, the prohibition in s 57A no longer applies since the township has then been declared an approved town. That reasoning is fully supported by the Corondimas case. o The principle laid down in several cases and affirmed in the Corondimas case that an agreement embodying sale subject to a suspensive condition is not a contract of sale until the condition is fulfilled has been trenchantly criticized by writers. However, the correctness of the decision and reasoning of the Corondimas case was not impugned before the court and thus stands.

Section 57A of the Ordinance construed in the context of the other relevant provisions of the Ordinance, does not manifest an intention by the legislature to forbid the entering into of contracts of sale of erven in a township not yet approved in terms of the Ordinance where the sale is made suspensive and subject to the due proclamation (approval) of the township. o If a contract is subject to a suspensive condition of the kind in question here, that right to the dominium is neither alienated nor correspondingly acquired until that condition is fulfilled. That is clear from the Corondimas case. There it was held that, until the suspensive condition was fulfilled, the alienatee did not "acquire" the right to the dominium of the land in question in contravention of the statutory prohibition. "Acquire" is merely the correlative word to sale, exchange, or dispose of. Consequently, until the suspensive condition in question here is fulfilled, it cannot be said that Soja acquired the right to the dominium of the erven, prospective or approved, and hence that Tuckers disposed of or alienated it in any manner to Soja under their agreement. Conclusion o The appeal is therefore dismissed with costs o

In 1984 the Strydom case came before the court, dealing with this issue. In the court a quo, the court held Corondimas and Soja to have been wrongly decided, however the AD held that this anomaly does not accord the common law
Tuckers Land and Development Corporation (Pty) Ltd v Strydom

Facts o During February 1971, appellant (as seller) and respondent (as purchaser) concluded an agreement for the sale of an erf, on condition that "the sale hereby made is suspensive and subject to the due proclamation of the said township". (Only the obligation to effect transfer was suspended: the buyer's obligation to effect payment, and his right of occupation, became effective immediately.) The township referred to in the condition was approved and proclaimed in 1977 in terms of an Ordinance. o In 1978 the appellant instituted an action in a PD for payment of the balance of the purchase price. The respondent contested the action, and instituted a counterclaim for repayment of the amount already paid, inter alia on the grounds that the contract was void in view of the provisions of s57A(1) of the said Ordinance. o At the time of the signing of the contract, s57A (1) provided that "After an owner of land has taken steps to establish a township thereon, no person shall, subject to the provisions of s 58, enter into a contract for the sale of an erf in such township until such township has been declared an approved township." o The trial Court found that the contract fell within the ambit of s57A(1), and the appellant's claim was dismissed inasmuch as he had failed to prove that the prohibition therein was not applicable in view of s58. The counterclaim was likewise dismissed because the respondent had not proved that the prohibition had precluded the conclusion of the contract in February 1971. This led to an appeal and cross-appeal, in which appellant relied principally on the approach in Corondimas v Badat to the effect that the mere insertion of a condition suspending the operation of the obligations, whether wholly or in part, qualified the existence or nature of the contract, so that the suspensive "condition" would result in the contract not being regarded as a contract of sale pending fulfilment of the condition. Law and Application o Although it was difficult to accept the Corondimas- approach on logical grounds, and although s 57A (1) had since been amended by another Ordinance (so as to bring contracts subject to a condition, including a suspensive condition, within the ambit of the prohibition as from 13 October 1982), the vested rights of a considerable number of purchasers and sellers depended on this approach. o In the interpretation of legislation such as the relevant Ordinance, where words such as "koopkontrak" and "contract of sale" are used, the Corondimas- approach should not be departed from, unless it appeared from the context in which the words were used that the legislature had indeed intended to include contracts subject to a suspensive condition. o The court held that the Corondimas- approach was directly in conflict with the common law and that it should not be followed, but that it was unnecessary to decide whether the result

finally arrived at by the Court in the Corondimas case was correct or not: the majority of the Court, on a nearly identical deed of sale in Soja (Pty) Ltd v Tuckers Land and Development Corporation (Pty) Ltd, had already, in the light of an interpretation of ss 57A and 58, concluded that a contract such as the one in issue did not fall within the ambit of the prohibition. o Two judges held that Trollip JAs approach in the Soja case had been correct: if it had been the intention to hit suspensive conditions such as the one in issue, the legislature, in the light of the Corondimas case, would have said so expressly and clearly. Conclusion o The appeal was allowed and the cross-appeal dismissed.

Thus according to this case, agreement occurs at A, and the requirement of performance occurs at B. There are, however, rights and duties pending fulfilment Therefore the position is still the same, contrary to general principles

BUT: LEGISLATIVE INTERVENTION The Alienation of Land Act 68 of 1981 Subdivision of Agricultural Land Act 70 of 1970 Where there is a sale of land, this includes a suspensive condition
Geue and another v Notling and others Facts o The first respondent (Van der Lith) sold an undivided portion of land without the consent of the Minister of Agriculture as required by s3(e)(i) of the Subdivision of Agricultural Land Act to the first and second appellants (jointly referred to as Geue). The sale was subject to a suspensive condition that such consent was obtained. o The sale agreement was signed and Geue paid part of the purchase price, which was held in trust, pending the transfer of the property. Geue then brought an application in the Pretoria High Court for an order declaring the agreement null and void by reason of the provision of section 3(e)(i) and the repayment of the purchase price. o Van der Lith brought a counter-application and sought an order declaring that the agreement had become enforceable upon fulfilment of the suspensive condition. The court a quo refused Geues application and granted Van der Liths counter-application. Geue appealed against this decision. Issue o Whether section 3(e)(i) rendered the agreement null and void. Law and Application o The Court examined what it referred to as the critical provisions of the Act, these being section 3(e)(i) and the definition of sale in section 1. o Section 3(e)(i) provided that no portion of agricultural land may be sold or advertised for sale unless the Minister of Agriculture had consented in writing. o Sale included a sale subject to a suspensive condition and sold had a corresponding meaning. o The Court had to determine the purpose of the Act and found the court a quos presupposition that the purpose of the Act was to prevent an owner of agricultural land from parting with an undivided portion of land without the Ministers consent, to be invalid. o The Court held that the purpose of the Act was not only to prevent alienation of undivided portions of land but rather that such purpose was much wider. It was clear that it was also aimed at prohibiting the advertisement of the sale. o The Court held that since advertising preceded the actual sale or alienation of an undivided portion, it was by no means absurd to infer that the legislature intended to prohibit any sale of an undivided portion of farmland whether conditional or not unless and until the sub-division had actually been approved by the Minister. o The Court concluded that in view of the definition, the agreement in the circumstances in casu fell squarely within the ambit of the prohibition contained in section 3(e)(i) and it had contravened the provisions of the section.

Conclusion o The Court declared the agreement null and void. o The appeal was upheld.

In the Geue situation, legislation was applicable and this prevented the contract from being valid But this only applies to these pieces of legislation and for all other sales, the common law remains the legal position Otherwise Corondimas applies i.e. in terms of incorporeals and immovable property

Resolutive conditions A valid resolutive condition has the following effect: o The contract has full legal effect from the moment it is perfecta pending fulfillment of the condition o An affirmative resolutive condition is fulfilled by the occurrence of the event, while a negative resolutive condition is fulfilled when it is certain that the event will not occur o Should the condition be fulfilled, the contract is dissolved retrospectively, and must therefore be regarded as never having existed Examples of commonly encountered conditional sales (a) Approval of financial stability A suspensive condition is sometimes found in commercial transactions to the effect that the transaction will be dependent upon the sellers approval of the buyers financial stability There will be no contract of sale until the seller gives his approval; he must exercise his discretion reasonably and in good faith
Machanik v Simon Facts o The parties entered into a contract of sale for 6 000 bags of oats to be delivered in monthly instalments of 100 bags, subject to the approval of the buyers financial stability o Simon sued Machanick for damages for a breach of contract to deliver certain oats. The defence is that the sale was subject to the condition that Machanick approved of the financial stability of the buyer when disclosed, and that he at no time approved. Law and Application o When goods are sold subject to the seller's approval of the buyer's financial stability the discretion thus given to the seller must be exercised arbitrio boni viri. o Where a surety for a debtor communicates a guarantee to the creditor and the creditor accepts such guarantee the surety cannot withdraw the guarantee to the prejudice of the creditor. o Where goods sold are to be delivered in monthly consignments after instructions as to delivery to be given during each month by the buyer, the buyer is entitled, in case of nondelivery by the seller, to recover damages in connection with only those monthly consignments in respect of which he has given instructions to the seller. Conclusion o Simon failed to carry out his obligations for the months of March to June and therefore cannot claim damages as for a breach by the seller o Judgment given for plaintiff in reconvention

(b) Sale or return (pactum displicentiae)

This type of conditional sale is often encountered in practice, and involves a buyer receiving goods from the seller with the option of becoming the owner. He can exercise his option in several ways, viz by buying the goods at the named price; by selling the goods to another, or by keeping them for so long that it would be unreasonable to return them This type of contract could be considered as subject to a condition which suspends the sale until the buyer has done one of the above-mentioned things to indicate his intention to become buyer
Juta and Co v Rorich

Facts o Plaintiff, a firm of publishers, concluded the following agreement with the defendant, a schoolmaster, concerning the supply of books for scholars at defendant's school: (1) defendant should notify plaintiff of the estimated requirements of the scholars; (2) plaintiff should send the books required carriage paid to defendant together with an invoice showing in parallel columns the wholesale and retail prices of the books; (3) defendant should sell the books to his scholars as and when they required or demanded them; (4) in the event of such sale to the scholars, either for cash or for credit, defendant should be responsible to plaintiff only for the wholesale price of any books so sold; (5) unsold books should be returned to plaintiff at plaintiff's cost - no time was mentioned within which such unsold books were to be returned; (6) the retail prices furnished by plaintiff were intended only to guide defendant, and were not obligatory upon him in reselling to his scholars. o A stock of unsold books forwarded by plaintiff to defendant under this agreement was destroyed by fire without negligence on defendant's part. o Plaintiff claimed the value of the books from defendant. Findings of Court o Defendant did not occupy the position of a del credere agent. o There was no sale between plaintiff and defendant, until there had been a resale by defendant, or until defendant had kept the books so long that it would be unreasonable that he should return them o The dominium in the unsold books destroyed by the fire had therefore been in plaintiff, and that defendant was not liable. Conclusion o Claim dismissed

Mackeurtan however feels that contracts of sale or return are examples of contracts subject to a resolutive condition (c) Sales on approval

There is some disagreement about appro sales. Some argue that these are sales subject to a suspensive condition: since the sale is subject to the examination and approval of the buyer, the operation of the sale is therefore suspended until the buyers approval has been expressed However, there is another view: that these are sales subject to a resolutive condition. The sale transaction is carried out completely, and the client is charged, but if the client feels that the merchandise is no good, they are entitled to return the item to the seller, and the transaction will be reserved. In modernday consumer contracts, this seems to be the better view