April 30, 2018

The implications of an irrevocable offer to purchase

If an irrevocable offer is couched in the following terms, “This offer is irrevocable until 19h00 on 20thDecember 2018 and is binding upon acceptance, irrespective of notification of acceptance to the purchaser/seller or not”, what are the legal implications?

The Supreme Court of appeal had occasion to decide this deceptively simple question in Geldenhuys NO v Daniels (20848/14) [2016] ZASCA 45, in a judgment that was delivered on 31stMarch 2016 per Tsoka AJA.

It is now trite that when the buyer accepts the offer to sell made by the seller any time before the stated date (20thDecember 2018) by which the offer is made to be irrevocable, then a binding contract comes into being. This is still the position even if the purchaser does not notify the seller of his acceptance of the offer.

Phrased differently, notification of acceptance of the offer is neither a requirement nor a sin qua nonto the constitution of a binding agreement. Only the acceptance – and not the notification of acceptance of the offer –  suffices for purposes of bringing about a binding agreement between the seller and the purchaser. All that is required is compliance with section 2(1) of the Alienation of Land Act 68 of 1981 that the acceptance of the offer must be in writing.

It is important to note, however, that should the purchaser then change the material terms stated in the offer made by seller before accepting same, he will be deemed to have rejected the offer made by the seller. Concomitant hereto, the changes will be deemed to constitute a counter offer made by the purchaser himself to the seller, which shall as the case may be, then be open to acceptance or rejection by the seller.

But what will the position be if the purchaser accepts the offer made by the seller after the date stipulated, for example, by accepting the offer on 24thDecember 2018 instead of by 20thDecember 2018? The legal position is that after 19h00 on 20thDecember 2018, the irrevocable character of the offer simply falls away and it becomes revocable at the instance of the seller. In other words, the offer which had hitherto been irrevocable, now becomes revocable at the instance of and by the seller. The seller remains at large to revoke the offer anytime before it is eventually accepted by the buyer.

It is also noteworthy here that should the seller in the meantime fail and/or neglect to revoke the offer after the expiry of the date on which it was stated to be irrevocable, and the offer is then subsequently accepted by the purchaser, then a binding agreement between the seller and the purchaser is constituted. Until it is revoked, it remains open and capable of acceptance by the purchaser.

In casu, the court emphasised that, the mere fact that the heading to the clause alluded to the lapsing of the offer –  without actual explicit provision in the clause itself, making unequivocal provision for the lapsing of the offer if it is not accepted by the stated date and time, i.e. 20thDecember 201, –  that will not assist any party that seeks to resile from the agreement. Any attempt to rely on the heading for an inference that the offer had lapsed after the expiry of the cut-off date will simply be futile.

OFFER LAPSES

This offer is irrevocable until 19h00 on 20thDecember 2018 and is binding upon acceptance, irrespective of notification of acceptance to the purchaser or not”.

In order to avoid a revocable offer whose life may be in perpetuity, which may inadvertently and to the annoyance of the seller, be accepted by the purchaser when the seller may no longer be interested in selling the property, the seller needs to incorporate explicit wording which provides for the automatic lapsing of the offer after the irrevocable period.

Finally, the purchaser retains the right to revoke the offer within five days of signature in terms of section 29A by written notice delivered to the seller. This will be the case for example, if:

  • the purchase price of the property does not exceed R250 000.00 or such higher amount as the Minister may from time prescribe;
  • the purchaser is a natural person;
  • the property was not purchased at a publicly advertised auction; and
  • the seller and purchaser have not previously entered into a deed of alienation of the same land on substantially the same terms.
Frank Setati
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