Q & A Section (Offer and Acceptance)

This is a new section that I am introducing to my Blog.  We, the staff at Shepperson Attorneys, will answer various readers'questions relating to South African Property Law.  Please e-mail your questions to gareth@propertylaw.onmicrosoft.com

(Please note that the Blog Disclaimer applies and contact us directly if you require a detailed legal opinion.)

Question:

We are in a process of buying a property and as the application for the loan is now with the banks, we have been told that there are two offers to the property. How do I go about finding out whether there is a written and thus legitimate second offer? If there is no second offer, what is the remedy to correct this situation?

Answer:

Naturally it is expected of people to be honest, fair and trustworthy in dealings with each other. These principles that form the foundation of good business are referred to as business ethics. However this is not always the case.

Until communication of the acceptance of the offer has been delivered, the seller may consider as many offers as he/she likes.

The rule of our law is that a contract is concluded the moment that an offer is accepted, provided the other essentials of a contract are present. Once the seller accepts the first offer, it becomes the binding agreement. If another potential buyer proposes an offer after the seller accepted and signed it, even if the offer is higher, the first offer will enjoy preference.

In the Bird v Summerville 1961 (3) SA 194 (A), the appellant, who wished to sell his property, was informed by an estate agent that the first respondent was interested in buying. The appellant signed a written offer to sell naming the first respondent as sole purchaser. However, the first & second respondents both signed as buyers. At the time of making the offer, the appellant had been unaware of the existence of the second respondent. The court found that although the appellant would have been prejudiced by both parties buying the property, the appellant was not bound to a contract of sale to both the respondents, because he never intended that his offer could be accepted by both of them.

 However, the seller will be able to consider other offers or second offers if maybe for some or other reason the purchaser is unable to get bond finance or the sale lapses. So if the seller accepts the first offer, he is bound to it and if the seller does not perform in terms of the offer the seller will be liable to pay damages.

In the De Vries Smuts v Dept of Economic Development & Environmental Affairs case, the plaintiff was claiming for damages arising from what the plaintiff refers to as repudiation by the defendant of an agreement concluded between the parties. Damages are based on what the plaintiff would have been entitled to, had the agreement not been breached.

Finding out if there is another offer to the property is not impossible, but in this situation there might also be a standard practice just as you have the doctor/patient or lawyer/client confidentiality, so it may be that if there is more than one bidder, each bidder’s offer be kept a secret from other bidders. This is what is called “blind” bidding unlike the “open” bidding process where bidders are aware of competing bids and can tailor their bids accordingly.

“Current buyers or would-be buyers should establish what they can comfortably afford and apply for a formal property loan pre-approval, which will ensure that sellers will take them seriously when they do make an offer”, says an expert.

Ø “Property is intended to serve life, & no matter how much we surround it with rights & respect, it has no personal being. It is part of the earth man walks on. It is not man.”  - MARTIN LUTHER KING, JR -

  There are certain steps when buying or selling that could be taken to ensure that the process runs as smoothly as possible.

Contact us for detailed advice whenever you are making or accepting an offer. Remember property is probably the biggest investment of your life and to do so without adequate specialised legal advice is extremely foolhardy.