FILTERS:

No resolution

19 October 2017

We have a transfer, wherein the Offer to Purchase stated that the purchaser will pay in cash for the property, by a certain date. That never happened. The Purchaser only paid a very small amount into the trust account of the Conveyancer initially, and never made another payment again.

The seller instructed us to cancel the transaction, and the purchaser was placed on terms and given 10 days to comply as stated in the Offer to Purchase, failing which the transaction will be cancelled and the deposit paid to the Estate Agents as are also stated in various clauses of the Offer to Purchase.

Our problem is the following
The seller is a CC, and the Offer to Purchase was only signed by one of the ten members of the CC. No resolution existed at the time of the signing of the Offer to Purchase wherein it was confirmed that the CC may sell the property, and that this specific member may sign the Offer to Purchase on behalf of the CC.

Obviously such a resolution would have been drafted by the Conveyancer and signed by all members before the transfer was registered, but the transaction never came to that as the purchase price was never secured.

Can the estate agents act on this contract and retain the deposit of the purchaser if there were no such resolution? Is the contract in other words legally binding?

Reader Comments: 4
Stuart Saville 20/10/2017:
Ridwaan Desai 20/10/2017:

Would it not be possible to have a resolution signed now ratifying what the member did? In my opinion that would then make the contract binding. Further, if the member gave the impression that he was authorised to act, then would estoppel not be the case?

Allen West 20/10/2017:

A member of a CC can bind a CC without written authority.

Allen West 20/10/2017:

Can the conduct of a member of a CC bind the CC? Members have the authority to act on their own and this can have the effect of binding the CC, unless the authority of the member in question has been restricted and the other party to the transaction knows or ought to have known of that restriction. Section 54(1) of the Act states “Subject to the provisions of this section, any member of a corporation shall in relation to a person who is not a member and is dealing with the corporation, be an agent of the corporation…”. The effect of this section is that each member of the CC has the ability to bind the CC in their individual capacity, except where there is an association agreement which states otherwise or it is expressly dealt with in terms of the default internal relations rules set out in section 46 of the Act.

Section 46(b) provides that members shall have equal rights with regard to the management of the business of the CC and with regard to the power to represent the CC in the carrying on of its business, provided that the consent of a member (or members) holding a member’s interest of at least 75%, shall be required for the following fundamental decisions: a change in the principal business carried on by the CC; a disposal of the whole, or substantially the whole, undertaking of the CC; a disposal of all, or the greater portion of, the assets of the CC; and any acquisition or disposal of immovable property by the CC.

Section 46(b) protects individual members to a degree, in that 75% or more of the members’ interests acting together are required to successfully bind the CC if they wish to give effect to any of the material changes or substantial transactions recorded in that section.

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