Reb Management Services CC sold a sectional title property for R870 000 to "Ras or nominee". The agreement was subject to the purchaser obtaining a loan (to be secured by a bond), and the nominee clause stated that the nominee had to be nominated and must accept, before or on a specified future date (10 October).
Ras wanted to form a trust to take transfer of the property, hence the nominee clause . . .
(Ras accepted that in light of SARS' view of nomination contracts, and from a transfer duty point of view there would be two transfers: from the seller to Ras and from Ras to the trust, once it has been formed and accepted the nomination; this aspect is not in issue.)
Ras applied to Standard Bank for a loan, and the loan was duly approved before the bond due date. The notification from the bank showed that it had approved a loan to "B D Ras and D Ras on behalf of a trust to be formed".
The trust was indeed formed and letters of authority issued, in the time allocated. Also duly finalised was the acceptance of nomination as purchaser under the agreement, by the trust. Ras signed transfer documents and had guarantees issued in time.
Somewhere along the line the seller changed its mind about the transaction (a better offer?) and refused to proceed with transfer on the basis that the agreement lapsed due to non-fulfillment of the suspensive condition.
The seller argued that the loan should have been granted to the purchaser (namely Ras), and that the fact that it was approved in favour of Ras and another "on behalf of a trust to be formed" meant the suspensive condition was not fulfilled.
Ras then took the matter to court. The court rejected the seller's argument, stating that, in obtaining the loan from Standard Bank, Ras was contracting with the bank as a principal. In order for the trust to obtain transfer, Ras had to obtain transfer first, and for this purpose needed and was granted, the loan.
It was accordingly held that the suspensive condition was duly fulfilled, the agreement was of full force and effect and Ras was entitled to transfer.
Moral of the story: Watch out for due fulfillment of suspensive conditions; be careful to check in whose name the bonds have been approved.
For ease of reference, I quote the relevant provisions of the contract below:
"NOMINATION OF THIRD PARTY AS PURCHASER
3.1 This agreement is subject to the resolutive condition that if the Purchaser is not in breach of any obligation under this agreement, the Purchaser (hereafter referred to as 'the Original Purchaser') may nominate a third party as Purchaser (hereafter referred to as 'the Nominated Purchaser') under this agreement in lieu of the Original Purchaser in the manner set out below.
3.2 Both the nomination and the nominee's acceptance of the nomination must be in writing and must be delivered to the seller by 10 October 2003 together with proof to the reasonable satisfaction of the seller of the authority of the signatory or signatories, failing which the right to nominate will lapse and the Original Purchaser will remain bound as Purchaser under this agreement.
3.3 The Original Purchaser will automatically be bound as surety and co-principal debtor for the Nominated Purchaser's obligations to the Seller arising out of the sale to the Nominated Purchaser, and the Original Purchaser undertakes to sign any deed of suretyship required by the lender of the loan referred to in clause 12 of the Schedule.
This agreement is subject to the Purchaser obtaining a bank or building society loan for the amount referred to in Clause 12 of the Schedule, or such lesser amount acceptable to the Purchaser, by no later than the date referred to in Clause 13 of the Schedule, failing which this agreement shall lapse and be of no further force or effect. Approval in principle, whether verbal or in writing, shall be deemed to fulfil this condition. This condition shall be deemed to have been fulfilled notwithstanding that such loan is granted subject to a condition that it can be with drawn at the lender's discretion or otherwise."
Igqwetha Training Academy (Pty) Ltd