What it means to sign a contract and consequences of a change of mind. (Article by Mark Leathers, Director of Mc Naught and Co):
Not only when you are a first-time buyer, but especially so, the prospect of signing an offer to purchase for a home can be exciting and is sometimes something which people rush into, only to realise after the ink has dried, that perhaps they were a tad hasty.
When this happens, we frequently see parties attempting to resile from their contract by simply advising either the estate agent or conveyancer that they no longer wish to proceed. These parties seem to adopt the view that the home may simply be on-sold to another buyer and “no harm, no foul.” Buyer’s suffering signing remorse come up with a host of creative reasons as to why they no longer wish to or can proceed with the property transfer, but as we will see below, these are not really relevant in light of our case law governing this very situation.
Whilst seller’s may not wish to engage in a fight with a buyer, attempting to withdraw from or repudiate a sale which was concluded by an estate agent becomes particularly problematic as any refusal to proceed with a binding contract, or attempt to withdraw without valid legal grounds would result in such a buyer being placed in breach and being held liable for the payment of the full estate agent’s commission, even though not now taking transfer of the home!
In the recent case of Naidoo and Another v Wakefields Real Estate (Pty) Limited (AT638/17) [2023] ZAKZPHC 95, Wakefields Real Estate instituted action against Mr and Mrs Naidoo after they failed to carry out their obligations in terms of the Offer to Purchase. A few days after signing the Offer to Purchase, Mr and Mrs Naidoo notified the agent that they no longer wished to proceed with the purchase as it was no longer financially within their means to do so. The Offer to Purchase contained a provision that the agency would be entitled to claim its commission from the purchasers if the latter failed to comply with their obligations in terms of the agreement. (A clause common to most sale agreements) In response to Wakefield’s claim, Mr and Mrs Naidoo argued that they were not aware of the said provision, it was never explained to them or brought to their attention and for that reason, they cannot be held liable.
The Pietermaritzburg High Court relied on the "cavaet subscriptor"-rule which states that a party who signs an agreement, consents to the contents of the document even if it subsequently turns out to be unfavourable to them. (The direct translation of this latin term is “Let the Signer beware”.) The Court rightly found that Mr and Mrs Naidoo had sufficient time to read the agreement before signing, and by signing the agreement, they automatically agreed to all the provisions, regardless of whether they understood the terms thereof. The Court then ordered them to pay Wakefield’s commission for the property even though they were no longer buying it. On appeal, the Supreme Court of Appeal upheld the decision of the High Court which means that the highest civil court in the land has confirmed that this decision is correct.
What can we learn from this? Take time to find the right home, preferably with the guidance of an experienced estate agent and/or conveyancing attorney, and ensure that you understand the terms and conditions of your offer to purchase before appending your signature thereto.
Mc Naught and Company has been in business for forty years and are specialists in the property industry. Together with a range of experienced property practitioners around the country we can ensure that you enjoy the best possible advice and guidance on your home purchase.
https://maclaw.co.za/expertise/property-conveyancing
