By Wade O’Connor and checked by Jordan Dias
BACKGROUND
In 2019, the North Gauteng High Court (the “Court”), was tasked with dealing with inter alia the question of whether or not an irrevocable offer could be deemed to be revocable.
On 14 May 2015, Van’s Auctioneers Gauteng CC (the “Auctioneers”), acting on behalf of the First Applicant, W & A Le Roux Slaghuis (Pty) Ltd (the “Seller”), conducted a public auction. The Auctioneers auctioned off a property (“Lot 1”) which consisted, of a double storey with offices, a butchery with a cold room and freezer rooms, storage rooms, bakery, cell phone tower with rental income, staff changing/restrooms, parking for customers and more.
The Respondent in the appeal, Mr. Van Niekerk (the “Purchaser”), made a successful bid of R3.3 million for Lot 1 and signed a sale agreement to purchase. The sale terms included a provision that the agreement was an offer to purchase and that the Purchaser was “irrevocably bound” for a period of 14 days, during which time, the offer was open for acceptance by the Seller.
Four days later, on 18 May 2015, and after paying several amounts, the Purchaser was informed that the Auctioneers had, mistakenly, auctioned off the cold and freezer rooms (forming part of Lot 1 for which he had bid) to another bidder and that the aforesaid loose assets had been removed.
The Purchaser contended that the Seller had repudiated the sale agreement by their actions and conduct due to, inter alia, the removal of the equipment or parts. The Purchaser withdrew his offer on the basis that what remained of Lot 1 was no longer the premises which he offered to purchase.
The Seller argued that Purchaser’s withdrawal was ineffective as the offer made by the Purchaser was irrevocable and, by virtue of the fact that it had not yet been accepted, he was not entitled to withdraw his offer to purchase. Furthermore, the Seller stated that the Auctioneers had paid to remedy Lot 1 to its former condition as a result of their error.
The Purchaser subsequently approached the High Court for relied. The High Court found that the Purchaser had lawfully terminated the agreement and ordered the Seller and Auctioneer to, jointly and severally, refund the Purchaser the deposit that was made in terms of the offer to purchase. The Seller and Auctioneer thereafter appealed.
HELD
In reaching its decision, the Court had to determine the following issues –
- whether a party, who makes an irrevocable offer, may withdraw said offer whilst it is still open for acceptance; and
- whether an agreement can be repudiated before it comes into existence.
The Court held that the irrevocable offer constituted an option to sell, which was granted to the Seller, and which option agreement was in existence and therefore, conferred contractual obligations and rights on both the Seller and Purchaser. However, this agreement must be distinguished from the sale agreement, which would come into effect when the Seller accepted the Purchaser’s offer and exercised the option.
The difference between the sale agreement and the option agreement was that the sale agreement was incapable of being breached as it had not yet come into existence. The option agreement, however, was valid and thus capable of being breached by the Seller.
Despite the fact that it was stated to be irrevocable, the effect of the Seller’s breach would entitle the Purchaser to revoke the offer provided that the breach was material. In support hereof, Mabuse J stated the following:
“The fact that an offer is said to be irrevocable does not make it irrevocable simply because it is said to be irrevocable. Whether or not an offer is irrevocable will depend on the conduct of the parties. An innocent party is entitled to withdraw the offer on any of the recognised grounds on which an agreement may be repudiated even if it is said to be irrevocable.”
The Court held that once the offer was made, there was an implied duty on the Seller to preserve the commodity that the Purchaser had offered to purchase. Where the Seller failed to do so, and said commodity was materially damaged or changed, the Seller is deemed to have repudiated the option agreement on the basis that the commodity is not the same as what the Purchaser had initially offered to purchase. The Purchaser was therefore entitled to accept the Seller’s repudiation and revoke the irrevocable offer.
The appeal was dismissed and the first judgement, in favor of the Purchaser, was confirmed. In concluding, the Purchaser was entitled to withdraw his offer notwithstanding that the offer was stated to be irrevocable.
VALUE
The High Court held that an offer is not irrevocable simply because it Is said to be irrevocable. The conduct of the parties will be decisive in determining whether an irrevocable offer may be revocable in certain circumstances.
META DESCRIPTION
The North Gauteng High Court concurred with the court a quo in that a purchaser is entitled to withdraw his offer to purchase, in certain circumstances, despite the fact that said offer was stated to be irrevocable.
FOCUS KEYWORD
Irrevocable offer , Offer and Acceptance , North Gauteng High Court, Appeal
