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The offer to purchase agreement : suspensive and resolutive conditions

What is a condition?

A condition in a contract is a clause, which renders the operation and consequences of the contract as a whole, dependent upon an uncertain future event.

What is a suspensive condition?

A suspensive condition or “condition precedent” suspends (puts on hold) the operation of the contract for a period of time, subject to the occurrence of a future event, and only if and when the condition has been fulfilled, will an enforceable contract exist. An example is the ‘Mortgage Bond’ clause whereby the contract is subject to the purchaser raising a loan from a bank for a specific amount before or on a certain date against security of a first mortgage bond to be passed over the property.

Some suspensive conditions are inserted for the sole benefit of one party, and can be waived by that party, meaning that he gives up the benefit of that condition, although it remains a suspensive condition until it is waived. For example, the condition may stipulate that the contract is subject to the purchaser selling his own house within a certain time period. If the purchaser decides, after signing the contract, that he can buy the new property without having to sell his existing house, he can waive the condition, providing that he notifies the seller within the specified time period.

If the conditions are not fulfilled or waived within the specified time period, the contract falls away completely, and the seller is free to sell the property to someone else, but pending the fulfilment of the condition/s, neither party can withdraw from the contract and the seller may not sell the property to anyone else. However, the seller could include an “escape’ clause, which could allow him to do so under certain circumstances.

What is a resolutive condition?

In the case where a resolutive condition is stipulated in a contract, the contract is immediately binding after the parties thereto have signed it, and will remain binding subject to the future event stipulated in the condition being fulfilled. An example is where it is stipulated that the contract will terminate if a national road is built next to the property sold, within a certain period. The event referred to in the condition must be accurately described and a time period must be specified for fulfilment (or non-fulfilment) of the condition.

If a condition is deliberately prevented from being fulfilled, the condition is deemed to have been fulfilled.

An example of this is when the buyer decides he does not want the property anymore and stalls the process of getting finance from a bank, until after the fulfilment date (of having to get a bond) agreed upon in the offer to purchase.

 

http://www.privateproperty.co.za/advice/property/articles/the-offer-to-purchase-agreement-suspensive-and-resolutive-conditions/3582 – Privateproperty

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