Firms reined in with property deals

Firms reined in with property deals
2008/05/21

Companies that get involved in property transactions cannot try to wiggle out of the deal at a later stage by assigning unreasonable interpretations to stipulations in the purchase agreement.
This unanimous verdict by five judges in the court of appeal is one of many in the last few months whereby the court issued a warning that property buyers and sellers have to strictly abide by the letter of their agreements.
Many sellers attempt to free themselves from a sales agreement, especially when they realise they can get more for the property.
In Mystic River Investment 45's case, over which the judges presided, the company sold an extremely precious piece of land in Springfield Park, Durban, for R12m to the closed corporation (CC) Koumantarakis Group.
One of the conditions in the buying agreement was that the CC should issue a guarantee of payment to Mystic "which should be satisfactory to Mystic".
The guarantee eventually issued via a bank contained words stipulating that the bank reserved the right to rescind the guarantee.
Mystic then rejected this guarantee and cancelled the transaction because it wanted an "irrevocable" guarantee.
During this time the property was again on the market, but at R2m more than what the CC would have paid.
However, appeal court judges C. Howie, I. Farlam, M. Navsa, F. Kgomo and N. Mhlantla unanimously rejected Mystic's actions and said the agreement contains no stipulation that the guarantee has to be "irrevocable" – only that it needs to satisfy Mystic. "If Mystic had an irrevocable guarantee in mind, it should have made specific mention of it in the purchase agreement."
Mystic was therefore not entitled to reject the guarantee that the CC provided and the transaction should now – after hundreds of thousands of rands in legal costs – take its due course. – Philip de Bruin, Sake24

Firms reined in with property deals