What makes an Offer to Purchase valid?

11/08/2022 - By Kelsey Nurse

The Alienation of Land Act 68 of 1981, provides the legal requirements to which the contract of sale must comply with regards to immoveable property.

➢ Land is sold by a seller to a purchaser for an amount of money (purchase price).
➢ The contract is signed by the parties or their agents, acting on written authority.

Therefore, the requirements for the sales agreement must be as follows:
➢ It must be in writing:
-Description of the parties to the contract (seller and purchaser)
-The description of the property being sold
-The purchase price agreed upon
➢ It must be signed and dated by both parties, or their agents.

In every offer to purchase there will be multiple clauses (sub-sections) that make up the offer/contract, which you are agreeing to when you sign the offer/contract, these clauses effect the validity of your offer/contract. Some of these clauses will be explained below:

➢ Purchase Price:
A. In the event of a cash sale the offer/contract will specify when payment of the purchase price will be due, for example upon registration of the property or deposit/payment due on a specified date. There are 3 different types of cash sale options:
1. Full purchase price payable in CASH– if the whole purchase price is payable in cash, then the purchase price
must be secured by
means of a bank guarantee (meaning the bank confirms that you have the funds available for the purchase price) or the full amount
is paid into the transferring attorneys trust account, before the guarantee date in terms of the offer/contract. (In this example the
purchase price is paid by the purchaser without assistance in terms of a loan)
2. Full Purchase price by means of a loan– if the whole purchase price is payable in terms of a loan (bond
provided by a bank), then the purchase price is secured in terms of a bank guarantee, which is to be delivered before the specified
date in the offer/contract.
3. Part of the purchase price is paid cash (deposit) and the balance of the purchase price by means of a loan.
When a deposit is to be made in terms of the offer/contract, it is payable by the due date specified therein. The balance of
the purchase price is secured by a loan in terms of which a bank guarantee is issued and which is to be delivered before the specified
guarantee date in the offer/contract.

B. In the event of a sale in terms of instalments chapter 2 of the Alienation of Land Act 68 of 1981 must be complied with.

➢ Suspensive Conditions:
The two most common suspensive conditions in an offer/contract occur where the purchaser will be paying either:

-By partly or totally by means of a loan; or
-From the sale proceeds of another property;

This is then known as a suspensive condition that is subject to, meaning the offer/contract is only valid if the purchaser can comply with the conditions required under this clause.

1. The approval of a loan– this condition requires the purchaser to obtain a loan for the purchase price or balance
purchase price from a registered Financial Institution within the specified due date. If the purchaser does obtain a loan in this time,
then the suspensive conditions have been met and the offer/contract will become fully legal and binding. If the purchaser does not
obtain a loan in the specified due date there is a possibility for the period being extended by the parties, upon written agreement. But
what if a purchaser cannot obtain a loan? The contract could lapse and therefore releases the parties from their obligations.
2. Subject to sale of the purchaser’s property- this offer/contract is then subjected to the sale of the purchaser’s
property being sold within a specified date range. The contract then only becomes fully legal and binding once the purchaser’s
property is sold, i.e. second offer signed and finances for the second offer are in place.

➢ Breach/Cancellation:
A breach or cancellation clause makes provisions for the possibilities where one party has failed to comply with their obligations in terms of the offer/contract, and as a consequence of this, the effected party can claim specific performance (being placed on terms), meaning the non-compliant party needs to fix their breach within a specified time, the alternative is that the contract is then cancelled.
Examples of a breach:
-Failure to pay deposit and/or costs by the due date or to sign documents
-Failure to provide payment of the purchase price or supply guarantees by the due date.
-Not complying with any other provisions of the contract.