AUCTION SALES “SUBJECT TO CONFIRMATION” AND FORMATION OF CONTRACTS Withok Small Farms (Pty) Ltd v Amber Sunrise Properties 5 (Pty) Ltd 2009 2 SA 504 (SCA)

Abstract

The Supreme Court of Appeal’s judgment in Withok Small Farms (Pty) Ltd v Amber Sunrise Properties 5 (Pty) Ltd (2009 2 SA 504 (SCA) (“Withok”)) raises two important issues for property practitioners, the one relating to auction sales and the other to the formation of contracts. The dispute arose largely because of a badly drafted agreement of sale document, but the import of the judgment is such that it may be prudent for practitioners to revisit even their well-drafted standard form sale and lease documents. The facts were straightforward. Certain properties owned by the first and second appellants (“the sellers”) were put up for sale at a public auction on 13 June 2006. The respondent, represented by one A, put in the highest bid, which the auctioneer accepted. Both A and the auctioneer signed a document entitled “Agreement and Conditions of Sale” (“the conditions of sale”), which set out the conditions relating to the auction. On 20 June 2006 the sellers’ representative confirmed the sale in writing by adding his signature in the allotted space on the final page of the document. However, the confirmation of the sale was not communicated to the respondent within the time contemplated in clause 1. In fact, the respondent did not receive notice of the confirmation until some time early in July 2006.
The respondent did not wish to be bound by the sale and in due course applied for an order declaring the agreement to be of no force and effect. Its case was that the confirmation of the sale had not been communicated to it within the seven-day period contemplated in clause 1 of the conditions of sale, with the result that no agreement came into existence. The sellers, in turn, contended that the conditions of sale signed by the respondent and the auctioneer at the time of the auction constituted an agreement of sale
subject to a suspensive condition, namely the confirmation of the sale by the sellers; the condition was fulfilled immediately upon the confirmation of the sale and without any need for it to be communicated to the respondent. The only issue in dispute was whether or not the confirmation of the sale had to be communicated to the respondent within the seven-day period.