Sick letters or fake letters?

corien newsletter depiction.inddThis article deals with medical certificates and whether or not an employee is justified in taking the day off for an “illness”.

Angela informed her employer on Monday morning that she would be staying at home as she felt very sick and was unable to do her work in her condition. Angela only decided on Wednesday that she would go to the doctor because she knew she would be returning to work on Thursday, and therefore needed a medical certificate from the doctor so that her work would not deduct the money from her salary. However, Angela had a surprise waiting for her.

In terms of Rule 15(1) of the Ethical and Professional Rules of the Medical and Dental Professions Board of the Health Professions Council of South Africa a practitioner shall only grant a certificate of illness if such certificate contains the following information:

  • the name, address and qualification of the practitioner;
  • the name of the patient;
  • the employment number of the patient (if applicable);
  • the date and time of the examination;
  • whether the certificate is being issued as a result of personal observations by the practitioner during an examination, or as the result of information received from the patient and which is based on acceptable medical grounds;
  • a description of the illness, disorder or malady in layman's terminology, with the informed consent of the patient, provided that if the patient is not prepared to give such consent, the medical practitioner or dentist shall merely specify that, in his or her opinion based on an examination of the patient, the patient is unfit to work;
  • whether the patient is totally indisposed for duty or whether the patient is able to perform less strenuous duties in the work situation;
  • the exact period of recommended sick leave;
  • the date of issuing of the certificate of illness; and
  • a clear indication of the identity of the practitioner who issued the certificate which shall be personally and originally signed by him or her next to his or her initials and surname in printed or block letters.

If preprinted stationery is used, a practitioner shall delete words which are irrelevant. A practitioner shall issue a brief factual report to a patient where such a patient requires information concerning himself/herself.

The above is largely self-explanatory. Subrule (e) refers to those occasions where, for example, the employee has been off sick on Monday and Tuesday and then on Wednesday he goes to the doctor and informs the doctor that he has had flu since Monday and requires a sick note. The doctor is then required to write in the sick note, “I was informed by the patient that …”

An employer does not have to accept this as a genuine illness. The doctor is only telling you that the patient says he was ill. The doctor is not certifying that he made an examination and is able to confirm the illness. You would therefore be perfectly justified in informing the employee that the time taken off will be regarded as unpaid leave and that in future he should visit the doctor when he falls ill and not after he has recovered from the alleged illness.

Unfortunately for Angela her employer recently read an article informing him of his rights to deduct money from her salary because she failed to come to work on Monday and Tuesday and only went to see the doctor on Wednesday, and there was no way of ascertaining that she definitely was ill on those days.

In light of the above it would be wise for employees to see the doctor on the same day that they feel ill, and for employers to insist on seeing the medical certificate and examining it properly.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Does the service of a notice of joinder interrupt prescription?

corien newsletter depiction.inddIn the recent judgment of Peter Taylor & Associates v Bell Real Estates and Renasa Insurance Company the Supreme Court of Appeal was requested to decide whether the court of first instance was correct in deciding that the service of a notice of joinder interrupted prescription.

The relevant sections of the Prescription Act provide as follows:

  • Section 15(1) – The running of prescription shall, subject to the provisions of subsection (2), be interrupted by the service on the debtor of any process whereby the creditor claims payment of debt.
  • Section 15(6) – For the purposes of this section, ”process” includes a petition, a notice of motion, a rule nisi, a pleading in reconvention, a third party notice referred to in any rule of court, and any document whereby legal proceedings are commenced.
  • Section 15(5) deals with the situation that is applicable where a person applies to be joined as a defendant in an action and provides as follows that if any person is joined as a defendant on his own application, the process whereby the creditor claims payment of the debt, shall be deemed to have been served on such person on the date of joinder.

In the Peter Taylor matter the Plaintiff was seeking to join a further defendant in terms of Rule 10(3) of the court rules. The court referred to various matters pointing out the opposing positions held by our courts. The crisp point on which the court relied for prescription to be interrupted was the question of whether the process served can be considered as a step in the enforcement of a claim for payment of a debt. The court held that it would be “stretching the interpretation of the Act a little too far to say that the application constitutes a ‘process’ whereby the creditor claims payment of the debt” and that its service thereof interrupted prescription. The Court found that it could not be said that the joinder application finally disposed of some elements of the claim and also that cause of action in the joinder applications differed from the cause of action for damages that was initially pleaded.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Are there limitations on ownership rights?

corien newsletter depiction.inddIt is a recognised principle of property law that ownership does not confer absolute and unlimited entitlement on the owner, but that various limitations exist in the interest of the community and for the benefit of other people.

The most important limitation on the owner in the interest of the community as a whole is the payment of taxes to the state in respect of certain movable and immovable property. In the case of immovable property several measures make land available to a larger section of the community, which implies that the restitution of land rights and the provision of land will require measures for expropriation. Furthermore, a number of provisions deal with environmental conservation and physical planning which limit the owner’s entitlement in the interest of the community. Limiting measures in the case of moveable property prohibit the use of such property to the detriment of the community, for instance motor vehicles, fire-arms and dependence-producing substances.

There are also measures which limit the owner’s entitlement, not in the interest of the community, but in the interest of other individuals. The best known example in this case is neighbour law, which implies that the owner may not use his land in such a way that it constitutes an unreasonable burden on his neighbours. The criterion of reasonableness determines that, in these circumstances, the owner of immovable property may exercise his entitlements within reasonable bounds, and that the neighbouring owner or occupier must tolerate the owner’s exercise of his entitlements within reasonable bounds.

Other examples of the application of the criterion of reasonableness in the case of neighbour law are the obligation to lateral and surface support, measures dealing with encroachments, the mutual obligation regarding the natural flow of water and the elimination of danger.

Other people besides the owner may acquire entitlements (for instance use rights) in respect of the moveable or immovable property of the owner. Holders of limited real rights acquire entitlements in respect of the asset, which limits the owner’s ownership (dominium) as they burden the property. It is therefore enforceable against the owner and his successors in title. Certain creditors’ rights may also result in people acquiring entitlements in respect of the owner’s property. These rights are, however, only enforceable against the owner personally and do not burden the property as such, therefore it is not enforceable against successors in title.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The sequestration process

corien newsletter depiction.inddThe sequestration process involves a Court Application. The Applicant in the Application is either yourself for your own sequestration (voluntary surrender) or the Applicant is one of your creditors (either a friendly or aggressive creditor). The applications are similar and although there are some different requirements for each, the result is the same.

Voluntary surrender

Voluntary surrender refers to the process whereby a natural person can make an application to place him/herself under an order for sequestration.

A person is insolvent if his/her liabilities exceed his/her assets. In such a case he/she can apply for voluntary surrender of their estate. Anybody can apply for voluntary surrender at any stage as soon as he/she is insolvent, even if they have been or are under debt counselling, for example.

The person who wants to sequestrate him/herself, will depose to an Affidavit which explains why he/she claims he/she is insolvent. This will be drafted by the Attorneys who will bring the application on behalf of the Applicant. As soon as the Affidavit is signed, the application will be issued at Court and a Court date is assigned. The Applicant does not have to appear in Court as the Advocate appears on his/her behalf.

If the Court grants a provisional order on the first Court date, the matter will be postponed for approximately one month. During that month notice will be given to all creditors, and if on the return date no-one has opposed the application, the order will be finalised and the Applicant’s estate will be sequestrated.

Compulsory sequestration

Applications are also made by way of a Court application; however, in this case the Applicant will be a creditor of the debtor. If it is a creditor with whom the debtor does not have a good relationship, we refer to it as an “aggressive” sequestration (for example the bank).

However, the banks seldom bring sequestration applications against the average debtor as it is much cheaper and easier for them to follow the collection procedures: attach property and sell it and/or attach your salary.

If it is a creditor with whom the debtor has a good relationship, we refer to it as a “friendly” sequestration (for example a family member or a friend to whom you owe money).

Aggressive (“unfriendly”) sequestration

Where an unfriendly creditor brings a sequestration application against a debtor, we refer to it as an aggressive sequestration. It is also a forced sequestration as opposed to voluntary surrender.

The creditor who brings the application must have established a claim against the debtor; in other words, the debtor must indeed owe the creditor money. A second requirement is that there must also be a benefit to creditors. Thirdly, the debtor must have committed an act of insolvency.

If a creditor brings an aggressive application against a debtor, the debtor can oppose such an application if he/she is not insolvent or if there is another reason why the order should not be granted.

Process for “unfriendly” and “friendly” sequestrations

The process for both these applications is the same and it is only the Applicant that differs.

As with voluntary surrender, an Affidavit will be given by the creditor to explain why he avows that the debtor owes him/her money. He will attach proof thereof (contract/statement) and also proof that the debtor has committed an act of insolvency (where the debtor has written a letter to say that he/she cannot pay the debt). In both instances the Applicant must prove that there will be a benefit to creditors to have the debtor sequestrated.

Once the Affidavit has been signed, the necessary documentation will be drafted, issued at Court and a Court date assigned. As soon as this is done, the documents will be served on the debtor, employees of the debtor, Master of the High Court and the South African Revenue Services by the Sheriff. The provisional order should also be given to all creditors above R5 000.00 by way of registered post. If the application is not opposed, a final order will be made for the sequestration of the debtor/Applicant.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

When is a tenant an illegal occupant?

corien newsletter depiction.inddWhere the Contract of Lease is breached in any way by the tenant and he or she after receiving notice thereof has not remedied such a breach within the period agreed upon, then the landlord may cancel the contract. The tenant will be found to be an illegal occupier in this instance.

Where a tenant fails to perform as agreed upon in his Lease agreement, he will be found to be in breach of that agreement. An example of this is a failure to pay rent timeously or at all. The landlord must notify the tenant in writing of his decision to terminate the contract by means of a letter of cancellation, allowing the tenant a reasonable period, or such timeframe as agreed upon in terms of such a lease, to vacate the property.

If the tenant chooses to ignore the notice of cancellation of the lease agreement by remaining on the property and continuing to use and enjoy it, the tenant will be regarded as an illegal occupier of the property. The same applies if the tenant continues to occupy the property after the expiration of the initial lease period. An illegal occupier may be evicted from the rented property by the landlord or owner. This will be done at a Magistrate’s or High Court and for that the services of a lawyer will be required.

There is no longer a Common Law right to evict someone. Instead the owner or landlord must follow the procedures and provisions of the Prevention of Illegal Eviction and Unlawful Occupation of land Act 19 of 1998 (hereinafter referred to as the “PIE Act”). The tenant must be notified of the pending action, by means of a Notice of Intention to Evict and this must be done at least 14 days before the date of the court hearing. This notice must also be sent to the respective Municipality involved.

On the date of the hearing, the court will consider factors such as whether the person is an unlawful occupier, whether the owner has reasonable grounds for eviction and alternative accommodation available to the tenant. It is now considered a criminal offence to evict someone without a court order to that effect. Constructive eviction, for instance, where a landlord cuts the water or electricity supply to the property in order to “drive” the tenants out, is a criminal offence.

The type of action or application that your legal representative will bring will vary depending on the facts and circumstances of the matter. Such actions or applications can be heard in the Magistrate’s or High Court, depending on the value of the occupation and not the leased property value. The lease agreement may also have a clause embodied in it where the parties agree to a particular court’s jurisdiction, where upon that will be followed. If the court proceedings are successful a Warrant of Ejectment may be issued, whereupon the owner or landlord may proceed with the eviction of the illegal occupier.

Once the owner or the proprietor of the leased property has followed all the prescribed procedures as laid out in the PIE Act and they have established that their tenant is considered an unlawful occupier then they may proceed with the above-mentioned steps in order to evict them from their property.

An unlawful occupier may be removed from the premises upon the instruction of an Eviction Order / Warrant of Eviction with the assistance of the Sheriff of the respective court at a minimal fee. The steps laid out in the PIE Act are simple to understand and follow allowing a transparent and fair chance to both the landlord and the tenant in these difficult situations.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Public Nuisances: Legal rights in terms of legislation

corien newsletter depiction.inddPersons who commit disruptive acts of unacceptable behaviour in public places may be warned, arrested and subsequently prosecuted by the authorities. The offender shall be liable for a fine, imprisonment or both upon conviction. How is this enforcement of our rights achieved by an ordinary citizen?

A public nuisance is a criminal wrong; it is an act or omission that obstructs, damages, or inconveniences the rights of the community. The term public nuisance covers a wide variety of minor crimes that threaten the health, morals, safety, comfort, convenience or welfare of a community.[1]

Legislation offers relief in this respect, in specific by-laws of local Municipalities. A by-law is a law that is passed by the Council of a municipality to regulate the affairs and the services it provides within its area of jurisdiction[2]. A municipality derives the powers to pass a by-law from the Constitution of the Republic of South Africa.

With regards to Public Nuisances one would look to By-law Relating to Streets, Public Places and the Prevention of Noise Nuisances, 2007[3]. The main body of this by-law lists certain acts that are deemed prohibited behaviour and are therewith criminalised. Various acts including begging, using abusive or threatening language, being under the influence of drugs or alcohol and causing a disturbance by shouting, screaming or making any other loud or persistent noise or sound, including amplified noise or sound are listed therein.[4]

Should anyone and his conduct fall within this definition and perform any or multiple prohibited acts of public nuisance, the authorities are to be alerted immediately. The authorities have the power to instruct the offender to immediately cease the offending behaviour, failing which he will be guilty of an offence.

Section 23 states that any person who contravenes or fails to comply with any provision of this by-law or disobeys any instruction by the authorities enforcing this by-law, shall be guilty of an offence. This offender shall be liable to a fine or imprisonment for a period not exceeding six months, or to both a fine and such imprisonment.

It is therefore evident that by identifying certain acts of unacceptable, aggressive, threatening, abusive or obstructive behaviour of persons in public the offender may be ordered to immediately cease such offending conduct or be arrested for not complying with any order to do so.

Reference List:

  1. http://openbylaws.org.za/za/by-law/cape-town/2007/streets-public-places-noise-nuisances/
  1. http://legal-dictionary.thefreedictionary.com/Public Nuisance
  1. http://openbylaws.org.za/
  1. https://www.capetown.gov.za/en/bylaws/Pages/Home.aspx

[1]http://legal-dictionary.thefreedictionary.com/Public Nuisance

[2]https://www.capetown.gov.za/en/bylaws/Pages/Home.aspx

[3]http://openbylaws.org.za/za/by-law/cape-town/2007/streets-public-places-noise-nuisances/

[4]Section 2 By-law Relating to Streets, Public Places and the Prevention of Noise Nuisances, 2007

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Can I still make a case of unfair labour practice if I have settled?

corien newsletter depiction.inddIn this article we will discuss whether, in the face of an agreement between an employer and an employee in terms of which an employee accepts a demotion to a lower position, the employee is nevertheless entitled to refer an unfair labour practice dispute concerning this demotion to the CCMA.

The facts in Builders Warehouse (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others[1] can be summarised as follows: The employee worked as an Administrative Manager at Builders Warehouse (Pty) Ltd. She was informed by doctors that she was very ill and would most likely have to go to hospital frequently and take various types of medication. Over the next three years her absenteeism increased significantly and her employers became concerned as she was no longer able to do her job effectively, even when she was not absent, due to the side effects of her medication. Builders Warehouse (Pty) Ltd, after having discussions with the employee, suspended her pending an investigation into her capacity to undertake the functions of an Administrative Manager, taking into account her health and performance. Builders Warehouse (Pty) Ltd held an incapacity hearing and the external Chairperson ruled that, due to the employee’s excessive and increasing absenteeism, dismissal was the appropriate sanction. The Chairperson, however, offered her a demotion instead of a dismissal. The employee accepted this demotion in writing.

After this agreement between Builders Warehouse (Pty) Ltd and the employee was concluded, she obtained legal assistance and subsequently complained to the CCMA that Builders Warehouse (Pty) Ltd had committed an unfair labour practice by demoting her.

The question here is whether, in the face of an agreement between Builders Warehouse (Pty) Ltd in terms of which the employee accepted demotion to a lower position, she was nevertheless entitled to refer an unfair labour practice dispute concerning this demotion to the CCMA.[2]

The arbitrator in the CCMA decided that because there was consent to the demotion, the CCMA did not have jurisdiction to hear the dispute. The employee then appealed to the Labour Court and once again to the Labour Appeal Court, of which the outcomes are set out below.

The Labour Court and the Labour Appeal Court looked at Section 186(2)(a) of the Labour Relations Act[3] in this regard, which states the following:

“Unfair labour practice means any unfair act or omission that arises between an employer and an employee involving –

Unfair conduct by the employer relating to the promotion, demotion, probation (excluding disputes about dismissals for a reason relating to probation) or training of an employee or relating to the provision of benefits.”

The Labour Appeal Court upheld the judgement in the Labour Court and found that although a binding contract comes into existence when employers and employees settle their differences by agreement, such an agreement does not mean that the CCMA does not have jurisdiction to hear the dispute. The fact that the parties have agreed that the employee accepts demotion is not a complete defence for the employer because the ambit of this unfair labour practice is wide enough to include the implementation of an agreement to accept demotion.[4] The Labour Appeal Court confirmed that the determination of whether a demotion took place, unlike the determination of dismissal, does not require an arbitrator to determine if there was consent or not.[5]

In conclusion, it is clear from the Builders Warehouse case that, although consent is a relevant issue in regard to the merits of a dispute regarding an unfair labour practice, it is not a jurisdictional prerequisite. This means that the CCMA does have the power to hear a matter relating to a demotion even though there was consent thereto.

Bibliography

  • Builders Warehouse (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (PA 1/14) [2015] ZALAC
  • Labour Relations Act 66 of 1995

[1] (PA 1/14) [2015] ZALAC.

[2] (PA 1/14) [2015] ZALAC Par 12.

[3] Act 66 of 1995.

[4] Builders Warehouse (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration

[5] Builders Warehouse (Pty) Ltd v Commission for Conciliation, Mediation and Arbitration and Others (PA 1/14) [2015] ZALAC Par 13.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The Credit agreement

corien newsletter depiction.inddIf you default on a credit agreement and action is taken against you by the credit provider, you still have time, according to Section 129(3)(b) read with 129(3)(a) and S129(4) of the National Credit Act (“NCA”)[1] as well as the case of Firstrand Bank Limited v Nomsa Nkata[2] to re-instate the credit agreement until the goods have been sold in execution.

Prior to the National Credit Act coming into force, the position regarding the right of a consumer to re-instate a credit agreement was determined by the principle of redemption in common law. According to this principle, a consumer would be able to re-instate the credit agreement by paying the credit provider the full amount of the debt, together with ‘default charges’ and reasonable costs of enforcing the agreement. According to the National Credit Act, ownership and possession of an item or premises can be redeemed by paying only the amount overdue at that date, together with charges and costs.

The issue, however, is at which point it becomes too late to pay the amount overdue in the execution process. This issue was addressed in the recent case of FirstRand Bank Limited v Nomsa Nkata.[3] Section 129(3) and (4) of the NCA states the following:

(3) Subject to subsection (4), a consumer may –

(a) at any time before the credit provider has cancelled the agreement re-instate a credit agreement that is in default by paying to the credit provider all amounts that are overdue, together with the credit provider’s permitted default charges and reasonable costs of enforcing the agreement up to the time of re-reinstatement; and –

(b) after complying with paragraph (a), may resume possession of any property that had been repossessed by the credit provider pursuant to an attachment order.

 (4) A consumer may not re-instate a credit agreement after –

 (a) The sale of any property pursuant to –

 (i) an attachment order; or

 (ii) surrender of property in terms of section 127;

 (b) The execution of any other court order enforcing that agreement; or

 (c) The termination thereof in accordance with section 123.”

The Supreme Court of Appeal found in the FirstRand Bank Limited case that in terms of both the common law as well as the NCA, “the Rubicon has been, and remains the sale in execution.” This means that at any point up until the time of the sale in execution, the consumer can put a halt to the execution proceedings and reinstate the agreement by paying the amount overdue, together with charges and costs.

The reason that the above provision was placed in the NCA was to make provision for the fact that many consumers borrow money over an extended period in order to finance the acquisition of large purchases such as a home or a motor vehicle. It was also noted in the above judgment that less affluent citizens may make use of extended credit to purchase household items and appliances. Therefore the NCA assists consumers in providing them with the option of paying the overdue amount rather than having to pay the entire amount of the debt.

The Court established in the FirstRand Bank Limited case that Section 129(4) (b) can only be used before the sale has taken place and not thereafter. Once the sale has taken place the credit agreement cannot be re-instated between the consumer and the credit provider. Should you find yourself in the temporary position of not being able to pay the monthly installments of your credit agreement but are able to pay those installments at a later stage, and to not want to cancel the credit agreement, then it is imperative that you pay the money which is overdue to the Credit Provider prior to any sale in execution as you will not be able to re-instate the agreement thereafter.

Bibliography

  • National Credit Act, 34 of 2005
  • Firstrand Bank Limited v Nomsa Nkata, (213/14) [2015] ZASCA 44 (26 March 2015)

[1] 34 of 2005

[2] (213/14) [2015] ZASCA 44(26 March 2015)

[3] (213/14) [2015] ZASCA 44(26 March 2015)

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

What is meant by real security?

corien newsletter depiction.inddReal security means that, on the basis of a creditor’s right against the debtor (principal debt), a creditor acquires a limited real right in the property of the debtor as security for the payment of the creditor’s right (principal debt) by the debtor. Real security differs from personal security in that a creditor does not acquire a limited real right in the property of the debtor in the case of personal security, but only acquires a creditor’s right against a third party as security for the payment of the principal debt by the debtor. Such a third party is normally surety of the debtor.

A requirement for real security is the existence of a valid and enforceable principal debt. The real security is accessory to the principal debt, in other words the real security is terminated automatically if the principal debt is paid in full.

If the object of security is moveable property, real security can be in the form of either pledge or notarial bond. In the case of pledge the object of pledge (corporeal or incorporeal moveable property) must be delivered by the pledgor (debtor) to the pledgee (creditor). Physical control of the pledge object is a requirement for the establishment and continuation of a limited real security right to the security object. The pledgee has the obligation to maintain the pledged property within reason and, on termination, to return the property to the pledgor. A notarial bond can be registered in respect of specified, corporeal moveable property of the debtor (mortgagor) in favour of the creditor (mortgagee) in the deeds registry. After registration of this bond, the mortgagee acquires a limited real right to the encumbered property without delivery thereof to the mortgagee.

Immoveable property of the debtor serves as the object of security in that a mortgage is granted by the debtor (mortgagor) to the creditor (mortgagee) and registered in the deeds registry. A mortgage is a liquid document which grants the mortgagee a limited real right in respect of the immoveable property of the mortgagee without the physical control of the property being passed to the mortgagee. More than one mortgage can be registered over the same immoveable property at the same time. Priority is given, in this case, to mortgagees in the order that the mortgages were registered (prior in tempore, prior in iure).

The pledge of the mortgagee (creditor) can, if the principal debt is not paid in full by the mortgagor or pledgor (debtor), have the security object sold in execution and is entitled to the proceeds of the sale in execution for payment of the principal debt. In the case of insolvency of the pledgor or mortgagor, the pledge or mortgagee acquires a preferent claim to the proceeds of the sale of the security object.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

What does a suspensive condition in a contract really mean?

corien newsletter depiction.inddMost people that have bought a property may have noticed a clause dealing with suspensive conditions in the contract of sale. Usually these conditions relate to deposits that need to be paid, financing that has to be procured and/or another property that needs to be sold before the sale can be confirmed. The interpretation appears straightforward enough – meet the requirements, and the contract is valid; fail to meet the requirements and the contract is invalid. But is it really that straightforward? And what are the consequences of non-compliance?

In layman’s terms a condition contained in a contract can be described as a provision that defers the obligation(s) of a party in the contract to the occurrence of some future uncertain event. This is usually termed a ‘suspensive condition’ or a ‘condition precedent’.

Legally a suspensive condition can be described as a condition, which suspends the operation or effect of one, or some, or all, of the obligations under a contract until the condition is fulfilled. If the condition is not fulfilled then no contract comes into existence. Once the condition is fulfilled, the contract and the mutual rights of the parties relate back to, and are deemed to have been in force from, the date of the signature of the agreement and not the date of the fulfilment of the condition.

The Supreme Court of Appeal recently confirmed that where a suspensive condition is not fulfilled timeously it lapses and the parties are not bound by it, even though one party has performed fully.

In the matter of Africast (Pty) Limited v Pangbourne Properties Limited the parties concluded a contract for the development of commercial property in an area in Gauteng. One of the suspensive conditions in the contract was that Pangbourne’s board of directors had to approve the contract and written approval had to be presented to Africast within seven working days from the date of conclusion of the contract. The contract was signed on 11 April 2007 and Pangbourne’s board of directors approved the contract on 20 April 2007, however the written approval was only provided on 25 April 2007 to Africast, which was after the required seven-day period. Pangbourne decided after 18 months that since the suspensive condition had not been met within the stipulated period, it was not bound by the contract and refused to deliver the required guarantees. At that stage buildings had already been constructed by Africast in terms of the agreement.

The Court confirmed Pangbourne’s view that since the suspensive condition in the contract had not been fulfilled timeously no contract had come into existence and that the contract had lapsed due to non-fulfilment of the suspensive condition. The Court came to this conclusion notwithstanding the fact that both parties had performed in terms of the agreement for some 18 months.

The most common appearance of suspensive conditions is in contracts involving the sale of immovable property such as a house, flat, plot, or farm. The conditions that are generally encountered in the contract of sale is that the sale is subject to the purchaser obtaining a bond from a financial institution and/or that the sale is subject to the purchaser selling his existing property within a certain period.

It is important to bear in mind that suspensive conditions are usually inserted in a contract for the benefit of one of the parties to the contract. In the abovementioned scenario, the suspensive conditions are included for the protection of the purchaser. Should the purchaser fail to obtain a bond and/or sell his existing property within the required period, the contract would not have any force or effect and the purchaser will not be bound to the terms and conditions of the contract. Non-fulfilment of a suspensive condition renders the contract void and should the parties still wish to continue with the sale, a new contract of sale must be concluded.

If a suspensive condition is included for the benefit of a particular party to a contract, such suspensive condition can be waived at any time prior to the lapsing of the time for the fulfilment of the suspensive condition by the party for whose benefit the condition was included. Having regard to the scenarios mentioned above, the purchaser may accordingly at any time before the lapsing of the period of the suspensive condition, inform the seller that he waives the suspensive condition and the contract is no longer subject thereto. This will then make the contract unconditional and the purchaser and seller will be bound to the terms of the contract.

It is always prudent to tread carefully when entering into a contract that is subject to a suspensive condition. Be aware of the stipulated periods for compliance, for whose benefit the conditions are inserted and the requirements to prove compliance. If necessary, ensure you seek legal advice before you sign the contract and obtain advice before you waive any conditions that have been inserted for your benefit.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.