Understand the fine print

2012-11-24 14:36

It is very important to understand the contracts you are entering into, whether for the sale of a house, joining a medical scheme, taking out a home loan or investing your money. Knowing the product or contract will help you make better financial decisions

Sebobe writes:
I received an offer to purchase my property and the purchaser was granted the loan by a bank.

He was then asked to apply for a senior position at his company, which may result in him relocating to another province.

He will not accept the bank quote until the results of the interview are in and the decision to relocate or not has been made. Does this mean he is in breach of contract?

Maya replies:
It is difficult to give a definite answer without understanding the terms of the contract, however, David Warmback of Shepstone & Wylie Attorneys says a standard condition in most property-sale agreements is the property is sold subject to a condition the purchaser obtain a loan within a certain period.

In other words, the purchaser is saying he is only able to acquire the property if he gets a loan from a bank for a certain amount.

The seller will usually give the purchaser that indulgence for an agreed period.

“It seems, in these facts, that following the job offer issue, it suited the purchaser not to get the bond formally approved,
and probably by not accepting the quote timeously, the bank did not formally grant the loan.

“This meant the agreement lapsed due to non-fulfilment of the condition relating to the bond approval,” says Warmback, who adds that the purchaser is obliged to show good faith in this process and do as much as he can to get the loan granted.

This must include lodging an application with one or more banks, providing the banks with all the information they require, and accepting a reasonable offer from the bank.

As the purchaser will not accept the bank quote, Warmback says the seller may well have an action against the purchaser, if he is able to prove the facts as stated.

Warmback says that under the legal principle of fictional fulfilment, a court could hold that as the purchaser intentionally frustrated fulfilment of the condition by not accepting the loan, the condition will be treated as having been fulfilled and he will have to perform his obligations.

“Unfortunately, any litigation is often lengthy and expensive and the seller may practically be in a better position to continue looking for another purchaser rather than pursuing a claim against the current purchaser,” advises Warmback.

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