It is common practice within the commercial environment to conclude contracts which are subject to suspensive conditions or otherwise known as condition precedents (“CPs”). Whilst most CPs are relevant and necessary for a variety of reasons (dependent on the particular transaction), ensuring the accurate fulfillment of same is often not attributed the same level of importance as the implementation of the contract as a whole. Despite this oversight leading to the unenforceability of the contract and therefore the termination of the transaction as a whole, a contracting party will often face an even worse fate when they proceed with litigation to enforce the contract on the incorrect reliance of Estopple.

There is a fatal misconception that, despite the non-fulfillment of CPs (whether due to the expiry of a time period or a fulfillment which differs slightly from the requirements set out in the contract), a contract will be valid and enforceable if the parties continued to conduct themselves in accordance with the contract under the impression that the CPs had been met.

When a party falls prey to the above pitfall it is often contended that, as a result of their conduct, the parties tacitly waived or extended the fulfillment of the CPs and revived the lapsed contract. A party with this understanding will often raise estopple during litigation in an attempt to convince the court that an enforceable contract exists.

A contract which is subject to CPs constitutes a valid contract from the moment it is concluded but the enforceability and other consequences of that contract  only come into full operation once the CPs have been fulfilled. It is trite in our law that an agreement which is subject to CPs automatically falls away and is no longer enforceable if the CPs are not fulfilled strictly in accordance with the terms of the contract (Meyer v Barnardo and another 1984 (2) SA 580 (N) and Marais v Kovacs Investments 724 (Pty) Ltd [2009] 1 All SA 174 (C).

Our courts view on the enforceability of a contract once it has lapsed due to non-fulfillment of the CPs is quite clear – one cannot breathe life into a dead corpse.

In Basson v Remini and another 1992 (2) SA 322(N) it was confirmed that a contract subject to a CP will automatically fall away if it is not fulfilled timeously and therefore “…nothing which is done after the date fixed for the fulfillment of the condition can affect that position .”

In Africast (Pty) Ltd v Pangbourne Properties Ltd [2013] 2 All SA 574 (GSJ) (which decision was upheld by the Supreme Court of Appeal) it was decided that the fact that certain people conducted themselves in a manner that was consistent with an inference that they believed the agreement was enforceable did not prove anything useful. The majority ruling was that their conduct was merely a result of an oversight of the CPs having been fulfilled and therefore such conduct was in fact wrong, the contract had lapsed and was therefore unenforceable.

The contention that parties to a contract waived the fulfillment of the CPs, extended the period within which to fulfill same and/or revived the contract through their conduct falls short of contractual logic and our courts are not easily persuaded by such submissions.

If the date by which the CPs were to be fulfilled was of no relevance and the parties were entitled to ignore that date and continue to enforce the contract through their conduct, what would be the purpose of specifying a date in the contract and furthermore, what would be the relevance of incorporating clauses such as the “non-variation” and “whole agreement” clauses which require that any amendment to the contract must be agreed to by the parties in writing and often signed by each respectively?

For any amendment to a contract containing the abovementioned clauses to be of any force and effective, it must be amended in accordance with the terms agreed upon by the parties (SA Sentrale Ko-op Graanmaatskappy Bpk v Shifren en andere 1964 (4) SA 760 (AD)). Therefore, if a party intends waiving a CP or extending the period within which it must be fulfilled, such an amendment must be effected in accordance with the non-variation and whole agreement clauses and before the date by which the CPs were to be fulfilled.

A failure to do so will render such an amendment unenforceable and the contract will be deemed to have lapsed. The only remedy, provided the parties wish to continue their contractual relationship, would then be to enter into a fresh contract.

The argument that CPs should be viewed in isolation and not in accordance with the other clauses of the contract is an argument which is not entertained by our courts. In Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA), Wallis JA confirmed that firstly an objective approach and not a subjective one must be followed when interpreting a contract provided such interpretation renders a sensible meaning. Wallis JA went on to say that Judges must caution against making a contract for the parties other than the one they in fact made and therefore the inevitable point of departure when interpreting the intention of the parties is to consider the language used in the contract within the context of the contract as a whole.

The raising of estopple when contending that a contract, which has lapsed due to non-fulfillment of the CPs, is enforceable as a result of the conduct and representations of the other party will only succeed if it can be shown that there was an intention by the latter to mislead the estopple assertor into thinking that the CPs had been met. Estopple cannot be raised against a party who says that it thought it had a contract but, it turns out that, in law, it was wrong to think so.

To illustrate this point I will use the following example; A and B enter into a sale of property agreement in terms of which B must provide A with a bank guarantee for the purchase price of R1 000 000.00 by 17h00 on 12 November 2014. The bank only provides B with the bank guarantee on 14 November 2014. B immediately submits same to A and both parties continue in accordance with the agreement. It is clear that the contract lapsed after 17h00 on 12 November 2014 when B failed to provide A with the bank guarantee and was therefore no longer enforceable.

The fact that both A and B continued to act as if the agreement was enforceable for a substantial period of time after it had lapsed is not a sufficient ground to enforce the contract. B did not intend to mislead A through his conduct. Both parties were well aware that the CP was to be fulfilled by 12 November 2014 and not after.

In Africast (Pty) Ltd v Pangbourne Properties Ltd [2013] 2 All SA 574 (GSJ) the court required an answer to two factual questions when the Plaintiff raised estopple.

  1. Firstly, what was within the knowledge of the Plaintiff about the non-fulfillment of the CPs?
  2. And secondly, what did the defendant do to mislead the Plaintiff about the truth?

It is therefore clear that the presence of deceit would be required in order to succeed with estopple.

Contracting parties often fail to see the importance of implementing a management procedure to facilitate their transactions and in particular to ensure compliance with all the terms of the contract but specifically that the CPs are fulfilled timeously and strictly in accordance with the terms set out therein. The legal position is clear that even the man on the street must take cognizance of facts that may have a bearing on his legal position.

When entering into an agreement, serious heed should be taken of the impact of an oversight regarding the fulfillment of CPs. In circumstance where an oversight does come to light, the parties must ensure that proper procedure, in accordance with the terms of their agreement, is followed to implement an amendment or waiver or alternatively to ensure that a fresh contract is entered into.

In practice, if parties come across a lapsed contract, we advise that the parties endeavor to remedy it through the proper revival of the contract whilst the relationship between them is still amicable as opposed to scrambling for a stepping stone during a break-up.