A suspensive condition is one of the most important clauses in any sale agreement. The reason for this is that fulfilment of a suspensive condition is essential for an agreement to come into full force and effect.
Usually, the parties will be under an obligation to use commercially reasonable endeavours to ensure that the suspensive condition is fulfilled. The question which arises therefore is: what happens if one of the parties deliberately prevents the relevant condition from being fulfilled?
The answer is derived from a doctrine known as the doctrine of fictional fulfilment. The doctrine states that if a party to an agreement deliberately prevents the condition from being fulfilled, the condition is deemed to have been fulfilled. The party that suffers from the deliberate actions of the defaulting party can therefore rely on the doctrine to remedy the situation.
A recent case that dealt with the doctrine is the case of Lekup Property Company Number 4 Proprietary Limited vs Wrightconcerning the circumstances surrounding a sale of immovable property agreement. In this case the seller (Lekup Property Company Number 4) owned an erf and sold a portion of the erf to the purchaser (Mr Wright).
The agreement provided that the purchaser is fully aware that the property had not yet been subdivided and that subdivision will only be approved and registered at a later date. The agreement further stated that in the event of the subdivision not being registered on the specific date, the agreement shall be cancelled.
Nevertheless the date for registration was further extended but had still not been approved. As a result the seller made an application to court and claimed that the agreement had lapsed. The purchaser alleged that:
- the seller deliberately and intentionally failed to procure the required rezoning and subdivision of the property; and
- based on the doctrine of fictional fulfilment, the relevant terms of the contract must therefore, inter alia for purposes of the Plaintiff’s allegation that the agreement had lapsed, be deemed to have been fulfilled.
The court held that the doctrine is an equitable remedy and derives its origins from Roman law. It stated that the doctrine is a condition that is deemed to have been fulfilled against a person who would, subject to its fulfilment, be bound by an obligation and who had designedly prevented its fulfilment, unless the nature of the contract or the circumstances shows an absence of dolus (intention) on his part.
The court further held that dolus in this context does not bear its usual meaning of deliberate wrongdoing or fraudulent intent but a more specific meaning, namely, the deliberate intention of preventing the fulfilment of the condition in order to escape the obligation subject to it.
The onus rested on the purchaser to prove that the seller had acted deliberately. In this case the Court was not convinced that there was any dolus on the part of the seller and that he had not intended to avoid all obligations under the agreement. The court found in favour of the seller and confirmed that the agreement between the parties had lapsed.
However a number of cases have relied on the doctrine where the court had found in favour of the aggrieved party as in the case of Thanolda Estates Proprietary Limited v Bouleigh. In this case the onus rested on the purchaser to take reasonable steps to procure the fulfilment of the suspensive condition i.e. the subdivision of the property.
The court held that the doctrine of the fictional fulfilment of a condition upon which performance by the purchaser depends is an equitable one, based on the rule that a party cannot take advantage of their own default, to the loss or injury of another. The purchaser had an obvious duty to take steps to procure the fulfilment of the conditions.
It is clear from the abovementioned cases that the doctrine acts as a remedy for both parties in a sale agreement. The onus can shift to either of the parties depending on the terms and obligations of the agreement. In some cases either of the parties could choose to waive the fulfilment of a suspensive condition, depending on whether the party is entitled to the waiver and if the condition has been included for their benefit.
This would eliminate the need to fulfil the obligation and the agreement will remain valid and enforceable.