It often happens that either or both parties require amendments to a contract before it is finalised. This is quite admissible provided the practitioner is fully aware of the implications and what has to be done. The following formalities must be observed in such circumstances.
- Changes to the contract
It is quite in order to cross out a clause or other portion of a contract and insert a change above it provided both parties initial the alteration together with the initials of anyone else who signed it, such as witnesses or sureties.
It is a common practice with many agencies to get the parties to initial every clause in the contract even if nothing has been included or altered in writing in contrast with the printed portions of the contract. This is, in my view, a very dangerous practice. The initialling alongside any portion of the text except at the bottom of any page in law verifies anything crossed out and amended at that point. It is presumed that initialling certifies such changes and any party disputing an alteration will have trouble explaining why they initialled at that point. It is better, once each party has signed a contract, to give them a photocopy of the exact agreement they have attested under cover of a letter confirming their participation in the contract. This prevents disputes later about changes and amendments. Only such later alterations should be accompanied by the initials of the parties.
Where a Buyer signs an Offer to Purchase in good faith containing all the terms upon which they are prepared to enter the contract and the Seller is willing to accept but changes any part of it and initials the same, this constitutes a counter-offer and it is not a valid contract until the Buyer accepts the change and initials it.
Be very careful – this goes for even the slightest amendment of any actual term of the contract. The parties must have agreed to, signed, and initialled at every point on the final contract.
It occasionally happens that a written portion of the text contradicts the printed terms. Where there is a hopeless, irreconcilable contradiction, the contract may be void for vagueness and incapable of being rectified. Where the contradiction does not affect the essential terms of the contract, the written portion will overrule the printed section because it is presumed that the former expresses the actual terms of agreement between the parties.
- Irreconcilable differences
If the printed contract says “it is expressly agreed that there are no suspensive or resolutive conditions affecting this contract” while a written portion says “this contract is subject to the Purchaser’s property being sold in 30 days, the cost of transfer to come out of such subject-sale,” the contradiction cannot be reconciled. Be careful to avoid such problems in practice.
- Reconcilable differences
If the contract says “The Buyer will be liable for all costs of transfer as well as all bond costs” while a written section says “The Seller will be liable for the costs of transfer up to R7000, the balance thereafter to be for the Buyer’s account,” the second clause will be deemed to supplement the printed section which will be read in harmony with it.
- Addendums and Amendments
Addendums to sale contracts, often drawn up sometime after the original sale, specifying certain new points of agreement, can also cause trouble where they tend to contradict the original. In this case, however, an embarrassing addendum cannot affect the validity of the original contract and if its terms are so vague as to render the whole contract unintelligible or unenforceable, the addendum will be invalid while the original contract will stand. Otherwise, the effect of an addendum is as follows:
- It is presumed to supplement the original contract and its terms will be read in harmony with the original terms where there is any confusion.
- If it obviously contradicts or overrules the original in any respect, it is presumed that the parties have elected to change the original and the terms of the addendum will prevail. For example, where an original says “Occupation will be given to the Buyer on registration of transfer” while a later addendum says “Occupation will be given on the 1st May,” the addendum will prevail even though nothing is said to explain the contradiction. This is often referred to as an amendment (changes) to the contract rather than an addendum (supplements).
It is important to know that an addendum is regarded as a separate contract between the parties and can be separately enforced. Nonetheless, it is subject to the terms of the original so that, if a breach is committed solely of a term in the addendum (such as the failure to pay an occupational rental), the Seller will nevertheless have to give written notice to rectify the breach within 7 days (or whatever period the contract allows) before they cancel or act to recover it if the original contract contains such a breach clause.
Addendums should be carefully drawn and must be signed by both parties.
- Omissions
What of omissions in the original contract? Here one has to distinguish between two types, namely actual terms that have not been completed and portions that have simply been left blank. The implications are as follows:
- Incomplete terms of a contract
It is highly dangerous to leave out essential terms of a contract. If your agreement says “Occupation will be given to the Purchaser on ……… with occupational rental being payable monthly in advance until registration of transfer in the amount of R…….. per month” and you fill in the date as 1st May but leave the rental blank, your whole contract can become invalid. Details of occupation as such are not necessarily an essential term of a contract but, once a date has been given and provision has been made for the rental, this must be included.
If, however, non-essential details have just been left out, the contract will not be affected. For example, where a clause says, “The following movables are included in this sale” and nothing has been inserted, it will be assumed that no movables are included. The important thing, to be on the safe side, is obviously to fill in all open terms. If the provision doesn’t apply, it is wise to state ‘not applicable.’ Alternatively, the whole clause, where applicable, should be deleted.
If your contract states on page 1, say, that the purchase price of R600,000 will be paid in full in cash by a certain date while a printed clause says “this contract is subject to a loan being granted to the Purchaser by the …………. for the sum of R ….. to be secured by way of a mortgage bond against the title deed of the property and, should such loan not be granted by the said date, this sale will immediately become null and void,” it is essential to cross out this clause. If it is left in and the blank portions are left blank, the contract can become invalid for vagueness irrespective of the clause on page 1.
Once again, be careful to complete the contract fully and delete printed portions not applicable to it.
- Blanks in a contract of sale
What of pure blanks in a contract, such as sections in a printed contract which allow for an extra clause that has simply been left open? In such cases, the validity or interpretation of the contract is unaffected, but the practice is poor and negligent. Delete carefully such blank sections as clauses can be written in afterwards on the original contract which were not there in the beginning, and proving they have been unlawfully added may not be easy.
Every property practitioner should exercise great care in ensuring all the essential terms of a contract are completed and complied with and that no spaces are left open which can invalidate the sale or give room for insertions later without the consent of one of the parties.
- Cash Deals
There are many sales where no bond is required, either because the full purchase price is being paid in cash or the Purchaser is using the proceeds of the sale of their property to fund the purchase price of their new property.
A common mistake made by property practitioners is to simply put the initials “N/A” in the bond clause where the amount of the bond is usually filled in.
Avoid this—the contract still states that the sale is subject to the suspensive condition that the Purchaser obtains a bond from a registered bank and this remains a specific clause and suspensive condition. By leaving the amount out or by filling in “N/A,” your sale can be declared void for vagueness.
There is a High Court case where this very decision was made, namely to rule the clause too vague to be interpreted. It doesn’t help to show that the contract elsewhere provides for payment of the full purchase price in cash or by way of guarantees. It still contains a specific clause stating that the contract is subject to the Purchaser obtaining a loan. Leaving the amount unspecified just aggravates the oversight.
Cross out the bond clause completely if no bond is required! Delete it!
It’s a good rule of thumb to delete all clauses that are not applicable to the sale. By leaving them in, they become material conditions of sale, even if the details required are not filled in. It is also important to ensure that all blanks in clauses are properly filled in. Far too often these are left incomplete, exposing the sale to being declared void for vagueness.
