The courts have reaffirmed that if suspensive conditions in an agreement are not fulfilled timeously the agreement will not be binding on the parties. This is not cured by either party performing in terms of the agreement.
Suspensive conditions and how they must be fulfilled must be precisely and carefully drafted.
Facts of the case
In Africast v Pangbourne Properties the parties concluded an agreement for the development of commercial property. This agreement contained a suspensive condition that required Pangbourne Properties to provide written notice of its board approval for the agreement to Africast within seven days of the agreement being concluded. The suspensive condition would be fulfilled only once Africast had received written notice of the board approval (and not on the date of the board approval).
The court found that the agreement could only be concluded once the signatories to the agreement had obtained the authority to bind their principals. The agreement was therefore not concluded upon its signature but rather once the signatories had obtained approval permitting them to bind their principals.
If suspensive conditions in an agreement are not fulfilled timeously the agreement will not be binding. This is not cured by either party performing in terms of the agreement.
Consequently, the seven day period for the fulfilment of the suspensive condition would only start running on the date of the Pangbourne Properties’ board approval authorising the conclusion of the agreement, and not on the agreement’s signature date. Were it not for this interpretation of the word conclude, the suspensive condition would not have been fulfilled timeously and there would not have been a binding agreement on which Africast could rely.
Importance for drafting
When drafting suspensive conditions it is important to be clear as to when the period for the fulfilment of these suspensive conditions will lapse. Failure to do so may result in a party performing under an agreement it assumes to be binding only to discover too late that the agreement was never binding and that it is unable to claim either specific performance or contractual damages.