A builder submitted a tender to the Development Bank of Southern Africa (DBSA) for construction of a school. The tender was ‘conditionally accepted’ and further documents had to be submitted by a deadline date after which the construction contract would be signed. The documents were not submitted in time nor was the construction contract signed. It was held that there was no acceptance of the tender and therefore no contract despite the fact that the works had actually commenced.
A suspensive condition is a condition suspending the operation of all or some of the obligations flowing from a contract, pending the occurrence or non-occurrence of a future uncertain event.
The use of the word ‘condition’ does not always translate into a true condition. Where there are outstanding issues at the time of negotiation of the contract, this either means that no contract comes into force until the conditions are met or that the parties intend to accept the offer as a binding contract and to allow the outstanding issues to be left for later negotiation.
The DBSA letter in response to the tender said that the construction contract would be signed ‘provided the above requirements have been complied with … and the date and location for signing of the contract will be communicated … once the submitted documents have been checked’. None of that happened and there was no basis for finding that the listed requirements were terms rather than conditions of a contract. The suspensive condition was never fulfilled and no contract came into being.
The word ‘condition’ is incorrectly used probably more often than not in contracts and it should only be used to describe true conditions (suspensive or resolutive) not mere terms of the contract.
The case is Sivubo Trading v Development Bank.