The full bench of an appeal court in the Pretoria High Court held that the claimant’s claim had prescribed three years after the contract was entered into despite there being a suspensive condition which has not fulfilled till four months after the agreement was entered into. Contracts with suspensive conditions should therefore specifically deal with the running of prescription.
The parties entered into the written agreement on 5 January 2009 for the sale of immovable property subject to the requirement that the Minister of Land Affairs granted consent to the transfer not later than 30 June 2009. Consent was granted on 4 June 2009 but the transfer never took place. The purchaser served a summons claiming performance on the seller on 6 March 2012, more than three years after the agreement was signed but within three years of the suspensive condition being fulfilled.
The court referred to the previous authority that the effect of fulfilment of a condition precedent is not only that the whole contract, or however much of it was suspended, becomes enforceable, but also that this enforceability operates retrospectively as if the contract had been unconditional from the onset. The date of the enforceable contract is from the time of its making rather than from the time of fulfilment of the suspensive condition. Put differently by the Supreme Court of Appeal, a contract containing a suspensive condition is enforceable immediately upon its conclusion but the obligations are postponed pending fulfilment of the suspensive condition. If the condition is fulfilled the contract is deemed to have existed from the outset. If the condition is not fulfilled, then no contract comes into existence.
Prescription begins to run as soon as the debt is due except in certain circumstances. Seeing that the agreement between the parties was deemed to be valid in all respects on the date of signature, the running prescription was unaffected by the suspensive condition and commenced from the date of signature. The parties had not recorded any specific stipulations to the contrary.
It is not clear how this works when it takes more than three years for a suspensive condition to be fulfilled. Prescription does not run until the creditor has knowledge of the identity of the debtor or the facts which the debt arises (section 12(3) of the Prescription Act of 1969). The creditor does not know all the facts from which the debt arises until the condition is fulfilled and obligations are postponed till then.
In the light of this decision however anyone drawing up a contract with a suspensive condition should deal with the issue of prescription explicitly.