In April 2025 the Supreme Court of Appeal held on the facts that an alleged oral agreement between two family trusts was not valid and binding because there was no meeting of the minds between the negotiating parties, particularly as to the purchase price for the shares.
The parties had fallen out and, at an annual general meeting of the company whose shares were under discussion, the individuals representing the two trusts discussed the possible terms of the sale to ensure the continuation of the business. The seller understood that a payment would be made of R25 million to the selling trust after settling the tax liability that arose from the sale. The buyer understood that the buying trust would not settle the tax liability. The sale price on either version was markedly different. Evidence revealed that the seller could have proposed further conditions for the deal because the attorney for the company would draft an agreement of sale so that the seller would have “someone look at it”. Secondly, the minutes showed that the proposal was made on a without prejudice basis. Thirdly, the seller said he did not want to argue about the terms in front of the company’s attorney, which meant more than simply reducing the agreement already reached to writing. Lastly, the conduct of the buyer after the sale was inconsistent with their case, that an agreement had been reached. The fact that the tax issue was not an essential of an agreement of sale did not nullify the evidence that the seller wanted R25 million after tax. These facts demonstrated the absence of the meeting of minds on the price. In the circumstances, no valid and legally binding agreement was concluded.
It is no easy thing to persuade anyone that a sale of shares agreement is entered into orally in a discussion of the basic terms. Clear evidence of agreement on all the necessary terms would be required. It is worth bearing in mind that conduct subsequent to a contract being entered into, or allegedly entered into, may be taken into account in deciding the validity of the contract or the interpretation of any ambiguity.