On 17 March 2025 the High Court dealt with an all-too-common situation where an oral agreement between good friends and business partners had not been reduced to writing. The business relationship was implemented and money paid without formal written agreements setting out the rights and obligations of each party. The court found that the investor was entitled to restitution of the money paid for the subscription for shares in the company.

The investor agreed with his business partner to invest R1 million into the company represented by his business partner in consideration for 5% of the company shares, on the assumption that the shares would be purchased from the existing shareholders. Payment was made into the company’s bank account on the instruction of the business partner, but no shares were received. According to his business partner as the company’s representative who negotiated the deal, the payment of R1 million “was simply an at-risk investment.”

The court had to determine whether the parties intended to bind themselves to an agreement, what the relevant terms of the agreement were, and needed to consider the parties “expressions of the agreement fairly and broadly, with a robust approach to factual findings.” The court accepted the investor’s version that the money was paid for shares, finding that it did not matter that he did not know who the seller was when all negotiations took place with his business partner. The business partner did not dispute that the company was duly represented by him when concluding the agreement.

The investor successfully established the existence of a subscription agreement between himself and the company, which was repudiated by the company when no shares were received, and the repudiation was accepted by the investor. The investor was entitled to restitution of the money paid for the shares. A short written agreement between the parties would have prevented the dispute.

Concargo (Pty) Ltd v Johnson and Others (A 187/2024) [2025] ZAWCHC 107 (17 March 2025)