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Verbal agreement not always enforceable

Question:

I have had my eye on a farm for some time, and approached the farmer about two years ago about the possibility of buying it.

His asking price was more than I could afford at the time, but he was prepared to grant me the option of buying the property within a period of five years.

We agreed to the terms verbally.for a period of five years to purchase the property on terms which we verbally agreed to.

I raised the capital and sent a signed deed of sale.

However, the farmer did not want to accept and told me that our verbal agreement was not valid.

Is he correct?

Answer:

Section 2(1) of the Alienation of Land Act 68 of 1981 stipulates that no sale of land (such as a farm) will be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.

This requires a written agreement of sale for the immovable property to be sold.

Now the question is whether or not the requirement for a written contract also includes an option to purchase such property.

The nature of an option to purchase is such that the seller (the grantor of the option) is required to sell if and when the option holder (the purchaser) decides to exercise his right to purchase in terms of the option and complies with any requirements set between the parties.

Such an option prevents the grantor from offering the property for sale to another party until the option period has expired.

Our courts recently considered whether or not an option to purchase land had to be in writing for it to be enforceable.

Two purchase options exist, namely an offer to purchase (the intended agreement of sale) and an agreement to keep the offer open (normally for a certain period).

The undertaking to keep the offer open (the option agreement) is an agreement that leads to the conclusion of the offer to purchase.

The affording of an option does not amount to a sale of property as envisaged in the Act, and is therefore not of itself required to be in writing.

However, the offer undertaken by the grantor must be a firm offer. Acceptance of such an offer will result in a binding contract. This means that an offer resulting in the sale of land can only bring about a binding agreement upon acceptance if it is in writing.

Therefore, where the property to which it relates is land as defined in the Act, an option cannot be valid if it is not placed in writing.

In your case, it appears that both the option agreement and the agreement relating to the terms upon which the sale would occur were concluded verbally.

An option of that nature – specifically relating to farmland – cannot be validly exercised.

You would therefore not be able to hold the farmer to the option agreement. - Pfuxamuti Rikhotso, Phatshoane Henney Attorneys

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