A suspensive condition suspends the rights and obligations under an agreement, in whole or in part, pending the occurrence or non-occurrence of a particular specified event. The first prize is that the parties to such an agreement monitor the due dates for the suspensive conditions and ensure that they are either timeously fulfilled, timeously waived or the fulfilment dates for the suspensive conditions are timeously extended if they cannot be timeously fulfilled. Generally, the legal effect of a suspensive condition not being fulfilled within the agreed upon period is that it renders the agreement void (in that the agreement lapses and there is no longer an obligation on the parties to perform and implement the underlying transaction).

In this alert, we discuss the judgment recently delivered by the Supreme Court of Appeal (SCA) in Maria Luisa Palma Codevilla v Paula Jane Kennedy-Smith NO and Others (494/2023) [2024] ZASCA 136 (10 October 2024) where parties, who found themselves with an agreement that had lapsed, attempted to revive it.

Facts

In this matter, an offer to purchase (OTP) was entered into for the sale of residential property. The OTP was subject to the suspensive condition that the purchasers were granted a loan by a financial institution by no later than 14 February 2020. Prior to 14 February 2020, the parties to the OTP entered into an addendum in terms of which the fulfilment date of the suspensive condition was extended to 19 February 2020. 

The purchasers were unable to meet the 19 February 2020 deadline. A second addendum was entered into on 20 February 2020 with the intention to revive the OTP and amend the terms of the financial obligations set out in the suspensive condition (second addendum).

Due to financial issues, the purchasers of the residential property sought to cancel the OTP on account of it having lapsed as a result of the suspensive condition having not been timeously fulfilled and a new agreement having not subsequently been entered into between the parties.

The issue before the SCA in this matter was whether the second addendum revived the OTP.

The majority of the judges of the SCA held that an agreement that has lapsed by virtue of the non-fulfilment of a suspensive condition cannot be revived. It was accordingly necessary for the parties to enter into an entirely new agreement.

The SCA found further that the second addendum was not a new agreement between the parties to the OTP and that the second addendum was invalid and unenforceable as it was entered into after the OTP had lapsed.

Interestingly, the minority of the judges of the SCA held that the OTP was validly revived by entering into the second addendum, as the parties had a clear intention to revive and amend the OTP to enable the implementation of the underlying transaction.

‘Reviving’ a lapsed agreement

What emerges from the judgment delivered by the SCA is that once an agreement has lapsed pursuant to its suspensive conditions not being timeously fulfilled, the parties to that agreement cannot simply purport to revive the agreement by subsequently:

• entering into an addendum extending the time periods within which the suspensive conditions have to be fulfilled;
• waiving the requirements for the suspensive conditions to be fulfilled; and/or
• deeming the suspensive conditions to have been timeously fulfilled.

If an agreement has lapsed, and the parties intend to still proceed with the underlying transaction, a new agreement must be entered into. It must be clear from the terms that the parties have entered into a new agreement; an intention to enter into a new agreement without the ancillary terms will not be sufficient to create a new binding agreement between the parties.

The new agreement can, of course, be on the same terms and conditions as the agreement that has lapsed. The parties would need to consider amending the fulfilment dates of the suspensive conditions to any such new agreement (or deleting the suspensive conditions in their entirety) and making the necessary consequential changes to ensure that the new agreement does not automatically self-destruct once it has been entered into