Whyte v Couto (1) (388/82) [1985] ZASCA 81 (13 September 1985)

Case no 388/82.

m c

PERCIVAL WHYTE - and -

FERNANDA SPARES DA COSTA COUTO

JANSEN JA.

Case no 388/82

IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)

In the matter betweenPERCIVAL WHYTE Appellant- and -FERNANDA SPARES DA COSTA COUTO Respondent

Coram: JANSEN, JOUBERT, TRENGOVE JJA et HOWARD, GROSSKOPF AJJA.

Heard: .10 May 1984.

Delivered: 13 SEPTEMBER 1985.

JUDGMENT

1.

JANSEN JA :-The appellant sued the respondent in the magistrate's court at Johannesburg for the sum of R800, being the first instalment in respect of the balance of the purchase price of a dry-cleaning business sold by the appellant to the respondent. The business, at the time of the sale, was conducted on premises leased by the appellant from Trasu Properties (Pty) Ltd. The contract of sale, in the form of a written offer by the respondent accepted by the appellant, contained the following provisions :-

"4. This agreement shall be subject to the following conditions :-

(a) [deleted]

(b) The / ....

2.

(b) The Lessor agreeing to give mea new lease of the premises fora period of 3(three) years and

months and an option to renew the lease for a further period to be negotiated commencing at a rental agreed to by the buyer.

(c) The grant to me of the necessaryTrading Licenses to enable me tocontinue running the said business.In this connection if the LicensingAuthority is prepared to agree tothe grant of a Licence subject to thealteration or renovation of thepremises same is to be construed

as a fulfilment of this condition and any alterations that might be required to the premises will be borne and paid for by the SELLER.

(d) I undertake to do all things necessary to procure the fulfilment of these conditions. (e) In the event of either of the above

two conditions not being fulfilled due to no fault of my own this

agreement /

3.

agreement shall become of no force or effect and so far as possible the parties will be

restored to the position they would have been in had it not been entered into. In particular I will in such event inter alia be obliged to restore the business and assets to the SELLER and account to him for all my trading and as against this I will be en= titled to the refund of any moneys paid to the SELLER."

In his amended particulars of claim the appellant

alleged inter alia :-

"The said conditions were fulfilled, alternatively, fictionally fulfilled in that the lessor tendered to the Defendant a new lease of the premises for a period of three years and the necessary Trading Licences were obtained, alternatively were capable of being obtained.

Alternatively /

4.

Alternatively to the aforegoing the said two conditions, if not fulfilled were due to the cause or fault of the Defendant."

To this the respondent pleaded that "the condition

relating to the said lease is so vague as to be un=

enforceable" and that the agreement was accordingly of

no force and effect; in the alternative she deniedthat the condition had been fulfilled in fact or other=wise. (It may be mentioned that fulfilment of condition

(c) was not in issue in the trial and that at no stage before us hasthe appellant invoked clause 4 (d) as part of his case.)

At the trial the appellant succeeded in his

claim: the magistrate held that the plea of vaguenessfailed and that the condition had in fact been fulfilled.On appeal the Transvaal Provincial Division (per

PREISS J, LE GRANGE J concurrente) however came to the

conclusion / 5. conclusion that the plea of "vagueness" should have been upheld. The conflicting views flow from a divergence in the interpretation of clause 4(b) of the contract.It was suggested en passant by counsel for the appellant that clause 4(b) constitutes a resolutive condition but this was not pressed and in the main the arguments proceeded on the assumption that it was indeed suspensive. On balance this assumption appears to be correct. There are, however, ex facie the document other difficulties in regard to the meaning of the clause. Does e.g. "agreeing to give me a new lease" imply consensus between the respondent and the lessor in respect of the terms of the lease and the conclusion

of / 6. of a binding lease? Or does it merely mean "intimating to the respondent a willingness" to give a lease and an option to renew? Do the words "commencing at a rental agreed to by the buyer" only relate to the "option" or does it also relate to the "new lease"? Is the "further period" to be "negotiated" at the time of the granting of the "option" or at the time the "option" is to be exercised? The appellant contends that the effect of the clause is that "the condition would have been fulfilled immediately the lessor signified that he was prepared to agree to a lease for a period of three years with a clause containing an option in the stated terms", i.e. the appellant reads the "agreeing" in the clause as meaning: merely intimating a willingness to give such a lease and

such /

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such an option. The attitude of the respondent is then

immaterial, as also the precise terms of the lease and

option. The negotiation in respect of the further period

is to be done at the time the option is exercised andthe agreement in respect of the commencing rental isalso to be arrived at that time. In the main this

is the reading of clause 4(b) adopted by the magistrate.The respondent however contends that the properconstruction is that accepted by the court a quo: viz

"the lease referred to in clause 4(b) was one whichwould be acceptable to the defendant". In effectthis postulates that the words "agreeing to give me a

new lease" in the clause connotes binding consensus between the lessor and the respondent in respect of all the

terms /

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terms of the lease: " it is unrealistic tointerpret the words 'the lessor agreeing' as meaning that any willingness by the landlord to enter into a lease with the defendant for three years, irrespective of its terms, would satisfy the condition". The ratio of the court a quo appears from the following :-

"It is clear that the intention of the defendant in stipulating for this condition was to ensure that the substantial purchase price paid for this business [R40 000: a deposit of R10 000 and monthly instalments of R800 spread over 37 months and a final payment of R400] would not be dissipated by securing a tenure of the premises for a short period only. What was stipulated for in the agreement was that the lease to be secured would be upon terms and conditions acceptable to her in the light of those circumstances."

That /

9.

That the clause was inserted for the benefit of the respondent, so as to safeguard her investment, seems clear. Not only is this obvious from the contract itself but the appellant also understood this to be the position. According to him the respondent and her husband not only wanted a new lease for three years [the existing lease would have expired after two years] but they also wanted an option to renew it for a further three years: "They didn't want to feel that they've come into the business and after three years the landlord would kick them out". If "agreeing to give me a new lease" simply means "intimating to the respondent a willingness" to give a lease and an option to renew" and not "concluding a contract of lease",

the / 9(a) the respondent would have had no real assurance as to the future and the whole purpose of clause 4(b) would have been stultified. The lessor would not be bound in any way until he actually concluded a contract of lease. However, there seems to be no cogent reason for reading the clause in this way and it would do the language no violence to find a meaning in accordance with its purpose. In my view "agreeing to give ... a new lease" means "concluding a contract of lease". The conclusion of a (binding) contract of lease would require consensus between the respondent and the lessor in respect of all the terms of the lease. The court a quo took the view that it was not implied that the terms to be agreed upon were ascertainable by

an / 9(b) an "objective test of reasonableness" and this was not challenged before us. The terms would, therefore be a matter for negotiation. From the respondent's point of view, it follows that any terms offered to her would have to be acceptable to her. It should not be thought that this unduly favours the respondent as purchaser vis-a-vis the appellant as seller of the business. It must be remembered that when the contract was concluded it was obvious that the respondent was serious about taking over the business. Not only was she prepared to sign the offer but she was also prepared to make a deposit of R10 000 00. Obtaining a lease was essential to her plans. It was no doubt at that time considered unnecessary to fetter her discretion in

relation /

9(c)

relation to the terms of that lease. The interpretation adopted above, is essen= tially that of the court a quo. It, however, held that on its construction of clause 4(b) the contract was "void

for / 10. for vagueness". "Vagueness" was used in a wide sense so as to include those cases which exemplify the maxim nulla promissio potest consistere, quae ex voluntate promittentis statum capit (D.45.1.108.1). The court considered the clause as equivalent to the pure potestative condition "si volam" and therefore as invalidating the whole contract. However, upon close consideration it is clear that the clause constitutes a mixed potestative condition: it does not depend entirely upon the will or whim of the respondent but also upon extraneous economic factors affecting the respondent. (Cf Wessels, Law of Contract, 2nd ed 1290, 1313). It follows that clause 4(b) does not

per /

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per se invalidate the whole contract between the appellant and the respondent, as held by the court a quo.On finding that the contract between the parties is valid, the next question is whether the appellant has discharged the onus of proving that the condition had been fulfilled - an inquiry the court a quo was not called upon to make as a result of its view of the nature of clause 4(b). It has been accepted above that "agreeing" in the clause means the entering into of a binding contract between the respondent and the lessor. As it is common cause that no binding lease was ever entered into between them, the condition was obviously not fulfilled.

There /

12.There remains the appellant's alternative averment in its claim that the condition was fictionally fulfilled. In argument before us this aspect was not pressed, counsel preferring to base his argument on the appellant's interpretation of clause 4(b) and the contention that on that reading of clause 4(b) the condition had been fulfilled. The question of fictional fulfilment must nevertheless now be considered.The principal cases on fictional fulfilment are collected in Van Heerden v Herman (1953(3) SA 180(T)) and Design and Planning Service v Kruger (1974(1) SA 689(T), 699H-700B). It is clear that if a conditional debtor prevents the fulfilment of the suspensive

condition /

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condition and he is guilty of dolus in so doing, the condition is deemed to have been fulfilled. What dolus entails in this context has not yet been precisely delineated. However it seems at least clear that the debtor should have acted with the direct intention ("oogmerk") of preventing the obligation from becoming enforceable. The onus of proof in this regard lies on the conditional creditor.The contention that clause 4(b) has been fictionally fulfilled must rest on the proposition that the respondent had failed to sign a proposed deed of lease prepared by the lessor's attorneys, with the direct intention of frustrating the contract of sale between her and the appellant. It may be assumed that the respondent's

husband /

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husband (as her agent) had previously approved the

terms embodied in that draft and that in fact the

respondent failed to sign the draft. But in the

circumstances it hardly be inferred on a balance of

probabilities that because she had approved the proposed

terms, she failed to sign the lease with the direct

intention of frustrating the contract between her and the

appellant. It appears that at the time the draft was

ready for signing difficulties had arisen between the

respondent and the appellant. Mr Levy (the lessor)spoke to the respondent (who had taken possession of thebusiness in February 1980) on 1st April 1980. Hisevidence in this regard shows her state of mind :-

"Could we then please go to your note of the first of April. Perhaps a significant date,

1980,/

15.

1980, 11Hh30.---1st of April 1980, 11h30.

Saw mrs. Couto and son and Carlos. Mrs. C. complains counter trade no good. Last months only Rl 317 and not Rl 600 as promised and guaranteed. (?? By Pretorius and Whyte?) Has difficulties with Whyte and maintains that. verbal guarantees take precedence over written agreement. (offer to purchase) Which she does not consider binding, as she had not signed the contract. I refused to be drawn into expressing an opinion and advised that I know nothing about the business, the discussions and negotiations and therefore could express no opinions.

Did mrs. Couto tell you that the turnover had been guaranteed? --- She implied it yes.

Did she tell you that verbal guarantees take precedence over her written agreement, the offer to purchase? --- Yes she did.

Did she tell you that she didn't consider that agreement to be binding as she hadn't signed the contract? --- She did."

On 16th April 1980 the appellant's attorneys threatenedto cancel the contract, inter alia because the respondent

had /

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had not yet signed the proposed lease. The reply to

this on behalf of the respondent (dated 21 April 1980)

raised the point that the respondent, although married

in community of property, signed the contract without theassistance of her husband and also that the contract hadbeen cancelled by "mutual consent". The attitude ofthe appellant, however, was that the respondent was apublic trader and he denied the alleged cancellation.

It is significant that at this stage the

respondent did not invoke the non-fulfilment of clause4(b). It is only on 7 May 1980 that her attorney writes:-

"We record that our client persists in the allegations set out in our letter to your= selves of the 21st APRIL, 1980. In view thereof we do not intend dealing with the allegations contained in your letter of the

30th /

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30th APRIL, 1980 as no good purpose can be served by our so doing. Our failure to deal with those allegations should, however, not be construed as an admission of the correctness thereof.

Without prejudice to our client's contentions in regard to the cancellation we advise that in any event the provisions of clause 4b of the Agreement of Sale have not been fulfilled in that, inter alia, certain terms contained in the proposed lease are not acceptable to our client."

The appellant would contend that it is to be inferred that the respondent did not sign the lease because she directly intended to frustrate condition 4(b) and thus the contract between her and the respondent. However, clause 4(b) was not initially invoked and it was only raised as an alternative on 7 May. Whilst maintaining

that /

18. that the contract was at an end she could hardly have

been expected to sign a lease, thus binding herself to

a third party. An equally plausible inference to the

one mentioned above, is that she did not sign the lease

because she at that stage could not risk binding herself

in this manner. In these circumstances it could hardlybe held that the appellant has discharged the onus of

showing the required dolus on the part of the respondentat any material time.

In my view the appellant has not established

that the respondent failed to sign the draft becauseshe had the direct intention of frustrating the suspensivecondition. It follows that the court a quo cannot befaulted for arriving at the conclusion (albeit fordifferent reasons) that the correct order the magistrate

should /

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should have made was: "Plaintiff's claim dismissed ".

I would dismiss the appeal with costs, including the costs attendant upon the employment of two counsel.

E.L. JANSEN JA. TRENGOVE JA concurs.