By Diyara Ishwarlall / Candidate Attorney / Mooney Ford Attorneys
What happens when a contract is subject to a suspensive condition, but no deadline is specified for fulfilling it?
A suspensive condition postpones the operation of a contract until an uncertain future event occurs. While the condition remains outstanding, a valid contractual relationship exists between the parties. However, if the condition is ultimately not fulfilled, the agreement is rendered void from inception, unless the parties have agreed otherwise.
The Supreme Court of Appeal considered this issue in Hanuscke Beleggings CC v Kungwini Local Municipality [2012] ZASCA 112. The Court confirmed that where a suspensive condition is not fulfilled within the stipulated period, or within a reasonable time where no period has been specified, the agreement lapses automatically.
What if the agreement does not specify a deadline?
The absence of a specified period does not mean that the condition can remain outstanding indefinitely. The law implies that it must be fulfilled within a reasonable time. What constitutes a reasonable time depends on the particular circumstances of each case, including the nature of the condition, the parties’ contemplation when entering into the agreement, their commercial interests and any reasonably foreseeable difficulties in obtaining fulfilment.
Importantly, placing the other party in mora is ordinarily not required before the agreement comes to an end. Once a reasonable period has expired without fulfilment, the agreement may be discharged automatically by operation of law.
There are, however, important qualifications. Where a party has a contractual or tacit obligation to take reasonable steps to procure fulfilment of the condition, failure to do so may constitute a separate breach. In addition, the doctrine of fictional fulfilment may apply where one party’s conduct or inaction has prevented fulfilment of the condition.
Why does this matter?
When faced with an agreement containing a suspensive condition, it is important to establish:
- Was the condition fulfilled?
- Was a period for fulfilment prescribed?
- If not, has a reasonable period expired?
- Who was responsible for taking steps to procure fulfilment?
- Did either party prevent or frustrate fulfilment?
These questions can be particularly important in property transactions requiring regulatory or third-party approval.
In Hanuscke, the SCA found that the suspensive conditions had remained unfulfilled for an unreasonable period and that the agreement had consequently lapsed. The Court emphasised that the parties could not have intended their agreement to “hang in the air for an indefinite period”.
The key takeaway: A suspensive condition does not make an agreement void merely because the condition is outstanding immediately after signature. However, where the condition is not fulfilled within the stipulated or, where none is stipulated, a reasonable period, the agreement may lapse automatically and be treated as void from inception, without the need for mora.
This article is intended for general information purposes only and does not constitute legal advice. The effect of a suspensive condition must be determined with reference to the wording of the particular agreement and the circumstances of each matter.
Photo by Cytonn Photography on Unsplash
