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A conveyancer who is tasked with the registration of transfer of immovable property at the deeds office also bears responsibility to ensure financial arrangements are in place prior to the transaction being registered. This would typically mean the acceptance of bank guarantees issued by a purchaser’s bank.

The agreement of sale would specify the type of guarantee that is required, the amount payable in terms thereof and the period within which it must be furnished. The guarantee will state the conditions under which the bank will make payment to the seller.

In Koumantarikas Group CC v Mystic River 45 (Pty) Ltd (172/07) [2008] 53 ZASCA (14 May  2008) the court had to look at the meaning and effect of a clause in the sale agreement in terms of which a bank guarantee had to be provided by the Applicant to the Respondent. It further had to decide whether the Respondent acted reasonably when rejecting the guarantee.

The guarantee furnished by the Applicant contained a clause in terms of which the bank reserved the right to withdraw if any new or undisclosed facts emerged which would prejudice the bank’s security or if circumstances arose that would unduly delay the registration of the transaction.

The Respondent contended that the guarantee did not comply with the terms of the agreement; therefore, it was entitled to reject same.

The court held that the agreement did not expressly make provision for the guarantee to be irrevocable or for it to provide security. It was held that the guarantee, in the context of the agreement, provided only for payment of the deposit and balance of the purchase price. The nature of a guarantee is to achieve as nearly as possible the desired reciprocity of payment and transfer.

When looking at the question as to whether the Respondent was entitled to reject the guarantee, the court looked at the grounds for rejection and applied a double requirement.

First the Respondent must exercise an honest judgment and secondly the Respondent’s reason to reject, must objectively viewed, be based on reasonable grounds. Honesty was not an issue in this matter. In analysing the grounds for rejection, the court found these to be unreasonable. The Seller was therefore not entitled to reject the guarantee and cancel the agreement. The appeal was accordingly upheld.

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