Legal Articles

Cancelling an effective contract is usually not without repercussions, depending on the nature of the contract and the obligations under it.

Some cancellations may be due to breach of the agreement by one party or both, requiring the affected party to seek redress and restitution to the extent of their proven loss.

There are, however, instances where the cancellation of a contract is not due to breach by one party and the repercussions may be minimal if at all.

Penalties for Cancelling a House Sale

While commencement clauses in a contract provide for the coming into effect of the contract, cancellation clauses provide for how either of the parties may terminate in the event that they wish to do so before the natural term of the contract comes to an end.

Breach and Cancellation clauses will also prescribe requirements, the manner, and the process of how such cancellation must be approached and effected and are usually designed in ways that present the minimal risk and loss to the affected party.

Where breach and cancellation presents material disadvantage to the affected party, these clauses also prescribe processes of redress especially where the affected party has performed their obligations under the contract.

Cancelling and Offer to Purchase in South Africa

With regards to Offers to Purchase (OTP) a purchaser who has decided to cancel the signed OTP agreement, may do so provided that they follow the prescriptions of the agreement.

This is because once a contract is signed between and by all parties it becomes effective and legally binding. Therefore, to cancel such a contract, one is required to follow the termination provisions of that particular contract and to the extent that the other party has performed under the Offer to Purchase, the cancelling party may be required to compensate for the loss of the affected party.

Exceptions to the above are whereby the Offer to Purchase specifically provides that the purchaser may cancel the OTP without repercussions, or where any suspensive conditions fail to be fulfilled within the appointed time.

When it comes to property sale agreements, unfulfilled suspensive conditions have the effect of rendering the contract ineffective unless an addendum is concluded to extend the period of the suspensive condition before its actual lapse. Most Offer to Purchase agreements contain a suspensive condition to the effect that the purchaser is given a time frame in which to secure a bond and in the event that such time lapses before a bond is approved, then the contract lapses and parties will have to conclude a new agreement even on the same terms.

Of particular note also is section 29A of the Alienation of Land Act which provides a 5-day cooling-off period for property sold below R250 000. The section aims to protect lower income transactions against costs that are generated at the conclusion of the Offer to Purchase, such as estate agent commission.

Van Deventer & Van Deventer Incorporated – Conveyancing Attorneys in Johannesburg and Cape Town

At Van Deventer and Van Deventer Attorneys we strongly advise that parties consult with us in the event that they wish to cancel contracts, so that they manoeuvre possible traps that may complicate things and result in disputes.  

We assist in a wide array of matters including all types of contracts and property law. Contact us for an appointment and consultation with attorneys in our property department.

The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter. One should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this site contain general information and may not reflect current legal developments or address one’s peculiar situation. We disclaim all liability for actions one may take or fail to take based on any content on this site.