Is a Verbal Agreement to Sell a Property Binding?

Aug 22, 2023 | , , , , , | News

It is common knowledge that it is not always necessary for a contract to be in writing in order for it to be valid and binding. The Supreme Court of Appeal confirmed the legal position relating to the validity of verbal contracts in the case of Imbuko Wines (Pty) Ltd v Reference Audio CC (405 of 2021) [2022] ZASCA 110 (15 July 2022). Naturally, if you need to enforce the verbal agreement, the issue with regards to proof of the terms of the agreement becomes one of the central issues.

Verbal Agreement

Verbal agreements are however not binding in all circumstances.

The question now arises whether one can conclude a verbal agreement with another party in terms whereof one will purchase the other party’s house or flat. Since a house or flat is an immovable property, the Alienation of Land Act becomes applicable, given that this Act regulates the essential terms of the transfer of immovable property.

The Alienation of Land Act refers to the sale and subsequent transfer of a property as a deed of alienation. The Alienation of Land Act defines alienate as:

“alienate”, in relation to land, means sell, exchange or donate, irrespective of whether such sale, exchange or donation is subject to a suspensive or resolutive condition, and “alienation” has a corresponding meaning;”

The Alienation of Land Act has various formal requirements that must be adhered to. The most important requirement that not everyone is aware of, is that the sale of a property must be recorded in writing and signed by both parties. Even though a verbal agreement may be binding, given that the Alienation of Land Act specifically requires that an alienation of a property must be recorded in writing and signed by the parties.

 

Section 2 of the Alienation of Land Act reads as follows:

Formalities in respect of alienation of land

(1) No alienation of land after the commencement of this section shall, subject to the provisions of section 28, be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.

(2) The provisions of subsection (1) relating to signature by the agent of a party acting on the written authority of the party, shall not derogate from the provisions of any law relating to the making of a contract in writing by a person professing to act as agent or trustee for a company not yet formed, incorporated or registered.

(2A) The deed of alienation shall contain the right of a purchaser or prospective purchaser to revoke the offer or terminate the deed of alienation in terms of section 29A.”

What this section essentially means is that any agreement for the sale of an immovable property must be recorded in writing. A verbal agreement for the sale of the immovable property will not be valid and binding.

 

A practical scenario:

John and Mary agree verbally over a coffee that John will sell his flat to Mary for R500,000.00. They do not record this verbal agreement in writing.

Mary will not be able to force John to sell the property to her if he decides not to proceed with the sale.

If John however wants to proceed with the sale, any Conveyancer who will be attending to the transfer of John’s property will advise them that their agreement must be recorded in writing and signed by both parties.

 

Given the substantial amounts involved in the purchasing and/or selling of an immovable property, it is always best to discuss the requirements that must be met with a Conveyancer and have a professionally drafted sale agreement.

The content does not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Kindly contact us on info@cklaw.co.za or 021 556 9864 to speak to one of our attorneys.

Author:

Petra van Vuuren

Petra van Vuuren

Petra joined CK during 2019 as an associate and was appointed as director during June 2022.

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