KOVI v ASHANTI GOLDFIELDS ZIMBABWE LTD & ANOR 2007 (2) ZLR 354 (H)

Flynote

Contract " formation " sale " essential requirements " if all requirements are present, absence of detail does not vitiate agreement

Headnote

On 1 November 2003, the respondent company, represented by its general manager and finance director, executed a memorandum of agreement with its employees, who were represented by the chairman and two committee members of the workers committee. Under the agreement, the company agreed to "dispose of" various of its housing units to its employees "who were sitting tenants effective 1 December 2003". An attachment to the agreement contained the names of the employees, the relevant house numbers, the new valuations and the monthly repayment rates. On 10 December 2003, the company entered into a five year lease agreement with the applicant, commencing on 1 January 2004. The stated rent, with a provision for escalation, was to be deducted from the applicant's salary. The agreement gave the applicant the option to buy the property after 60 months and provided that the rentals paid would reduce the purchase price. It also provided that if employee left the service of the respondent, the respondent was entitled to terminate the agreement. Rents were never deducted from the applicant's salary, but over the next three years he paid the full purchase price in three instalments. When he asked for transfer of the property, the respondent disputed that an agreement of sale had been concluded. It averred that the subsequent lease agreement complemented the original agreement, which it said was merely an expression of intent. At the hearing, the issues were whether the original agreement constituted an agreement of sale; whether the lease agreement was a valid and binding agreement and whether the relief of specific performance was available to the applicant.

A Held, that in interpreting contracts, courts give effect to the grammatical and ordinary meaning of the words used in the particular contract. In this case, "to dispose of", in the context of the memorandum of agreement, should be interpreted to mean "to sell". The date on which the sale was to commence was not indicated in the memorandum of agreement: it was neither the date of signature nor 1 December 2003. The sale would commence on some unknown future date to those employees who were sitting tenants as from 1 December 2003. Until the lease agreement was concluded, the applicant was not a "sitting tenant".

Held, further, that as long as the essential requirements of an agreement of sale are present, the absence of detail does not vitiate the agreement. There are three essential requirements of a contract of sale. These are agreement (consensus ad idem); a thing sold (merx); and a price (pretium). Neither delivery nor payment is necessary to the creation of the contract, for they both fall within the category of its performance. In casu, both the price and the thing to be sold were clearly identifiable in the memorandum. As to whether both parties mutually evinced an intention to be bound by the agreement, the first respondent agreed to sell the house to the applicant for an agreed price (the valuation figure), once he became a sitting tenant.

Held, further, that this was not an inchoate agreement, where the offeree knew or ought to have known that it was intended to be accepted on a provisional basis only and that the conclusion of a binding contract was to be dependent on agreement on further points. The parties entered into a valid agreement of sale on 1 November 2003. That agreement would come into effect on the execution of a lease agreement, such an agreement being a condition precedent of the agreement of sale. The lease agreement did not novate, annul or supplant the agreement of sale. It was designed to make the payment of the purchase price easier for the employee.

Held, further, that by accepting the full amount of the purchase price in circumstances where it was clear that it was not for rental but for the payment of the house, the first respondent was deemed to have waived the operation of the clause in the lease agreement which gave an option to purchase after 5 years. Once the applicant had paid the purchase price in full, he could not be evicted if he left the respondent's service. Consequently, as the applicant had fulfilled his part of the bargain by paying the purchase price in full, he was entitled to specific performance.