KHUMALO v MANDEYA & ANOR 2008 (2) ZLR 203 (S)

Flynote

Contract — Contractual Penalties Act [Chapter 8:04] — applicability — instalment sale — of land — when such sale exists — agreement under which lessee to buy sells rights in property to another — not a sale of land — contract one of cession of rights and interests in land — contract not governed by s 8 of Act

Headnote

The applicant entered into a lease-to-buy agreement with the Bulawayo City Council in respect of a stand in a high-density suburb. The agreement included a clause in terms of which the applicant was prohibited, prior to transfer of the property to himself, from ceding or assigning the agreement or any rights acquired by him thereunder, or parting with the possession of the property or any part thereof or alienating, donating or otherwise disposing of the same without the prior consent in writing of the Council. The applicant subsequently entered into a written agreement with the first respondent in respect of the property before transfer of ownership of the property to him by the Council. The transaction was described by the parties as an "agreement of sale", the subject matter of which was referred to as "a piece of land". The agreement provided for payment by means of a deposit, followed by two instalments (which were not equal amounts). The applicant had sought and obtained the written consent of the Council. With that consent the applicant ceded all his rights and interests in the property under the lease-to-buy to the first respondent.

The first respondent did not pay the deposit in full, nor did she pay the instalments either timeously or in full. The applicant, acting in terms of the agreement, gave the first respondent,

who admittedly was in breach of the contract, 14 days' notice to remedy her breach. When she failed to do so within the time limit prescribed in the notice, he cancelled the agreement.

The first respondent applied to the High Court for an order declaring the cancellation of the agreement of "sale" by the applicant null and void on the ground that the written notice fell foul of s 8(2)(c)(i) of the Contractual Penalties Act [Chapter 8:04]. Section 8(1) of the Act prohibits a seller under an instalment sale of land from terminating the contract on account of any breach of by the purchaser unless he has given notice in terms of subs (2) and the period of the notice has expired without the breach being remedied, rectified or discontinued. The period given to the first respondent within which she was called upon to remedy the breach was less than the thirty days specified in s 8(2)(c) in respect of an "instalment sale of land". An "instalment sale of land" is defined in s 2 of the Act as a contract for the sale of land whereby payment is required to be made by way of a deposit and two or more instalments; and ownership of the land is not transferred until payment is completed. The court a quo held that the agreement was an "instalment sale of land" as the subject matter of the sale was "land", the purchase price for which was payable by way of a deposit and two or more instalments. The judge declared the cancellation of the agreement by the applicant null and void ab initio.

The applicant noted an appeal, but out of time. About a week later, an application for condonation was made. The reasons given for not noting the appeal in time were unconvincing. However, allowing the application:

Held, that whilst the concept used by the parties to describe the merx was an important factor to consider in the determination of the question whether the subject-matter of the agreement of sale was "land", it was not an overriding one. At the time the parties entered into the agreement, the applicant was not the owner of the land and improvements thereon. He could not pass title to the land to the first respondent at the payment of the purchase price in terms of the agreement. At the time the parties entered into the agreement, the applicant held rights and interests in the land and improvements thereon under the lease-to-buy. With the written consent of the Council he ceded those rights and interests to the first respondent, who stepped into his shoes as the cessionary and acquired them under the lease-to-buy. In spite of the language used by the parties in the agreement, what was in effect sold and purchased were rights and interests in the land, not the dominium in the land. The Contractual Penalties Act accordingly was inapplicable to the transaction.