PRIZE COMMERCIAL HOLDINGS (PVT) LTD v GOLDBERG & ORS 2012 (2) ZLR 452 (H)

Flynote

Contract — sale — option — right of first refusal (pre-emption) — creation of — can only be created by contract or agreement between grantor and grantee — cannot arise in terms of a custom, convention or practice — nature of the right — undertaking by a grantor to offer the property at a price equal to that offered by another — sitting tenant of leased property — no custom or convention whereby such tenant has right of pre-emption

Headnote

"A right of pre-emption can only be created by a contract or agreement between the grantor and the grantee. Where breach of the right is alleged as a cause of action and its existence is denied, the onus is on the plaintiff to show that there was an agreement between the parties in terms of which the defendant undertook to offer him the property at a price equal to that offered by another." (dicta per Malaba JA in Eastview Gardens Residents Assn v Zimbabwe Reinsurance Corp Ltd & Ors 2002 (2) ZLR 543 (S) at 548G-H, followed).

A right of pre-emption or first refusal differs from an option by giving the holder the right to buy in priority to other prospective buyers if and when the seller decides to sell. The grantor of such a right cannot be compelled to sell the property concerned, but if he does sell, he is obliged to give the grantee the preference of purchasing and consequently he is prevented from selling to a third person without giving the first refusal. A right of pre-emption thus involves a negative contract not to sell the property to a third party without giving the grantee the first refusal; and the grantee has the correlative legal right against the grantor that he should not sell. This is a right which is enforceable by appropriate remedies. The right of pre-emption can only be created by contract or agreement between the grantor and the grantee. Where breach of the right is alleged as a cause of action and its existence is denied, the onus is on the plaintiff to show that there was an agreement between the parties in terms of which the defendant undertook to offer to him the property at a price equal to that offered by another. In the case of a leased property, a right of pre-emption can only be granted by the property owner and by agreement of the parties. In Zimbabwe there is no custom, convention or practice under which a plaintiff can claim the right of first refusal (or pre-emption) as a sitting tenant on a property to be sold.