HATIVAGONE & ANOR V CAG FARMS (PVT) LTD & ORS 2015 (2) ZLR 141 (S)

**HATIVAGONE & ANOR v CAG FARMS (PVT) LTD & ORS 2015 (2) ZLR 141 (S)**2015 (2) ZLR p141

Flynote

Contract — breach — remedies — specific performance — discretion vesting in court — compliance with order for specific performance not possible — such order should not be issued

Contract — validity — agreement to contract in the future — not enforceable — cannot be treated as substantive contract — contract in breach of statutory provision — such contract void

The appellants were owners of a farm. The first respondent had made a written "final offer" to the appellants for the acquisition of the farm.The appellants accepted the offer and the parties then drew up an "irrevocable memorandum of understanding" (MOU) in relation to the farm. The MOU specifically provided that its purpose was to set out the basis upon which the transaction should be concluded and to set out the rights and obligations upon each party leading to the signing of a sale agreement between the parties.

In view of the statutory legal requirement attendant upon the sale of rural land, the appellants immediately made an application to the Ministry of Lands for the issuance of a "certificate of no present interest". The application was acknowledged and the certificate was issued some time in the same month. In the meantime, in anticipation of the issuance of the certificate, the respondent had prepared a written agreement of sale. However, the agreement was not signed due to alleged unwillingness to co-operate on the part of the appellants. A few months later, the respondent became aware that the farm was being advertised for sale as subdivided plots. Being of the view that a valid sale agreement had been concluded between itself and the appellants, it approached the High Court seeking an order declaring that a valid agreement of sale of the farm had been concluded between the parties and, consequent thereto, an order for specific performance of the sale agreement in its favour. The court a quo found that an agreement of sale had been entered into and it ordered specific performance in favour of the respondent.

The appellant argued that (a) the respondent was not entitled to an order for specific performance because the property had already been subdivided by the time the matter came to court and because there was no valid and binding agreement between the parties; (b) the MOU did not constitute a valid and binding agreement; (c) the offer and acceptance and the MOU were both void ab initio having been entered into before the issue of a certificate of no interest by the Ministry; and (d) the dies induciae of the offer and acceptance and the MOU had lapsed before the parties could sign, so there was no valid and binding agreement between them.

Held, that there were two contracts envisaged after the offer for the purchase of the farm was accepted. The first was the MOU itself, which would lay the basis for the conclusion of the agreement of sale of the land, the second was the contract of sale itself. The MOU was a vehicle through which the agreement of sale would be concluded. The MOU specifically provided that a contract would be concluded upon the obtaining of a certificate of no present interest. The sale agreement was to be effected at a later date, subject to the terms and conditions set out in the MOU, and subject also to further negotiations by the parties. The wording of the MOU itself lent support to an interpretation which was only consonant with a finding that the MOU was not the agreement of sale in itself. The sale of the farm had not been concluded by the signing of the MOU.

Held, further, that agreements akin to the one in casu are not enforceable, primarily due to the uncertainty which accompanies such contracts. In agreements to agree in the future, the parties thereto retain a discretion as to whether or not to agree or disagree in the future. The court a quo prematurely found that an agreement of sale had been entered into when both parties agreed that the agreement of sale had not yet been concluded and would only be executed at a later stage.

Held, further, that, by the time the application was brought to the High Court, the MOU had expired and there were no rights arising from the MOU which could be enforced by any of the parties. The respondent had no cause of action.

Held, further, that, in terms of s 3 of the Land Acquisition (Disposal of Rural Land) Regulations (SI 287 of 1999) a holder of rural land cannot sell such land to any other person without having approached the State to exercise its statutory right of first refusal. If the State is not interested in the land, the relevant Minister will issue a certificate of no present interest and only then may a party proceed to enter into an agreement of sale with any other party. A seller has no discretion and must comply with the statutory condition. Where a contract is proscribed by statute, it is invalid and non-compliance with the condition invalidates the whole contract. The "agreement" which the court a quo found to exist between the parties was illegal. A sale of rural land before the relevant Minister has expressed his disinclination to buy the same is prohibited. It is, in addition, an established principle of the law of contract that an agreement of sale that is subject to the fulfilment of a condition precedent that has not been fulfilled is not a valid sale.

Held, further, that a whole piece of land is a different entity to subdivided portions of the same. The subdivision of land is not a matter of form, it is one of substance. Once the appellants obtained a subdivision permit in respect of the farm, the merx as it originally stood and offered to the respondent had ceased to exist. The grant of an order of specific performance is discretionary. The principle lex non cogit ad impossibilia states that specific performance should never be ordered if compliance with the order would be impossible, as it would be here.