Koumantarakis Group CC v Mystic River Investment 45 (Pty) Ltd and Another

The appellant (purchaser) and the first respondent (seller) concluded a written agreement of sale for immovable property for R12 million plus VAT. The agreement required the purchaser to provide bank guarantees acceptable to the seller for a deposit of R1 million and the balance of the purchase price, both payable on registration of transfer. After disputes about extensions for due diligence, the purchaser furnished a Standard Bank guarantee containing a standard clause allowing withdrawal in limited circumstances. The seller rejected the guarantee, insisting on an irrevocable guarantee, and purported to cancel the agreement without first giving notice to remedy the alleged breach. The purchaser sought to enforce the agreement.

The appeal was upheld. The seller was found not entitled to reject the bank guarantee or cancel the agreement. The purchaser was entitled to enforcement of the agreement of sale.

The case clarifies South African law on the interpretation of bank guarantee clauses in agreements for the sale of immovable property. It confirms that, unless expressly stipulated, a seller cannot insist on an irrevocable guarantee and that 'acceptability' of a guarantee is subject to objective reasonableness. The decision limits arbitrary rejections of guarantees and provides certainty in conveyancing practice.