The parties concluded a written sale agreement on 23 March 2009 in terms of which Lindley Farm 528 (Pty) Ltd sold immovable property to Cradle City (Pty) Ltd for R112 million. Clause 4 of the agreement required Lindley Farm to give possession together with vacant occupation on transfer. At the time of sale and transfer, the parties knew the property was occupied by unlawful occupiers. Shortly before transfer, Lindley Farm issued a letter and, on the date of transfer (7 May 2009), the parties concluded an Indemnity and Undertaking in which Lindley Farm undertook to lawfully evict all squatters by no later than 31 August 2009 and indemnified Cradle City against claims arising from their occupation. The unlawful occupiers were not evicted by that date and remained on the property. Lindley Farm sued for payment of the balance of the purchase price, a contractual penalty, clearance costs, and compensation received from the State for expropriation of part of the property. Cradle City resisted payment relying on the failure to provide vacant occupation and raised the defence of reciprocity (exceptio non adimpleti contractus), and counterclaimed for R300 million in damages allegedly arising from the lack of vacant occupation and alleged misrepresentations.
The appeal was upheld in part. Judgment for Claim 3 was granted in favour of Lindley Farm in the amount of R3 767 158 less R1 159 095, with interest. Judgment in respect of Claims 1 and 2 was suspended until the unlawful occupiers are evicted and vacant occupation is given. The appeal in respect of the counterclaim was upheld and the order of the High Court was substituted with absolution from the instance. Each party was ordered to pay its own costs.
The case is significant for its clarification of the interpretation of indemnities and undertakings in sale agreements and their relationship to core contractual obligations such as vacant occupation. It affirms the application of the reciprocity principle (exceptio non adimpleti contractus) in South African contract law and illustrates a flexible remedial approach where a party elects to uphold a contract despite defective performance, including the suspension of execution of judgment pending proper performance.