M H Blake and Another v Z Cassim and Another

The case concerned a written agreement for the sale of a 100% member’s interest in a close corporation (Odhin Investments CC) for R1,6 million. The purchaser, Mr Mia, was required to pay a deposit and furnish two bank guarantees for the balance of the purchase price. Clause 20.2.1 afforded him 12 months to sell his Umdloti property, from which the first guarantee would be furnished, failing which guarantees for the full purchase price had to be provided. Mr Mia paid only part of the deposit and failed to furnish the required guarantees. His estate was subsequently sequestrated, and the respondents, as trustees, elected to proceed with the purchase. After correspondence regarding the form and timing of guarantees, the seller placed the respondents in mora and cancelled the agreement when acceptable guarantees were not furnished timeously. The respondents challenged the validity of the cancellation.

The appeal was upheld. The cancellation of the agreement by the seller was declared valid and lawful. Costs were awarded against the respondents, subject to agreed exclusions.

The decision clarifies South African contract law regarding the interpretation of guarantee clauses in sale agreements and confirms that, where time periods are stipulated, failure to comply entitles the seller to cancel. It also establishes that a seller is not obliged to define the form of an acceptable guarantee before making demand, provided the contract requires a guarantee acceptable to the seller or conveyancer.