Mia v Verimark Holdings (Pty) Ltd

The parties concluded a written agreement on 2 July 2002 for the sale of Verimark’s immovable property in Sandton to Mr Mia for R13.5 million. The agreement was subject to a suspensive condition requiring Mia to furnish a suitable, unconditional and irrevocable bank guarantee within seven days. The guarantee was not furnished timeously and it was common cause that the suspensive condition failed, with the result that the agreement lapsed. The contract nevertheless contained a clause (7.3) providing that if the suspensive condition was not fulfilled, the purchaser would be liable for the seller’s costs of drafting, negotiating and signing the agreement and for ‘any other damages’ suffered as a result of such non-fulfilment. Verimark sued Mia in the Johannesburg High Court for these contractual costs and for substantial additional damages allegedly arising from its inability to relocate its business premises as planned. The High Court upheld both claims. Mia appealed to the Supreme Court of Appeal.

The appeal was upheld with costs, including the costs of two counsel. The order of the High Court was altered to grant Verimark only R13 160 for drafting and related costs with interest, to dismiss the second damages claim, and to adjust the costs orders accordingly.

The decision is an important authority on the legal consequences of the non-fulfilment of suspensive conditions in South African contract law. It clarifies that damages claimed under clauses dealing with failed suspensive conditions are subject to strict principles of foreseeability and proof, and that extensive business losses will not lightly be recoverable. The judgment also reinforces the distinction between general and special damages and the evidentiary burden required to establish special damages.