Tight Business Enterprises CC v Petrus Johannes Lordan NO & Others

On 5 January 2009, the Johan Lordan Trust (the seller, represented by Mr Johannes Hermanus Cronje Lordan as trustee) and Tight Business Enterprises CC (TBE, the buyer) concluded a written agreement for the sale of immovable property. Clause 18 of the agreement contained a suspensive condition requiring that by 30 June 2009, the Minister of Agriculture consent to the property being transferred separately from an adjacent property. TBE alleged that such consent was obtained on 4 June 2009 (alternatively, that consent had been granted when the agreement was signed). TBE alleged the trust did not fulfil its obligations under the agreement. On 6 March 2012, TBE instituted a claim for specific performance against the trust. The trustees raised a special plea of prescription, asserting that the agreement was subject to a three-year prescription period under s 11(d) of the Prescription Act 68 of 1969, that prescription began running on the date the agreement was signed (5 January 2009), and therefore expired on 4 January 2012, before summons was served. TBE maintained that prescription only started running when the suspensive condition was fulfilled on 4 June 2009.

• Whether prescription begins to run on the date of signing an agreement or on the date on which a suspensive condition is fulfilled
• Whether a debt is 'due' under s 12(1) of the Prescription Act 68 of 1969 when an agreement is signed subject to a suspensive condition or only when the condition is fulfilled
• Whether the enforceability of an agreement subject to a suspensive condition affects when prescription commences to run

The appeal was upheld with costs, including costs of two counsel. The order of the full court was set aside and substituted with an order that the special plea of prescription is dismissed with costs (including costs of two counsel where employed). The matter was remitted to the high court to determine the merits.

In terms of s 12(1) of the Prescription Act 68 of 1969, prescription commences to run when a debt is due. A debt is due when it is immediately claimable by the creditor and immediately payable by the debtor. Where an agreement is subject to a suspensive condition, the suspensive condition suspends the enforceability of the agreement until the condition is fulfilled. Until the suspensive condition is fulfilled, the debt arising from the agreement cannot be enforced and is therefore not due. Accordingly, prescription only begins to run from the date the suspensive condition is fulfilled, not from the date the agreement was signed. The fact that an agreement may be valid from the date of signature does not mean the debt is due from that date if enforceability is suspended by a suspensive condition.

The court noted that the Corondimas principle (that when a contract of sale is subject to a true suspensive condition, there exists no contract of sale unless and until the condition is fulfilled) remains good law, though it was of limited value in determining the particular question in this appeal. The court observed that whether the agreement was valid from the date of signature or invalidated by non-fulfilment of the suspensive condition is a question to be determined at trial as it goes to the merits of TBE's claim for specific performance. The court also noted that the principle that agreements subject to suspensive conditions have ex tunc effect (operating from the date of signature) is a contractual fiction to regulate mutual rights between parties, and does not override prescription rules under the Prescription Act.

This case clarifies an important principle in South African prescription law: that when an agreement is subject to a suspensive condition, prescription only begins to run when the condition is fulfilled and the agreement becomes enforceable, not from the date of signature. The judgment establishes that the distinction between when a debt arises and when it becomes 'due' for prescription purposes is crucial. It confirms that enforceability is the key consideration - even if an agreement is valid from signature, if it cannot be enforced until a suspensive condition is met, prescription cannot run. The case provides important guidance on the interaction between contract law principles regarding suspensive conditions and the Prescription Act 68 of 1969, particularly s 12(1). It also clarifies that the ex tunc effect of suspensive conditions is a contractual fiction that does not override statutory prescription rules.