Eldacc (Pty) Ltd v Bidvest Properties (Pty) Ltd

Eldacc (Pty) Ltd entered into a written lease agreement with Rennies Distribution Services (Pty) Ltd for a ten-year period. Clause 35 of the lease contained an option to purchase the leased property, which granted Rennies or its nominee (being any subsidiary of the Bidvest Group Limited in existence at the date of signature) an option to purchase the property. The clause constituted a stipulatio alteri in favour of the nominee. Rennies orally nominated the respondent, Bidvest Properties (Pty) Ltd, which was a subsidiary of Bidvest Group Ltd and in existence at the date the lease was signed. Bidvest sent a letter exercising the option within the specified time period (before 1 June 2007). Eldacc purported to cancel the resulting agreement. Bidvest brought motion proceedings for specific performance and ancillary relief in the South Gauteng High Court, which granted the relief sought.

• Whether acceptance by a third-party beneficiary (Bidvest) of an offer made through a stipulatio alteri required written variation of the original contract between the lessor (Eldacc) and lessee (Rennies), in light of clause 30 which required variations to be in writing
• What is the legal relationship created when a third party accepts a benefit under a stipulatio alteri
• Whether the third party beneficiary 'steps into the shoes' of the stipulator upon accepting the benefit
• Whether acquisition of the stipulator's right to have the option kept open was a precondition for the third party's exercise of the right to accept the offer

The appeal was dismissed with costs, including the costs of two counsel.

In a stipulatio alteri, the third party beneficiary's right to accept the offer made by the promisor is independent of the stipulator's right to compel the promisor to keep the offer open. Upon acceptance by the third party beneficiary, a vinculum iuris (legal bond) is created directly between the third party and the promisor. The third party does not succeed to the rights of the stipulator nor 'step into the shoes' of the stipulator. Acquisition of the stipulator's right to protect the offer is not a precondition for the third party's exercise of its right to accept the offer. When a third party accepts a benefit under a stipulatio alteri in accordance with the terms of the original contract, no variation of that contract occurs, and therefore clauses requiring variations to be in writing do not apply to such acceptance.

The Court approved Professor R G McKerron's explanation in 'The Juristic Nature of Contracts for the Benefit of Third Persons' (1929) 46 SALJ 387 that a stipulatio alteri comprises: (a) an offer to sell on defined terms to the stipulator or nominee; and (b) an agreement to keep the offer open for acceptance until a specified date. The Court noted that this explanation has stood the test of time. The Court also observed that while there have been cases where it was said that by accepting the promise the third party 'becomes a party to' the contract between stipulator and promisor, this has never meant that the third party succeeds to the rights of the stipulator. The Court cited with approval the statement in Crookes NO v Watson that 'broadly speaking the idea of such transactions is that B [the stipulator] drops out when C [the third party] accepts and thenceforward it is A [the promisor] and C who are bound to each other.'

This case is significant in South African contract law as it provides authoritative clarification on the operation of stipulatio alteri (contracts for the benefit of third parties). It definitively establishes that upon acceptance by a third-party beneficiary, a direct contractual relationship (vinculum iuris) is created between the third party and the promisor, not through succession to the stipulator's rights. The judgment confirms that the third party does not 'step into the shoes' of the stipulator but rather acquires independent contractual rights. This has important practical implications for commercial transactions involving options and nominations, particularly in property and corporate group contexts. The case reinforces the long-standing principle articulated in cases such as McCullogh v Fernwood Estate Ltd and Crookes NO v Watson, and provides clarity on the independence of the third party's rights from those of the stipulator.