Joseph Similanie and Elizabeth Similanie v Leon Kuswayo and Regina Kuswayo

The O'Kiep Copper Company donated land and houses in Nababeep to the Namakwa municipality, which in turn donated these to occupants. The respondents (Kuswayo) received their property on 17 November 2003. On 6 November 2006, before the property was registered in their names, the Kuswayo sold the property to the appellants (Similanie) for R50,000, with a R15,000 deposit paid. Registration in the Kuswayo's name only occurred on 22 May 2007. The title deed contained a condition prohibiting sale or alienation by the transferee or successors in title within 5 years from the date of donation (17 November 2003) for the benefit of the Namakwa municipality. The appellants complied with their obligations and tendered the balance of the purchase price. The respondents refused to transfer, claiming the agreement was invalid due to the registered condition, and offered to return the deposit. The appellants contended that the municipality had waived its rights, relying on a letter from Ms Jolene Faro, an administrative official of the municipality, dated 25 January 2008, stating that the municipality renounced its rights and the condition in the title deed lapsed. The magistrate's court of Springbok granted the appellants' application for an order requiring transfer. The Northern Cape High Court on appeal set this order aside. The appellants then appealed to the Supreme Court of Appeal.

• Whether an agreement of sale concluded in conflict with a prohibition against alienation registered against title deeds is invalid or merely unenforceable
• Whether a restraint on alienation imposed for the benefit of a third party (the municipality) can be waived by that party
• Whether the waiver by the municipality was valid despite being only evidenced by a letter from an administrative official without a formal council resolution being produced
• Whether the validity of an agreement should be assessed at the time of contracting or at a later stage when performance is required

The appeal was upheld with costs, including the costs of the application for leave to appeal. The order of the Northern Cape High Court was set aside and replaced with an order dismissing that appeal with costs, thus restoring the magistrate's order requiring the respondents to sign transfer documents or authorizing the sheriff to do so.

The binding legal principles established are: (1) The validity of an agreement of sale must be determined with reference to the circumstances existing at the time it is concluded, not at the time of performance. (2) An agreement of sale is not invalid merely because a prohibition against alienation is subsequently registered against the title deeds; such a prohibition may render the agreement unenforceable, but not invalid. (3) A restraint on alienation registered for the benefit of a third party (such as a municipality) may be waived by that party. (4) Such waiver may be effected informally and need not be evidenced by formal resolutions if the intention to waive is clear. (5) Where a party annexes evidence of waiver to their papers and the opposing party fails to challenge the authority of the person granting the waiver or its validity in their answering affidavit, they cannot raise such challenges later. (6) An agreement is not invalid on grounds of initial impossibility where the impediment to performance (such as a restrictive condition) is capable of being removed through waiver.

The court made non-binding observations that: (1) The criticism by the High Court of the magistrate's succinct reasons for judgment was unwarranted. (2) It does not matter whether the condition was properly characterized as a right of pre-emption or another form of restraint, as the municipality's intention to waive whatever rights it had was clear. (3) Even if the municipality misconceived the nature of its rights, this does not affect the validity of the waiver given the clear intention to renounce those rights. (4) The fact that the waiver was not expressed to be retrospective is immaterial and cannot affect the validity of the agreement of sale. (5) The situation is analogous to the sale of res aliena, where the agreement is valid but may not be enforceable unless the seller acquires ownership.

This case establishes important principles in South African property and contract law regarding: (1) the distinction between the validity and enforceability of agreements of sale affected by restraints on alienation; (2) that validity of an agreement must be assessed at the time of conclusion, not at a later performance stage; (3) that restraints on alienation imposed for the benefit of a third party can be waived by that party, even informally; (4) the circumstances under which waiver will be recognized without formal documentary proof such as council resolutions; and (5) procedural requirements for challenging the authority of persons purporting to act on behalf of municipalities or other entities. The judgment clarifies that an agreement of sale is not void merely because a registered condition against alienation exists, particularly where that condition can be and is waived by the beneficiary.