Pretoria East Builders CC and Infogold Investments CC v Basson

Infogold Investments CC was the registered owner of erf No 6733, Moreleta Park, Pretoria. Pretoria East Builders CC was the developer charged with building a house on the property. Mr F van Schalkwyk was the sole member of both close corporations. He appointed his sister, Ms Badenhorst, as project manager with a mandate to market the property. In November 2001, the respondent submitted a written offer to purchase the property for R890,000 to Pretoria East Builders, which Ms Badenhorst signed and accepted on its behalf. After acceptance, Ms Badenhorst inserted paragraph 18 making the offer subject to presentation of a specification list and signing of a building contract. The respondent noted this addition but did not initial or sign it. Building work proceeded, with the respondent requesting alterations. Ms Badenhorst never disclosed that Pretoria East Builders was not the registered owner. In April 2002, shortly before the scheduled occupation date of 1 May 2002, Infogold's attorneys advised that Van Schalkwyk had not signed any contract and Infogold was not bound by any sale agreement. The respondent then brought an urgent application for specific performance.

• Whether Infogold, as owner of the property, was bound by the sale agreement entered into by Pretoria East Builders
• Whether Ms Badenhorst or Pretoria East Builders acted as agent for Infogold as an undisclosed principal
• Whether the insertion of paragraph 18 after the respondent signed the offer constituted a counter-offer requiring written acceptance under section 2(1) of the Alienation of Land Act 68 of 1981
• Whether specific performance should be ordered in circumstances where the owner refuses to transfer and it is impossible for the seller to perform

The appeal was allowed with costs. The order of the court a quo granting the interdict and ordering specific performance was set aside and replaced with an order dismissing the application with costs.

The binding legal principles established are: (1) A material alteration to a written offer to purchase immovable property after the purchaser has signed constitutes a counter-offer which must be accepted in writing to comply with section 2(1) of the Alienation of Land Act 68 of 1981, failing which no enforceable contract comes into being; (2) In a sale of property belonging to another (res aliena), the owner is not bound unless there is proof that the seller was authorized to act as the owner's agent - mere knowledge by the owner that someone sold its property is insufficient to establish agency; (3) Courts will not order specific performance of a contract for the sale of land where it is impossible for the defendant to perform, particularly where the registered owner refuses to transfer the property; (4) In motion proceedings, where there is a dispute on the papers regarding fundamental facts such as authorization to act as agent, the Plascon-Evans rule requires acceptance of the respondent's version unless it is so far-fetched or untenable that it can be rejected on the papers alone.

The court noted that counsel for the respondent raised the question whether the provisions of section 2 of the Alienation of Land Act No 68 of 1981 preclude the application of the doctrine of the undisclosed principal in a sale of land because it requires disclosure of the identity of the principal in the written deed of alienation. The court observed that it was not necessary to consider this point because the facts did not show that when the contract was concluded either Ms Badenhorst or Pretoria East Builders was acting as agent of Infogold. This leaves open the question for future consideration of whether an undisclosed principal can be bound to an agreement for the sale of land given the requirements of the Alienation of Land Act.

This case is significant in South African property and contract law for several reasons: (1) It clarifies the operation of section 2 of the Alienation of Land Act 68 of 1981 regarding counter-offers - material alterations to a written offer after signature constitute a counter-offer requiring fresh written acceptance; (2) It addresses the sale of res aliena (property belonging to another) and confirms that without proof of agency or authorization, the owner is not bound by such a sale; (3) It reinforces the principle that specific performance will not be ordered where it is impossible to perform, particularly where the actual owner refuses to transfer property; (4) It demonstrates the application of the Plascon-Evans rule in motion proceedings where there are disputes of fact; (5) It provides guidance on agency relationships in the context of close corporations and property transactions, requiring clear evidence of authorization to bind the principal.