When does a signed contract come into being? The answer is not always as easy as it is assumed to be. This question was recently reconsidered and answered by the Supreme Court of Appeal in Withok Small Farms (Pty) Ltd v Amber Sunrise Properties 5 (Pty) Ltd [2008] ZASCA 131.

A principle of South African common law provides that a contract comes into being when the acceptance of the offer is brought to the notice of the offeror, unless the contrary intention is established. The parties may however expressly or impliedly indicate the mode of acceptance by which the contract will come into being. Most people assume that the date of the last signature is the date that the contract comes into being. This is not always the case.

In the Withok case, the highest bidder for certain land signed the terms of the sale immediately after the sale. The terms of the sale provided that the properties were provisionally sold to the highest bidder "subject to confirmation of the sale by the seller within 7 days". Accordingly, the highest bidder was bound to keep its bid open for seven days from the date of signature by it. Although the seller did ‘confirm' the terms of sale by signing it within the seven day period, confirmation was not immediately communicated to the highest bidder. The question in issue was whether the confirmation of the sale had to be communicated to the highest bidder within the seven day period for the contract to come into being.

Unless there is indication to the contrary, if an offer to contract takes the form of a written document signed by the offeror it will more readily be accepted that mere signature by the offeree is sufficient for acceptance of the offer, particularly when the document requires the signatory to specify the date of signature.

In the Withok case, the words "The seller hereby confirms this sale on the conditions as herein set out" appeared immediately above the signature of the seller, followed by the date of signature. This was said to be the clearest indication that the mode of acceptance was to be the signature by the seller. Accordingly, communication of acceptance was not necessary to bring a binding contract into being.

Written agreements should expressly provide that the contract will come into being on the date of the last signature, or on another agreed date. It is important to have a provision of that nature which expressly sets out the intentions of the parties to avoid any doubt as to whether there is a binding contract and when it commenced. In the Withok case, the unclear wording of the agreement created a dispute and as a result an agreement that was signed on 20 June 2006 was only declared to be fully in force by the court on 21 November 2008.

In the current economic climate property auctions have become common as a way of disposing of immovable property. Although the Alienation of Land Act does not require a sale of land by public auction to be contained in a written agreement, a written agreement is almost invariably (and wisely) signed by the parties recording the sale.

The Withok case also alerts potential buyers to the implications of making an offer at a public auction. Before bidding on a property, bidders must ensure that they obtain a copy of the terms and conditions of the sale so that they know how and when the agreement will come into being. Signature may not be required at all, or signature alone may bring the sale into being, or communication of acceptance within a certain time may be necessary for a valid sale. The same principles apply to any agreement. Contracting parties must ensure that there is certainty as to how and when they are bound to each other.

Written by: Diane Canterbury, Associate - Conveyancing and Marlise Schmidt, Associate - Commercial of Deneys Reitz