Validity of oral variations

Any changes, variations or amendments to an agreement must be reduced to writing and signed by all the parties to the agreement. As a matter of good practice this should be done whether the agreement includes a non variation clause or not.

Dreyer V Lubbe and Others (8620/07[2010] ZAWCHC (18 FEBRUARY 2010)
 
THE FACTS
The parties entered into an agreement for the sale of the sellers members interest and loan account in a close corporation.
The purchase price was the sum of R1 595 000.00 and a deposit of R480 000.00 was payable. The agreement was subject to the suspensive condition that a mortgage bond in the sum of R1 115 000.00 be granted within 60 days which period could “be extended with the consent of both parties”.
The deposit was to be refunded in the event of the mortgage bond not being granted on due date.
The agreement contained the following non variation clause:
“This agreement constitutes the sole record of the terms and conditions governing the sale of the subject matter to the purchaser, and governing the related matters referred to herein, and no prior agreement in the same regard shall be binding on any party hereto. Furthermore, no addition to or variation of this agreement shall be binding on any party hereto, unless reduced to writing and signed by all the parties or their duly authorized representatives.”  
Prior to the expiry of the 60 day period the parties orally agreed to extend the period to 9 March.
After the expiry of the 60 days but before 9 March the purchaser cancelled the agreement on the basis that he could not obtain the mortgage bond during the 60 day period. As a result he claimed the repayment of his deposit which he had part paid in the sum of    R120 000.00.
The seller claimed that the purchaser’s cancellation was not valid as the period for the bond was extended.
The purchaser in turn alleged that the extension was not valid as it was an oral agreement and constituted a variation to the agreement and thus had to be reduced to writing and signed to be valid and binding.
WHAT THE COURT HELD
The Court held that the oral agreement changed a material provision of the agreement and that this was the type of variation which the parties intended to be reduced to writing and signed.
The Court held further that it is trite that a non variation clause is binding and a Court must enforce this.
The oral agreement was thus not binding and the agreement was not valid. The purchaser was entitled to the repayment of the deposit.

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