The Offer to Purchase forms the foundation on which the transferring process is based on. The name ‘Offer to Purchase’ in itself refers to an offer that must be proposed. A valid offer constitutes a proposal to contract on the part of the purchaser, indicating the performance that he or she is prepared to make and the terms on which he or she will make it. Only once said offer is unequivocally accepted by the Seller, does it constitute a legal and binding contract.
It is very important for the Offer proposed by the Purchaser to be legal and binding. The requirements for the validity of an Offer is as follows:
THE OFFER MUST BE FIRM
The offer must be firm, meaning that the purchaser must make the offer with the intention to contract and knowing that the acceptance of the offer will call into being a binding contract. This element is the most important element because without fulfilment of this requirement, there is no valid offer. The Purchaser must intend to make the offer with the purpose of acquiring the property and not merely making a joke proposing to purchase the property.
THE OFFER MUST BE COMPLETE
The purchaser and seller must be in agreement regarding all the material aspects of the contract. For instance, the parties should not still be negotiating regarding certain terms such as the purchase price.
THE OFFER MUST BE CLEAR AND CERTAIN
If the offer is not sufficiently certain then it can be regarded as void for vagueness. A offer should be so clear and certain that the seller understands what the offer entails in plain and understandable language.
THE OFFER MUST BE AIMED AT SOMEONE
The offer must be aimed at a specific individual, who should be aware that the offer has been made to him or her. For instance once the purchaser makes an offer to the seller of a specific property, the estate agent would inform the seller.
THE OFFER MUST NOT HAVE LAPSED
The offer usually has an expiry date by which the seller should have accepted the offer. The offer will not be valid after the expiration date. Therefore, if the seller has not responded then by virtue of no response, the validity of the offer would lapse and the offer would be invalid. Likewise, if the seller responded after the expiration date then the offer would be invalid
Once a valid offer is accepted then the offer is terminated and a legal binding contract comes into existence, known as the Offer to Purchase (OTP). The essential elements for the validity of an OTP of immovable property is as follows:
Consensus (or the meeting of minds) must be reached between the seller and purchaser in respect of the following:
(a) Purchase Price
(d) Compulsory Cooling-Off Clause (only applicable to transactions where the purchase price of the property is R250 000.00 or less). This is an “escape clause” which provides the purchaser the option to cancel the agreement should he / she wish to do so within five days from date of sale.
All of the above must be reduced to writing embodied in a contract such as an Offer To Purchase and it must be signed by all the parties concerned. Signature by all relevant parties to the contract is concrete proof that the parties, at the time of signature, agreed to all terms and conditions contained in the agreement and that there was in fact a meeting of minds between the parties, in other words: consensus was reached.
It is important that the intention of the Purchaser is to purchase the property in question and made in good faith because the Offer made by the Purchaser and acceptance by the Seller constitutes a legal and binding contract once signed by both parties. Should the OTP be subject to suspensive condition (s), such condition suspends the operation of the contract until such time as all suspensive conditions have been met.