A pivotal point of the transaction

Too often a faulty agreement of sale reaches us which causes unnecessary delays and frustration to all involved. The agreement is not only the initial starting point of the process, but also the critical point around which it all revolves.

When the time comes to sign the sales agreement, make sure you understand everything written in the contract and don’t sign if you are uncertain about any of the clauses or meaning thereof. The bottom line is; make 100% sure that you are aware of your obligations in terms of the agreement. Make sure that you fully understand the terms and conditions before signing. Do not be manipulated by the agent or any other party to enter into a contract, unless you are sure you want to be bound by it and agree to all the terms and conditions.

Besides the duty that estate agents have to disclose all offers between the buyer and the seller, he/she should also explain to you all the terms and conditions in the contract (or at least refer you to someone who can do so), as well as provide the contracting parties with a copy of the sales agreement without undue delay.

It is your own responsibility to be aware of the necessary formalities, as well as the general clauses of an agreement of sale. In the absence of these formalities a party to a contract could claim that there were misrepresentations afterwards and thus the contract could be declared invalid and should be set aside.

For an agreement to be legally binding the following formalities must be in place:

• Contained in a deed of alienation (in writing).
• Signed by the parties (or their legally representative agents).

Besides the above formalities the following general requirements must be met before the contract will create legal obligations:

• Full description of the parties.
• The parties (buyer and seller) must have the legal capacity to enter into the agreement.
• Full and proper description of the property and purchase price as well as the manner in which the purchase price is to be secured.
• The parties must reach consensus (minds must meet) on price and conditions of the sale.
• The date of occupation, the occupational rental payable, if any.
• The mechanism for resolving a breach of the agreement by either of the parties.
• A voetstoots clause.

The common law is applied strictly as the basis of the interpretation of the agreement between the parties. Our Courts will not lightly interfere where the terms of a contract of lease are unambiguous, not contra bones mores (against good moral standards), or against public policy.

It is further important that the agreement is unambiguous as to the intentions of the parties; therefore clauses in which parties undertake to agree on issues at a later date should be avoided totally. Normally if these matters are material terms the proposal is not a complete offer and therefore acceptance will not create a binding contract.


When it comes to the format, there is no clear “right” or “wrong” when it comes to the length of an agreement of sale. If all the relevant provisions are dealt with and if the stipulations are clear and easy to understand, it does not matter whether the agreement is two or twenty pages long. A contract can even consist of two separate documents, the written and signed offer together with the written and signed acceptance (as long as both documents refer to each other) In terms of drafting the agreement, the process may vary. On a typical transaction, the purchaser arranges preparation of the offer with a conveyancer and presents it to the seller. 

The following cover the most important areas not only of a valid sales agreement for immoveable property, but also general real estate matters in Namibia.

Parties to the Contract

Capacity to contract; The parties must be capable of contracting, that is, they must have legal capacity to enter into a valid agreement. Where parties are married in community of property, they would generally require the assistance of their spouses to deal with real estate. Parties married outside Namibia would also require their spouse's consent. To date, besides Agricultural land, no further restrictions are being placed on the acquisition of landownership by foreigners.

One or both parties may act on behalf of a legal entity; in this case the name of the legal entity (close corporation or company) must be cited as well as the name of the actual authorised person with a clear indication that he is acting on behalf of an entity and not in personal capacity. To ensure that you are dealing with the actual owner of the property best is to ask a conveyancer to conduct a deeds search on the property.

The buyer may even act on behalf of a close corporation or company yet to be formed. Sometimes special clauses could be included that would make the representatives liable in their personal capacities should the legal persona not be registered in a certain time or if registered the transaction not being adopted/ratified by the entity. It is best is to gain information from your lawyer to fulfil the necessary requirements (note that a buyer may not act on behalf of a trust yet to be formed).

The buyer may also enter into the contract “as nominee”. For instance: If a person wishes to purchase property and at the time of entering into the agreement, he/she is not certain whether to purchase in his/her name or in the name of another person or entity, he/she then enters the agreement as nominee. This may become a tricky and could open the way for possible disputes and subsequent transfer duties issues. Nominee agreements should always be very carefully considered and the correct wording should be used in the sales agreement. It is advisable that the time period within which the nominated other person should be appointed be in writing, as well as the timing period within which the nominated party should accept and ratify the agreement.

Domicilia citandi et executandi?

Also referred to as Domicilium which is the physical or “legal” address the parties choose for any delivery of legal notices and/or the process thereto. It can also be translated as the “place they consider to be their permanent address”. When a notice has been sent to the person’s domicilium address such action constitutes valid service of such notice, whether the party receives it or not. The domicilium should be a physical address and not postal address and should also be an address within the borders of Namibia.

Property description

This property description should be clear without resources to outside evidence. The conveyancer needs to know for certain which property the agreement relates to. It would be problematic if the wrong property were transferred because of a misunderstanding or incorrect information. Make sure about the erf number, which is not the street/gate number allocated to the property. The erf number would show on municipal accounts, however the best way to obtain the correct property description is from the existing title deed.

Note that the title deed will also reflect possible conditions regarding the restrictions, use and enjoyment of the property. Normally the property clause will end with a reference to these conditions.

Buying a rented property: Ensure whether there are any existing rental agreements in place over the property. In our law we have a provision that states that ‘lease goes before sale’, better known as “huur gaat voor koop”. Which means that when a leased premises is sold before the lease of the current tenant has expired, the tenant may in terms of the huur gaat voor koop rule remain in occupation of the premises until the lease expires. Also be weary of tenants that may not necessarily want to vacate the property even after the lease agreement has expired. Tenants do not always do what they are supposed to do and therefore there is always the chance that you may end up in a situation where legal action is necessary. Practically it would be good to try and ascertain directly from the tenant what their intentions are, even before you buy.

Sale and purchase of what: When you buy a house, you in fact buy the land on which the house is situated. Our common law states that, unless otherwise stipulated in the contract, all permanent improvements (including fixtures and fittings) become part of the property and therefore part of the sale. To make sure there are no misunderstandings, the agreement needs to specify which fixtures are excluded in the sale. Indoor and outdoor plants, TV aerials/dishes, ovens, bar counters, alarm systems, blinds and light fittings, and pool cleaning equipment are the most commonly disputed items. Because all fixtures are suppose to stay it is probably better to specifically list those items that will not stay, or those that the seller may remove, which will therefore not be part of the sale.

Purchase Price and Guarantees

The purchase price is an important fact for the conveyancer who needs to collect (secure) the full amount before the property can be transferred. This price and method of payment should be established, for example:

• A part of the purchase price is to be paid as deposit and the rest is payable by loan;
• the full purchase price is payable in cash; or
• the full purchase price is payable by loan.

The full purchase price is normally payable in a lump sum upon registration of transfer in the name of the purchaser. The guarantees referred to in sales agreements mean that the purchaser should furnish the seller (or his conveyancer) with an undertaking or a promise (mostly from a bank) that the amount as stipulated on the guarantee will be paid in full upon registration of transfer. Usually these guarantees are issued by recognised banks or financial institutions.

Deposits or purchase price paid to the lawyer in trust: Holding and investing clients’ money is a huge responsibility. By law, attorneys must have “trust accounts”. A trust account is a separate banking account in which clients’ monies are kept and is guided by strict rules as prescribed in the Legal Practitioners Act. Attorneys are not allowed to “mix” money that belongs to clients or other third parties with their own money. Such practice could lead to abuse and clients losing their money. All funds received from a purchaser will be paid into a firm’s trust account. The Attorneys Fidelity Fund is a special insurance fund that exists to reimburse clients of law firms who lost money due to the misuse of trust funds by attorneys and/or their employees. This fund only covers trust money, and not money that was handed to the attorney with the instruction to “invest in an interest bearing account”.

Should the attorney be instructed to invest the funds in an interest bearing account, the instruction should stipulate who the interest will accrue to. If the purchaser had not consented to this, and the money was only paid into the trust account, the interest accumulated in the account will be paid over by the law firm to the law society’s fidelity fund. The attorneys will therefore have no “right” to the interest accumulated.

Risk and benefits of ownership

Risk and benefits of ownership are usually transferred simultaneously on the date of registration. However, sometimes parties may stipulate that risk is transferred on the date of occupation. This clause will determine who will be entitled (and from what date) to the rent money and liable for rates and taxes levied upon the property. The one who would be liable for the costs of repairs to damage, caused by a leaking geyser for example, would depend on the wording of the contract. This is normally the seller, but the contract could also state that risk will transfer to the buyer on a specific date. Unless the agreement provides for a specific date, for example the Date of Possession, risk passes to the Purchaser when the sale is perfecta. This means as soon as all conditions have been fulfilled and there is no other legal provision that can cause the deal to lapse.

This arrangement, however, is impractical and a prudent seller will maintain his/her insurance cover until registration of transfer. It is also a practical idea to allow the risk in the property to pass from the seller to the buyer on transfer of the property (and not necessarily on occupation). In practice this is the best option, because this is the date on which the purchaser becomes the owner of the property and the logical date from which he/she will want to insure the property against risk. Such an arrangement means that careful sellers will stay fully insured until transfer and that there will be no need for buyers to take out special insurance before they take ownership.

Voetstoots or “as it stands”

This clause generally indicates that the property is sold as it is, with all its defects (faults). It is in essence an exemption clause and protects the seller by excluding liability for defects in the property sold. The purchaser is obviously at risk and should therefore exercise extreme caution when inspecting the property. This is why a sales agreement will include a clause to confirm that the purchaser inspected the property.

However, our law also protects the buyer against severe defects discovered after transfer of the property went through. The court will first discover whether the defects were hidden or clearly visible. For those clearly visible defects the seller will not be liable.

In case of hidden defect the seller may be liable up to three years up to the date of discovery of the defect, and the court will make a ruling as to who is responsible for the cost after examining the following:

1. Did the hidden defect exist at the time the sale was concluded?
2. Is the defect material?
3. Did the seller know about the defect and deliberately and fraudulently refrain from mentioning it at the time of the sale?

The burden of proving that the defect is a hidden defect rests on the buyer, therefore it could be wise to insist on certain guarantees and have the seller warrant conditions of specific things. Another option would be to have a thorough inspection of the property even before you enter into the sales agreement.

Transfer and Registration

After the agreement has been concluded, ownership needs to pass from the Seller to the Purchaser. In Namibian law, ownership of immovable property passes only after transfer has been registered in the Deeds Office. It is the Conveyancer's duty to attend to these details, and to give effect thereto. A conveyancer is an attorney who is qualified and authorised to prepare and execute documents in the Deeds Office. He is also personally responsible to ensure that the terms, obligations and finances relating to the transaction are strictly adhered to.

Although the parties to the contract can decide which law firm and conveyancer would be responsible for the transfer, for several practical reasons it is customary in Namibia for the seller to appoint the conveyancer.

Transfer fees and Costs

As far as cost and duties are concerned, it should be remembered that the contract normally stipulates that the purchaser is responsible for paying costs and duties. Keep in mind that should the contract not clearly state that the purchaser should pay the Stamp Duties, by law it should then be paid by the seller.

Occupational Rent/Interest, Possession and Transfer

There are three distinct events in a transfer, each with important legal implications:

• Occupation (physically moving in).
• Possession (together with the legal control the risk of accidental damage or loss, as well as responsibility to maintain and upkeep the property, passes to the possessor. The possessor is also the one entitled to the benefits of the property, such as rental income, etc.).
• Transfer (transfer or “shift” of ownership in the particular property is registered in the deeds office).

The best is to use the correct wording in a sales agreement, and to link possession (and the transfer of risk) to the event of transfer, not to a calendar date.

Thus: Occupancy of the property does not necessarily have to coincide with registration of transfer. Risk and possession of the property passes to the purchaser according to the terms that were agreed upon in the deed of sale. Ownership does, however, pass to the new owner only on registration of the property in his/her name in the deeds office. The deed of sale grants the purchaser the “legitimate expectation” to claim transfer of the property to him/her.

When it comes to occupation, more often than not, the purchaser will move into the house some time before transfer is actually registered, giving rise to a situation where the purchaser is living in the home before the seller has been paid for it. To compensate for occupying, the purchaser pays an amount of rental to the seller for the right to use, enjoy and control the property. This rental is called occupational rent. This is paid monthly in advance and the purchaser should be refunded for any such unexpired portion of the month in which the registration takes place. The parties may arrange between themselves to collect the monthly payments or instruct either the estate agent or conveyancer to attend to collection. 

The question of when the Purchaser should be given occupation must be considered carefully and depends on the circumstances of each individual transaction. Sellers should always be cautious when the buyer wants to take possession and occupation with the intention to do renovations before transfer. Generally this could be problematic and should be avoided. In most cases it is advisable to consider giving occupation only on transfer. It is certainly not advisable to give occupation prior to the suspensive conditions having been met, and especially not before the bond has been granted. As a rule of thumb, contracts should rather stipulate that occupation should only be given after guarantees have been accepted for the full purchase price and costs have been paid.

The amount of occupational rent also requires careful consideration. Too low an amount (relative to the value of the property, the proposed monthly bond repayment and also out of line with the market related lease) may result in the purchaser seeking to slow down the transaction.

Escape Clauses

Suspensive condition clauses in a contract should be very carefully worded and thoroughly scrutinised as the incorrect choice of words may lead to the unintentional cancellation of the agreement and subsequent legal action.

In the case of suspensive conditions the contract depends on a specific condition to actually form a binding contract. It means that the contract of sale would be subject to the prior sale of the purchaser’s property, on or before a specific date, or the purchaser being able to obtain a loan. This would mean that the agreement is “suspended/put on hold/hanging in the air” until the purchaser’s house is sold or the loan is obtained. Only after these events have taken place, a binding agreement would come into existence. These kinds of conditions should have a time frame (generally 14 to 30 days) in which they need to be either met or waived.

In essence, a suspensive condition is a condition inserted in an agreement which has the effect of suspending the working of a contract. Practically, it works as follows:

• If the condition is fulfilled, there is a binding contract as from the date of signature of the contract.
• If the condition is not fulfilled, there is no contract whatsoever. All performance in terms of the agreement must therefore be returned so that the parties are in the position in which they were before contracting; to put it in "legalese", the status quo ante must be restored. It follows that if a purchaser paid a deposit, it must be returned to the purchaser.
• A bond clause is an exclusive benefit for the purchaser (if the purchaser does not get the required loan, in the exact amount and on the day stated in the bond clause, the agreement lapses on due date).

Waive of condition: Such a clause can be waived (i.e., the purchaser may dispense with its protection) unilaterally by the purchaser. Such waiver must take place before the due date for fulfilment of the condition. When waived the contract is not suspended anymore and a legally binding agreement immediately (unconditionally) comes into existence.

Counting of days: Unless specifically stated that “days” mean business days with the exclusion of Saturdays, Sundays and Public Holidays, “days” mean calendar days. In other words: all days included. According to the Interpretation Act, when counting days, exclude the first day and include the last day.

Acceptance by the seller when purchaser is in breach: In case where the purchaser did not obtain the bond as stipulated in the contract within the number of days allowed, the contract lapses and is of no further force and effect, however; what happens when the seller accepts the offer, after it has lapsed, and the buyer then still wants to proceed? Can the seller then escape the agreement by relying on the fact that the offer lapsed before he accepted it?

According to our courts, the best way to approach this type of scenario would be to regard the expiry date as a stipulation that was inserted solely for the benefit of the buyer, which he could elect to waive. As such, the buyer would then also be entitled to accept (or reject) the "irregular" acceptance of his initial offer by the seller. Naturally, this election of the buyer would have to be communicated to the seller within a reasonable time, depending on the circumstances.

In summary, the acceptance of an offer by the seller, after the expiry of the offer, can result in a valid agreement if the purchaser chooses to accept such late acceptance. The best practice would be to simply make an amendment which is signed by the parties to the deal.

Deliberate prevention of fulfilment of condition: If a condition is deliberately prevented from being fulfilled, the condition is deemed to have been fulfilled. For example the buyer decides that he does not want the property anymore and deliberately stalls the process of obtaining finance at the bank until after fulfilment date agreed upon in the contract.

Special Condition
Evident of our relationship to South Africa, purchasers often insists on including the following wording: "This agreement is subject to condition that there is no damp (or woodrots) in the property" or “This agreement is subject to the seller providing the purchaser with an electrical (or plumbing) compliance certificate”.

The general rule is that the wording of this clause amounts to a suspensive condition. Assuming that the property does contain damp or woodrots, the effect of this clause would be to give both parties an opportunity to not proceed with the sale, or at the very least, an argument which delays the transaction.

Conclusion
The above deserves careful consideration with regard to the failure of sellers and buyers to comply with conditions precedent in Agreements of Sale. Each condition should be considered in its specific set of circumstances and the beneficiary of each condition should be established prior to deciding that the non-compliance thereof constitutes an invalid agreement. The only "golden rule" should perhaps be that "there are no golden rules" and each set of circumstances should be considered carefully and with reference to the facts in hand.

Outside Offers

If the sale of a purchaser’s property is made a suspensive condition, the “outside offer” takes the form of a suspensive condition in an agreement of sale and will normally follow directly after the condition. It essentially enables the seller, pending the fulfilment of the suspensive condition, to market the property and receive written offers from other prospective purchasers. Should the seller receive a better offer from another prospective buyer (the outside offer), the purchaser shall be entitled to:

• declare the agreement unconditional; or
• make an offer that is equivalent to, or better than, the other offer.

If the purchaser does not do one of the above, the seller is entitled to accept the other (outside) offer.

Estate Agent’s Commission

An estate agent who is in possession of a valid Fidelity Fund Certificate and insurance, and who was the effective cause of the sale, is entitled to remuneration for his/her services where a valid agreement has been concluded.

Although it is common practise for the seller to pay the estate agent’s commission, mistakes sometimes mean that the contract does not stipulate who is actually responsible for paying the agent’s commission. It is best practice to simply stipulate the amount, inclusive or exclusive of VAT, by whom (seller or purchaser) and when it is payable. Also specifically mention whether it is included or excluded in the purchase price.

It would be fraudulent to enter into a separate (hidden) agreement with the agent for payment of commission in order to evade or pay fewer duties on the transfer.

Stipulatio alteri  (Stipulation for the benefit of a third party)

Stipulatio alteri refers to the legal position of an agent when a contract is made between two other parties. Under the Roman Dutch Law, a third party to a contract (the agent) can acquire a benefit from a contract only if he/she has accepted it. The provisions of such a clause is intended, by the seller and the purchaser, to be a contract for the benefit of the agent (commission) which may be enforced by the agent only in such case where

• the benefit has been recorded as such, and
• the agent has accepted the benefit thereof (by his/her signature at the foot thereof).

The fact that the Seller (or buyer for that matter) agrees to pay the Agent a commission does not automatically entitle the Agent to take legal action and claim commission. The Agent must first indicate his acceptance of the benefits conferred upon him to become a party to the agreement. Ideally this should be done by adding a clause at the foot of the agreement in which the Agent indicates his/her acceptance of the benefits. It should be dated and signed. Only after this has been done does the Agent become a party to the agreement.

Breach of Contract

The law of contract and the law relating to breach of contract is a fairly specialised area of law. The following is a brief summary thereof:

A breach of contract could exist when one or all of the parties do not do what was agreed upon in the written agreement (paying deposit or occupational interest, providing the necessary guarantees in time provided, failing to sign the necessary documents or taking the necessary steps to obtain finance). No party who suffers from a breach of the contract by the other party is entitled to cancel the agreement and claim damages or claim specific performance without notifying that party of the breach and giving them the prescribed time, in terms of the contract, to remedy their own breach.

• Cancellation:
  Cancellation will only be granted when the breach is of a term of the contract that is sufficiently important to reach to its root. If the breach is of a minor clause, only specific performance or damages may be claimed. A delay in the performance of a party’s obligations is not usually something that goes to the root of a contract unless it is specifically agreed to do so.
• Damages:
  The aggrieved party can claim either damages to put him/her in the same position as before the breach or can claim for compensatory damages for the losses he/she may have suffered. A person claiming damages has to prove that he/she has indeed suffered loss as a direct result of the breach of the contract. Naturally damages are difficult to prove.
• Performance:
  In terms of performance, the aggrieved party may seek:
  1.    An order to compel the defaulter to fulfil his/her side of the contract.
  2.    To refuse to perform his/her side of the contract.
  3.    A diminution of his/her own performance.
  
  

Notice to a party in breach should be done according to the contract.

Rouwkoop or Pre-estimate damages

A 'rouwkoop' clause entitles a contracting party to pay a sum of money in order to be allowed to withdraw from the contract. In essence it is the 'purchase price for freedom from the contract' payable by a purchaser. Depending on the wording of the contract, this could be a unique way to get out of the contract by paying the agreed rouwkoop amount.

This is in a way distinguishable from a penalty clause of pre-estimate damages which would come into operation where there was breach of contract. Penalty clauses in contracts are dealt with by the Conventional Penalties Act. In terms of the Act penalty clauses are enforceable. The Act states that a person may be to be liable in terms of a contractual obligation, to pay a sum of money as pre-liquidated damages when in breach.

In order for the Act to apply to a clause, thus ensuring that the penalty clause is enforceable, three requirements must be met:

1. The clause must provide for the ''payment of something over and above whatever the debtor already owes in terms of the contract”;
2. the clause must come ''into operation on breach of the contract'', and
3. It must be intended to act as dissuasion to breaching the contract out of fear of the consequences or ''as a genuine pre-estimate of loss”.

Jurisdiction Clauses

For the purpose of resolving disputes (in a cheaper and less complicated way) that may arise between the parties, a clause is often added to an agreement stating that the party instituting legal action may do so in a Magistrate’s Court (as opposed to the High Court under which the jurisdiction will normally fall) if he/she wishes. This is mostly done because it could be less expensive for the parties involved and also to speed up the procedures to resolve the dispute. Express agreement is required to do so, because the law in Namibia states that when someone wants to institute legal action in a dispute that involves a claim of more than N$ 20 000.00, the claim must be brought to the High Court, unless the parties agree otherwise.

• Variation
  Parties should also agree that the deed of sale constitutes the entire Agreement between them and nothing else, other than what is specifically stated in the written document, has been agreed upon. This way, neither of the parties can claim later on that there were “silent agreements to amend the agreement”; it is all in writing.
• Date
  The date of sale (agreement date) is the date on which the last signature was made on the agreement.
  This date is important for it serves as the “base date” for suspensive conditions like obtaining a loan, guaranteeing due dates, and transferring duty payments (which must be paid within six months from date of sale).

Signing and witnessing

Although the contract must be in writing and signed by the parties, there is nothing in law that requires a deed of sale to be witnessed. Even if no witness signs the agreement, it is valid. The purpose of witnesses to a contract is to prove that the signature of the seller and purchaser was indeed brought about by that person. This will naturally assist the conveyancer who needs to make sure that the instruction is not fraud and that the parties involved seriously did intend to create legal rights and duties.

The same goes for initialling each page at the bottom (not referring to changes and alterations) of each page. An agreement of sale of land will not be invalid if there are no initials at the bottom; there are no legal obligations to do so. However, lawyers usually insist that parties initial at the bottom of each page, purely as a matter of precaution to eliminate the risk that a party can act in bad faith, for example adding a page at a later stage. For the same reason all deletions should be initialled by the parties and witnesses to the contract.

Note that the general function of a witness to a document is to give evidence as to whether the signature is really that of the alleged person. Should a document or signature be disputed, the witness should be capable of giving evidence in a court. Therefore a witness must be older than 16 years, of sound mind and able to describe the circumstances of the signing to a court.

• Mistakes
  If a mistake is made in a contract it does not render the contract invalid. Although not recommended, errors can be rectified. Rectification is the correction of the written record and does not allow the opportunity for any additional terms to be included in the contract. Therefore omitted words may be added, extra words may be deleted and incorrect words may be replaced by means of rectification so that the mistake may be yield to the truth of the matter. When making changes it should be clearly worded (in easily understandable terms). It is in the best interest of all parties involved to initial next to the rectification in order to eliminate future disputes about the mistake.
• Blank spaces
  General rule is not to initial when filling in blank spaces (names, dates, property descriptions, etc). Important however is that blank spaces on these documents should never be left blank. If it is not applicable, clearly state: “Not Applicable”.
• Amendments
  Verbal arrangements are often forgotten by parties for their own ends. As the sale of immovable property must be recorded in writing and signed by both parties it also means that the amendment of any clauses should therefore also be in writing and signed by the parties to the contract. If this is not the case, these (oral) amendments will be of no force and effect. Amendments can be made on the original contract or on a separate document.
• Acceptance
  Offers to purchase immovable property often state that the offer “will be deemed to be accepted on signature by the seller". The effect of this is that the offer is accepted in writing and the seller (or his/her agent) has signed his/her acceptance. Depending on the contract it would generally not be necessary for further notification of acceptance to be conveyed to the Purchaser in a specific way or within a specific time for the document to be a legal and binding contract. However, in order to prevent any later disputes between the parties it is best that reasonable steps should be taken to inform and communicate to the purchaser that the Seller has accepted the offer. This is even more important in the case where there is an expiry date of the offer or perhaps where the contract specifically addresses the issue of how acceptance should be conveyed to the other party.
  

Options and Pre-emptive rights

An option gives the optionee (one who may want to purchase) the right to purchase a certain property within a certain time, at a possible fixed price. An option obliges a seller to sell the property to the specific purchaser (optionee) if and when the option is exercised.

The Right of First Refusal gives the holder of that right (mostly municipalities, lessees or perhaps previous owners) a preference to purchase a particular property if the owner should decide to sell it. If the seller receives an acceptable offer from a prospective purchaser, he/she is obliged to first offer the property to the holder of the right of first refusal at the same price and conditions. The right of first refusal imposes no obligation on a seller, except the obligation to give the holder of the right the first opportunity to purchase.

Both an option and a right of first refusal must be in writing and signed by both parties.

Essential Difference:
In the case of an option, the owner/seller is compelled to sell if the option is exercised.
In the case of right of first refusal, there are no obligations to sell; the only obligation is to give the holder the first opportunity to purchase should the owner/seller decide to sell.

In conclusion

The contract is obviously a vital legal instrument in commercial law.  People enter into contracts on a daily basis.  It is therefore obvious that it also plays an important role in the arena of real estate.  As buyers and sellers it is important to understand the key concepts that are required for concluding valid and enforceable sale of land agreement. Note however that an agreement of sale is a legal matter that requires knowledge and skill and is best left to an attorney who understands the theory and practice of property law and conveyancing. Experienced property investors also prefer to instruct their attorneys to draft an agreement, tailor-made for the specific transaction.