Cancellation of an OTP – when do property defects justify it?

Is buyer’s remorse adequate justification to cancel?

We’ve all bought something we later regretted, from an unsuitable garment that looked great in the shop to an appliance that seemed life-changing, only to sit and gather dust. Most of the time, buyer’s remorse stings our pocket temporarily and is soon forgotten. But what happens if you make an offer to purchase (OTP) a property and then change your mind? Is your change of heart sufficient in law to release you from the contract? The short answer is no. A recent case demonstrates a key principle of South African contract law: cancellation must be based on lawful grounds. Post-purchase regret is not sufficient.

The case

A buyer signed an OTP for a luxury home in Johannesburg for a substantial sum. The contract included a clause that allowed the buyer to inspect the home and cancel the deal if they discovered “structural defects or defects that are unacceptable to the purchaser”.

After conducting inspections and obtaining valuations from two firms, the buyer decided to cancel. However, they gave no specific reason, saying only that they were withdrawing “after due diligence”. They later expressed doubts about the price and attempted to submit a lower offer. The seller refused to accept the cancellation and approached the High Court for an order of specific performance. The court granted the order, compelling the buyer to proceed with the purchase. The decision was upheld on appeal.

The court’s findings

The court found in favour of the seller for three key reasons:

1. Cancellation clauses have limits. Although the OTP allowed the buyer to cancel if unacceptable defects were found, the court made it clear that such discretion is not absolute. The discretion must be exercised reasonably and in good faith. There must be a genuine defect, not just a change of heart. In this instance, the buyer failed to identify any actual defect when they cancelled. Their later complaints, such as wanting to widen the driveway, redesign the kitchen and install a lift, were personal preferences and not defects in the legal sense. Aesthetic dissatisfaction is not a valid reason for cancellation under this type of clause.
2. Cancellation must be justified at the time. A buyer cannot retroactively justify cancellation by later claiming defects. The buyer only alleged defects such as cracks in the walls months after cancellation, and only once legal proceedings had begun. The court rejected these delayed claims, saying they were not raised at the time and lacked proper supporting evidence. If a buyer wishes to cancel due to defects, these concerns must be raised clearly and without delay. Ideally, they should be backed by a structural report or other credible evidence.
3. Attempting to renegotiate does not invalidate the original agreement. After cancelling, the buyer submitted a fresh offer at a lower price and initiated discussions about changes with architects and designers. These negotiations eventually failed. The court held that the seller had never accepted the cancellation or abandoned the original contract. A willingness to consider a new deal did not cancel the seller’s right to enforce the original OTP.

Key lessons for buyers and sellers

1. Understand the clauses before you sign. A cancellation clause may seem flexible, but it still has legal limits. Even where the clause provides discretion to cancel, that discretion must be exercised in a reasonable and lawful manner.
2. Identify and prove defects if you want to cancel. If you rely on defects to cancel, you must clearly identify the problem and provide evidence. Vague complaints or changes in taste do not meet the legal standard for cancellation.
3. Do not assume a seller has accepted your cancellation. The fact that a seller enters into discussions about a new offer does not mean they have accepted a cancellation. Unless a cancellation is explicitly accepted, the original contract remains in force.
4. Legal advice is essential. High-value property transactions often involve complex terms and legal implications. Before signing, cancelling or renegotiating an OTP, consult an attorney. Legal advice ensures your rights are protected and your obligations are clear.

This judgment is a cautionary tale for anyone involved in a property sale. It illustrates that a signed agreement cannot be nullified based on second thoughts. Cancellation must be supported by proper legal grounds, clearly expressed at the time, consistent with the contract’s terms. Failure to comply with these requirements can result in serious consequences, including a court order to proceed with the sale. Attempting to wriggle out of an OTP will only result in an expensive and time-consuming dispute.

For further information

Simon Dippenaar & Associates, Inc. is a law firm of specialist property lawyers in Cape Town, Johannesburg and Durban. If you have questions about property purchase or any other contract, contact one of our attorneys on 086 099 5146 or simon@sdlaw.co.za. 

Further reading:

• Property inspection
• Contract disputes

SD Law – Simon Dippenaar & Associates Inc.

Attorneys, Notaries & Conveyancers

SD Law is a Cape Town law firm with a strong practice in divorce and family law, urgent eviction matters, antenuptial contracts, liquor licence applications and selected commercial disputes. Clients instruct us when the matter is urgent, high-stakes or strategically sensitive, and when they want direct, clear legal advice backed by practical litigation experience.

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