For both buyers and sellers, clarity on the fulfilment of the bond (financing) suspensive clause is crucial. Under South African law, and in particular the National Credit Act, knowing whether “grant of bond” or “acceptance by the purchaser” triggers fulfilment can determine whether a sale proceeds - or can be lawfully challenged.

The Bond Clause: Common Pitfalls

Many standard Sale Agreements state that the contract is subject to the buyer obtaining “bond approval” or an “approval in principle.” However, these terms may be insufficient under the NCA, which designs specific steps to ensure fairness to the consumer.

What the National Credit Act Requires

Under the NCA, the mere issuance of a loan offer or quote by the bank does not itself constitute approval of the bond for purposes of the suspensive clause.

Rather, a bond is only deemed granted once both of these occur:

1. A Quotation and Loan Agreement (pre-agreement statement and quotation) is issued by the financial institution to the purchaser; and
2. The purchaser accepts that quotation and loan agreement.

Until both steps are completed, the bond clause cannot be considered fulfilled. In short: the offer ≠ approval; approval = offer + purchaser’s acceptance according to the NCA.

Why Acceptance Matters - and What It Entails

NCA Acceptance Rights

The NCA affords consumers the right to consider a quotation for a minimum of five business days before accepting or rejecting it – which means that any bank’s offer must remain valid for at least a 5-day period. Any clause that attempts to bypass this cooling-off protection may be deemed unlawful.

Court Confirmation

The Western Cape High Court reaffirmed this in Royal Energy Management Services (Pty) Ltd v D F Carse N.O. (2021), confirming that following the quotation’s issuance, the consumer must be afforded (and may use) the right to accept or reject it.

Practical Acceptance Methods

Practically speaking, an email or WhatsApp message from the purchaser accepting the documentation may suffice, even if unsigned, though courts have not definitively ruled on the validity of digital acceptance. To avoid any dispute, having the purchaser sign and return the documents is still the safest route.

Concerns for Sellers and Agents

Due to the above, there is a level of tension the National Credit Act (NCA) created: it protects buyers as consumers, but it can leave sellers and agents exposed when buyers don’t follow through, because:

• The bond clause is usually suspensive, meaning no binding sale exists until it’s fulfilled.
• The NCA says the bond is not “granted” until the buyer accepts the bank’s quotation and loan agreement.
• This means a buyer can technically walk away without penalty by simply not signing, even if a bank is willing to lend.

Risk to the Seller (and Agent):

• Until the clause is fulfilled, the Sale Agreement remains conditional.
• If the buyer refuses to accept the bond, the contract lapses and the seller is back at square one.
• The agent may also lose commission, as commission is usually only due on a binding, unconditional sale.

Suggested Bond Clause (Seller/Agent-Friendly, NCA-Compliant)

Clause X.X: Suspensive Condition – Mortgage Bond

This agreement is subject to the Purchaser obtaining, within [X] days of signature hereof, written approval of a loan in the amount of R [amount] from a recognised financial institution.

For the purposes of this clause:

1. A loan shall be deemed to have been granted once the financial institution issues a pre-agreement statement and quotation together with a loan agreement as contemplated in Sections 92 and 93 of the National Credit Act 34 of 2005, and the Purchaser has accepted same in writing.
2. The Purchaser undertakes to apply for such loan without delay, to furnish all documentation reasonably required, and not to unreasonably withhold or refuse acceptance of a loan that meets the terms of this agreement.
3. If the Purchaser refuses to accept a loan offer that otherwise satisfies the requirements above, such refusal shall be deemed a breach of this agreement, and the Seller shall be entitled to cancel the agreement forthwith and retain any deposit paid as pre-estimated liquidated damages, without prejudice to the Seller’s further rights.
4. Written confirmation by the bank, mortgage originator, or conveyancer that such loan approval has been granted and accepted by the Purchaser shall be sufficient proof of fulfilment of this suspensive condition.

The above suggested clause will cover many bases, such as:

• Clause 1 ties fulfilment to the NCA’s definition (offer + acceptance).
• Clause 2 forces the buyer to act in good faith and prevents deliberate time-wasting.
• Clause 3 gives the seller a clear remedy (keep the deposit) if the buyer refuses a valid loan.
• Clause 4 makes it practical – once Phoenix Bonds or the bank confirms acceptance, the clause is ticked off.

This clause has bite, but is still in line with the NCA. Courts are much more likely to enforce a seller’s right to keep a deposit if the contract explicitly records that refusal of a valid loan = breach.

Use a reputable mortgage broker

Using a reputable broker will ensure you get more value out of the bank’s offer. By using a broker, you can access multiple offers simultaneously and negotiate on fees and interest rates so you can have the confidence knowing you received the best deal in the market at the time.

Phoenix Bonds is a premium mortgage broker in South Africa, with a proven track record (check out the reviews on Google).  For expert advice and personalised service, fill in your details HERE and one of our experienced Consultants will be in touch.