Credit Agreement Resolutive Condition

Pactum reservati dominii 2. Facts of the case and the issues to be decided4 3. Validity and effects of pactum reservati dominii in the present case5 Conclusion7 References8 Table of Cases Quirk’s Trustees v Assignees of Liddle & Co. (1884 – 1885) 3 SC 322 Courtney-Clarke v Bassingthwaighte 1990 NR 89 (HC) Smith & Venter v Fourie 1946 WLD 9 R v Ellinas 1949 (2) SA 45 Gosvenar Motors v Samson 1956 (3) SA 169 National Motors v Fall 1958 (2) SA 570 Introduction
The law governing credit transactions is the Credit Agreement Act 75 of 1980 (hereinafter referred to as the Act) which replaced the Hire-Purchase Act 36 of 1942 as a result of Proclamation AG 17/1981 which states that “Subject to the provisions of this Proclamation, the Credit Agreements Act, 1980 shall apply to the territory of South West Africa. ” The act regulates transactions where movable goods are purchased or leased on credit. It also applies to services rendered on credit.
According to the Act, a credit agreement is a credit transaction or a leasing transaction or any transaction with the same import regardless of its form or regardless of the fact that the transaction(s) is subject to resolutive or suspensive conditions. For the purpose of this assignment, I will only discuss issues pertaining to credit transaction because the case of Quirk’s Trustees which is central to the question whether there is sale before the last assignment is paid falls with the ambit of this paper.

A credit transaction according to the Act includes ‘goods sold and services rendered against payment of a stated of determinable future date or in whole or in part in instalments over a period in future’. Section 1 (b) states that the “goods” shall mean movable goods or in other words movable property. This point is significant given the nature of the problem we are faced with of whether a contract of sale by credit exists. 1. Pactum reservati dominii Before looking at the facts in the case of Quirk’s Trustees v Assignees of Liddle & Co . It is important to briefly discuss the concept of pactum reservati dominii. Credit agreements are in a form of pactum reservati dominii which entails that the seller allows the purchaser to take possession of the goods but ownership is retained by the sell until the buyer or purchaser has paid all the instalments. The pactum reservati dominii is meant to protect the seller who sells goods on credit. It also provides the seller with security in case the buyer defaults on the payment of instalments. The pactum clause is the same as a suspensive condition.
It suspends not only ownership but also the whole contract of sale until the fulfilment of the suspensive condition – the payment of the purchase price in full. It means that unless there is an agreement to the contrary, the risk will only pass to the buyer when the last instalment has been paid. Consequently, the Aedilitian remedies for defects of the goods are not available to the buyer until the payment of the last instalment. 2. Facts of the case and the issues to be decided The case of Quirk’s Trustees v Assignees of Liddle & Co is concerned with the transfer of ownership.
The Briefly the facts from the headnotes are as follows: Q sold the furniture, fitting and stock of a certain hotel premises to L. , who subsequently assigned his estate for the benefit of his creditors, and Q and L. ’s assignees the entered into the following written agreement: “ Sold by L. ’s assignees to Q. all the furniture, fitting etc. – in fact, everything stored in the town for ? 650, Q. to give bills at three, six, nine and twelve months. Property in goods bought to pass to Q. only upon payment of the last bill”. The greater portion of the goods so sold was delivered to Q. who, however, neither gave the bills nor paid any portion of the price. Q. the surrendered his estate. Q. ’s trustees and L. ’s assignees both claimed the goods delivered to Q. The issues were (a) whether this was a valid sale on credit and (b) whether ‘upon a contract of sale of goods the property must be held to pass forthwith to the purchaser, notwistanding a condition attached to the contract that the property shal only pass upon payment of the last of several promissory notes, payable at different dates, agreed to be given by the purchaser in payment of the rice. ’ 3. Validity and effects of pactum reservati dominii in the present case The Credit Agreement Act provides the following regulation: (1) The Minister may…. (a)prescribe the maximum period within which the full price under a credit agreement shall be paid; (b)prescribe the portion of the cash price or any other consideration which shall be paid or delivered as an initial payment or initial rental in terms of a credit agreement; (c)prescribe the manner in which the price of any goods or service shall be displayed or advertised; d)generally, prescribe any such conditions as he may find fit in regard to any credit agreement. (2) Different regulations may be made under subsection (1) in respect of different credit agreements, kinds of credit agreements, goods, services, classes or groups of goods or services, credit grantors or credit receivers or categories of credit grantors or credit receivers. It is also worth mentioning that Section 1 (b) states that the “goods” shall mean movable goods or in other words movable property. There is no doubt that the parties agree that the buyer will pay in instalments.
There is also no doubt that the buyer did not honour the agreement. The problem that we have to deal with is whether this type of agreement can be regulated by the Credit Agreement Act 75 of 1980 which is still applicable in Namibia despite the fact that where it originated in South Africa, it has since been replaced by a more progressive and market cognizance National Credit Act. Based on our understanding of Section 1 (b) the agreement does not fall within the realm of the Act and hence it cannot be said to be a credit agreement as it involve sale of immovable property.
This agreement is rather governed by two Acts that are still applicable to our law i. e. Formalities in Respect of Contracts of Sale of Land Act 71 of 1969 and Sale of Land on Instalments Act 72 of 1971. Although the merx is sold with movable properties, the substance of the agreement is the building and land on which it stands and not the furniture, fittings etc. Section 5 of the Act provides for the following requirements of the contents of the credit agreement that….. ; (1) Subject to ……. any credit agreement shall- (a)be reduced to writing and signed by or on behalf of every party thereto; b)state the names of the credit grantor and the credit receiver and their business or residential addresses or, if they do not have such addresses, any other address in the territory; (c)state the amount paid or to be paid as an initial payment or as initial rental; (d)contain a description whereby the goods or service to which that credit agreement relates, and any goods delivered to the credit grantor as payment, may be readily identified; (e)if it is an instalment sale transaction, state the conditions, if any, as to the reservation and passing of the ownership of the goods to which that credit agreement relates; f)if it is an instalment sale transaction or a leasing transaction, state the conditions, if any, as to the right of the credit grantor to the return of the goods to which that credit agreement relates; (g)contain a reference to the provisions of section 13; (h)be in the official language which the credit receiver may request in writing. (2) No person shall be a party to a credit agreement which does not comply with a requirement referred to in subsection (1): Provided that a credit agreement which does not comply with any such requirement shall not merely for that reason be invalid. 3) If after delivery to the credit receiver of goods to which a credit agreement relates, the credit grantor and the credit receiver agree that those goods or any part thereof shall be replaced by any other goods, the goods to be described in terms of subsection (1)(d) in that credit agreement shall, as from the date on which those goods are or any part thereof is replaced, be the goods to which that credit agreements relates. We can rightfully contend that agreements do not always show clearly their true nature. A contract, though called by the parties a credit agreement, is really one of sale if it does not entitle the buyer to sale.
The condition as to the passing of ownership is a suspensive one if the ownership is not to pass till all instalments have been paid. , Conclusion A consideration of the Quirk’s case shows that a suspensive condition is of more frequent occurrence than a resolutive one. A resolutive condition provides that the ownership shall pass to the buyer immediately on delivery, but revert to the seller if the instalments have not been paid by a certain time, or on any other event. What is known as lex commissoria usually takes the form of such a resolutive condition.
It appears, however, that the lex commissoria does not concern the passing of ownership. In the present case, it is clear that this is not a credit agreement although the makers chose to call it as such and that it resembles a credit agreement. It is rather a matter of substance versus form. . References R R Pennington Retention of Title to the Sale of Goods under European Law The International and Comparative Law Quarterly, Vol. 27, No. 2 (Apr. , 1978), 277- 318. C Visser, JT Pretorius, R Sharrock and M van Jaarveld Gibson South African Merchadile & Company Law 8th ed. Cape Town: Juta & Co

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