Voetstoots – Rouwkoop Clause

The Voetstoots or Rouwkoop Clause

This clause is common in the contracts for the sale of immovable property. These clauses purport to protect the seller against claims from the purchaser based on defects in the property, and furthermore, often also exclude liability for representations which the seller MADE, but that are not contained in the sale agreement itself.

However, few people are aware that these clauses only offer limited protection, even where the Consumer Protection Act 68 of 2008 (CPA) does not apply. In terms of the common law, if there is fraud on the part of the seller in concealing a defect or making a representation, the contract is voidable at the instance of the purchaser, and this right cannot be contracted out of by the parties.

The judgment of the Supreme Court of Appeal in Sim Road Investments CC v Morgan Air Cargo (Pty) Ltd (024/10) [2011] ZASCA 81 (27 May 2011) explains this point succinctly. The court firstly acknowledged that “liability for a misrepresentation made innocently and even negligently may be excluded by parties to a contract”. It therefore follows that the voetstoots clause can lawfully exclude liability where there is no fraud on the part of the seller.

However, the court continued, “The difference that fraud makes is that one cannot contract out of liability for fraudulent conduct.” In other words, where there is fraud on the part of the seller, no protection can be afforded by contract, whether in the form of a voetstoots clause or otherwise.

The court also pointed out that even where “[the purchaser] has been foolish or negligent in relying on the fraudulent misrepresentation, that does not in any way affect the liability of the [seller].” It is therefore important to determine whether there was fraud. If not, a voetstoots clause may be an absolute defence.

Essentially, proving fraud requires proof that the seller knew of the defect and intended to misrepresent the true state of affairs to the detriment of the purchaser. Importantly, however, although referred to as a “misrepresentation” silence itself may suffice even though it is an omission. For example, it has been held that a party is expected to disclose facts which fall within his or her exclusive knowledge where such information would be mutually recognised by honest persons in the circumstances as being the sort which he or she would have a duty to impart to the other party. (ABSA Bank Ltd v Fouche 2003 (1) SA 176 (SCA) at para 5). Therefore, a material non-disclosure of facts may itself amount to a misrepresentation which, if accompanied by fraud, would be grounds for rescission or a claim for damages.

The other important issue to consider is that of materiality. In other words, the misrepresentation must be material before a purchaser may cancel the contract or claim damages. In the context of sales of immovable property this raises a separate subject all together which perhaps the author will touch upon in a separate article. However, the following are some examples of possible material non-disclosures or misrepresentations:
• If the seller states in response to a query from the purchaser that there are no boundary disputes and it turns out there is a current dispute about a boundary fence, this would likely amount to a material misrepresentation.
• Likewise, if the seller responds to a query from the purchaser about whether there have been any recent burglaries at the property, “Not to my knowledge”, and the seller knows this to be false, this too may amount to a material misrepresentation.
• Another obvious example would relate to defects in the property which are either not disclosed, or misrepresented not to exist, such as structural problems with the premises, issues with flooding, etc.  

To sum up: The voetstoots clause only serves to protect a seller in situations where he or she did not deliberately conceal defects or facts to the detriment of the purchaser. In cases of fraud, the purchaser retains the remedies of cancellation and claiming damages regardless of whether the contract purports to exclude such a right.