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THE DOCTRINE OF FICTIONAL FULFILMENT

Jul 26, 2024

We recently published an article titled “Demystifying Suspensive Conditions” where we explained that a suspensive condition suspends the operation of a contract pending the fulfilment of the condition, in other words – no contract comes into being until the condition is met. An important question that follows from this, is whether a remorseful purchaser could use a suspensive condition to escape the consequences of a sale agreement by simply refusing to take steps to fulfil the condition such that the contract would lapse by virtue of non-fulfilment of the condition.

The short answer is no, thanks to the doctrine of fictional fulfilment.

What is the doctrine of fictional fulfilment?  

The doctrine of fictional fulfilment provides that if a party to a contract which is subject to a suspensive condition imposed in their favour deliberately prevents the fulfilment of that condition with the intention to escape the contract, the condition shall be deemed to have been fulfilled by that party. This doctrine has its origins in Roman law and is an equitable remedy available to the innocent party, aimed at preventing the defaulting party from benefitting from their own default and escaping the consequences of the contract.

What are the requirements for the doctrine of fictional fulfilment to apply?

For the doctrine to apply there are two requirements that need to be met, firstly; it must be proven that there was deliberate conduct by the party to prevent the fulfilment of the condition, and secondly, this must have been done with the intention to escape from the contract. It must therefore be proven by the innocent party that the defaulting party acted in bad faith with a clear intent not to be bound by the contract. A deliberate intention can be established from the party’s action, or in cases where there is a duty on the party to do something in terms of the condition, from their inaction. For example, if a sale agreement is subject to the purchaser obtaining mortgage bond approval by a certain date and they submit fraudulent documentation so that the mortgage bond is not granted then the doctrine will apply. Furthermore, if the party fails to take any steps to apply for mortgage bond approval such that the contract lapses, then the doctrine may apply.

Mere negligence however will not suffice. If a party therefore mistakenly does not comply with a suspensive condition which leads to the contract lapsing, then the doctrine will not apply. For example, if the purchaser in the above example mistakenly fails to submit all the required documents to the bank in time to obtain the mortgage bond approval and the contract lapses as a result, the doctrine will not apply. The innocent party must therefore be able to establish by way of circumstantial evidence that the defaulting party acted with intent to be able to rely on the doctrine.

Conclusion

Suspensive conditions may therefore not be used to deliberately escape sale agreements. The doctrine of fictional fulfilment will apply where an innocent party is able to prove that the defaulting party intentionally took steps to frustrate the fulfilment of the suspensive condition, or took no steps to fulfil the suspensive condition, with the intention to escape the consequences of the sale agreement.

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Daniel Hodgeson