If you buy a property in the name of
a company, the offer to purchase can state that Joe Bloggs acts in his capacity
as an agent of a company to be formed. This is perfectly valid in that the
company can subsequently ratify the offer.
This is not the case with trusts. The following principals apply:
·
All contracts must be concluded with
an already-established trust;
·
All (or in the case of some trusts, a
majority of) trustees must consent in writing to the contract before entering
into contracts on behalf of a trust. If there is no prior written authority
(usually in the form of a resolution), the contract will be void;
·
A void contract cannot be rectified
by ratification (i.e. the remaining trustees can’t approve – and thereby
resurrect – a void contract after it has been signed).
This was
confirmed by our Supreme Court of Appeal in the case of Thorpe and
Others v Trittenwein and Another 2007 (2) SA 172 (SCA). In this
case one trustee (who was also the founder and a beneficiary of a trust) signed
a sale agreement for the purchase of land without the prior written authority
of the other trustees. The other trustees subsequently ratified the first
trustee’s act but the Court held that this was not possible and the seller was
free to sell to someone else.
·
Trustees can only exercise a power if
that power is given to them in the trust deed. If, for example, the trust deed
doesn’t give the trustees the power to buy and sell property, a unanimous
resolution of trustees to do so doesn’t cure this defect – the agreement will
still be void.
So if you are about to enter into a
contract with a trust, make sure that the trust deed gives the trustees the
authority to contract with you, satisfy yourself that the trustees are who they
claim to be (see latest Letters of Authority for the trust) and ensure that an
appropriate resolution is in place, signed by all the trustees.
