Study Unit 12: Succession by Contract

Question 1

What is the general rule regarding succession by Contract in South Africa?

Answer 1

generally impermissible in terms of South African Law as it negates the freedom of testation of the party/s bound by the contract.

• FOT held in high regard in SA, and so a contract as such is contra bonos mores.

Question 2

Latin term of succession by contract

Answer 2

pactum successorium

Question 3

Reason for freedom of contract not prevailing for the pactum successorium?

Answer 3

Should a pactum successorium be valid, it will permit parties to regulate the devolution of property on death without having to comply with the formalities prescribed in the Wills Act 7 of 1953 for the execution or amendment of wills

• This is because contracts can generally be concluded formality-free in terms of South African law

Question 4

test to consider whether something is a pactum successorium?

Answer 4

vesting test

Question 5

What does the vesting test prescribe?

Answer 5

If, in terms of the contract, the right to benefit vests in the beneficiary immediately upon conclusion of the contract/at least prior to the giver’s death (even if use/enjoyment of benefit postponed until giver’s death) then disposition is inter vivos (I.e., between living parties) and so NOT a pactum successorium.

If right to benefit vests in the beneficiary only on/after giver’s death, the disposition is mortis causa (in consequence of death) and contract is an invalid pactum successorium

Question 6

McAlpine v McAlpine 1997

Answer 6

Two brothers, who each owned 50% shareholding in a company, concluded a contract in terms of which the surviving brother would obtain the other brother’s shareholding upon the death of the first-dying brother

o Was this a pactum successorium?

The court construed the contract as imposing a suspensive condition on benefiting from the first-dying brother’s 50% shareholding – it was a future uncertainty which brother will indeed be the first-dying one

As the effect of a suspensive condition is to postpone vesting until the occurrence of an uncertain future event, the death of the first-dying brother was the earliest moment upon which vesting could occur

the disposition was, consequently, not one inter vivos, but one mortis causa and the contractual provision on the devolution of the shareholding was thus an invalid pactum successorium

Question 7

Van Aardt v Van Aardt 2007

Answer 7

Two brothers concluded a contract in terms of which the one brother sold his farms to the other brother or the other brother’s successors-in-title (descendants) by means of a postponed contract of sale; the effective date of the sale was the death of the seller

o Was this a pactum successorium?

The court reasoned that certainty as to the identity of the purchaser did not exist prior to the death of the seller – would it be the seller’s brother or the seller’s brother’s successors-in-title who would actually purchase the farms?

The court ruled that the aforementioned amounted to an ‘irrevocable post-mortem disposition’ in that vesting will occur only on the death of the seller

The contract thus amounted to an invalid pactum successorium

Question 8

Two valid forms of pactum successorium recognised in South African Law

Answer 8

the ante-nuptial contract

the donatio mortis causa – a contract of donation made in contemplation of death

Question 9

Ante-nuptial contracts

Answer 9

• An ante-nuptial contract that contains testamentary provisions does not thereby become a will
• It, therefore, need not be executed or amended in accordance with the Wills Act’s prescribed formalities
• It must, however, be notarially executed and registered as required by s 87 of the Deeds Registries Act 47 of 1937