“My mother and father were married in community of property. They often joked by saying that they could get out of any contract as long as only one of them signed because the law required that both of them must always sign. As a business owner, through the years I’ve always wondered whether this is correct and how careful a business needs to be when dealing with couples married in community of property?”
In a marriage in community of property, our South African law determines that spouses to such a marriage has one joint estate and each party to the marriage has the right to perform juristic acts with regard to the joint estate as they are equal managers of the joint estate. This does not however mean that a spouse can do as he or she pleases when it comes to transactions that involve the joint estate.
The rights of spouses married in community of property to enter into transactions relating to their joint estate is governed by Section 15 of the Matrimonial Property Act 88 of 1984 (the “Act”). Although in general, a spouse may perform any juristic act in respect of the joint estate without the consent of the other, there are a number of transactions listed in the Act that does require the consent of the other spouse, including certain formalities which may also need to be complied with in order to evidence the consent.
For a number of the transactions listed in the Act, the consent of the other spouse can be obtained after the act to ratify the transaction, provided such consent is obtained within a reasonable period of time after the transaction. But, such ratification is not possible with all transactions such as for example with the sale of immovable property or the entering into a contract of surety, understandable given the important consequences for the joint estate of such transactions. It is also clear from the Act that spouses married in community of property are required to comply with the Act and ensure that the necessary consents and formalities are met.
But where does this leave a third party contracting with a spouse married in community of property?
The Act regulates this position by determining that when a spouse enters into a transaction with a third party without the necessary consent and the third party does not know (or cannot reasonably know) that the necessary consent has not been obtained, it is deemed that the necessary consent has been given.
What this boils down to is a consideration of the interests of the parties and the weighing up of the interests of the innocent spouse against the prejudice the third party would suffer should the transaction be set aside or continue (as the case may be). To benefit from the presumption provided for in the Act, the actions of the third party are relevant. In instances where the third party knew that the spouse who entered into the transaction did not act with consent or should have reasonably known such (based on the facts at hand), the third party will not be able to enjoy the protection of the presumption and the transaction may be invalid for lack of consent. This translates into a duty of enquiry for businesses - making it a prudent business practice for any business that concludes transactions where consent would typically be required to ensure that the necessary spousal consents have been obtained. It does not mean that spouses married in community of property can ‘get out of any contract’ by not having the consent of both spouses, as the Act is clear in expecting such spouses to meet the letter of the law, but it does at the same time not blindly protect a third party that should ‘have known better’ at the cost of the innocent spouse.