The donation agreement should be simple, clear and without reservations
A parent wishing to transfer property to a child should not leave pending matters which may create disputes between their children, leading them to court. The completion of a donation without any reservation, other than the parent reserving the right of enjoyment and to reside in the property during their lifetime, is preferable.
Any reference in the donation agreement, especially in a vague manner, to an intended right of another child who is not a party to the agreement must be avoided. The acceptance of the donation must be unconditional, except for the aforementioned reservation, to avoid unnecessary disputes. The content of the agreement must be simple, clear and without reservations. In fact, donations made between persons who are not closely related are valid when completed, despite the absence of consideration.
The privity of contract in a donation agreement between the donor and the beneficiary and any reference to a third person, even another child, does not create a contractual relationship.
In a unanimous judgment on July 8, the supreme court examined the issue and intervened, setting aside the first instance judgment, which ordered the appellant to take all necessary steps for the registration or transfer of the disputed pieces of land to the name of the respondent.
The court of first instance wrongly found that the mother of the appellant transferred the pieces of land by donation to his sister under the condition that she would transfer them to him after five years. It also wrongly found that the mother’s wish when transferring the properties to his sister, who then transferred them to the appellant company, was that they should ultimately be transferred to the respondent.
The supreme court quoted the contents of the donation agreement, which did not justify these findings. There was a provision that the beneficiary (daughter) accept the donation and that after five years and when circumstances permit, she build a bungalow house, shop or restaurant on the properties and register or donate it to her brother.
The court emphasised that at no time did the beneficiary undertake the obligation to transfer the properties donated to her to her brother. What she agreed to was the aforementioned provision.
The supreme court noted in its judgment that the Statement of Claim did not reflect the exact content of the donation agreement and was drawn up in a misleading manner, which unfortunately the defence lawyer and the court of first instance did not realise. In paragraph 6 of the Statement of Claim, there was special reference to the content of the donation agreement, which however was not supported at all by the donation agreement itself. There was no obligation to transfer the properties to the respondent, with or without any buildings, or to build a house, shop or restaurant within 5 years of signing. The agreement stated that after the lapse of five years and when circumstances permit, this should happen.
Finally, the supreme court noted that the respondent was never a contracting party to the agreement. According to its content, whoever violated its terms, would be subject to payment of damages to the other contracting party, not to the respondent. In light of its conclusion, the supreme court held that there was no need to examine whether the doctrine of privity of contract should not be taken into consideration here and accepted the appeal.
George Coucounis is a lawyer practising in Larnaca and the founder of George Coucounis LLC, Advocates & Legal Consultants, [email protected]