The Key Already Cut
A businessman can hold a signed contract that gives him the right to buy a company, or to renew the lease his whole business stands on, and then discover that in law he holds nothing at all. He has not been cheated. No one has torn up his document. Regardless of the paper it was written on, the right simply never existed, and it never existed because of a distinction dealmakers often do not notice until the day they try to rely on it. That is the distinction between an option and an agreement to agree. One is enforceable in law and the other one is not.
I have seen careful people confuse the two. They assume that the argument, when it comes, will be about whether they may exercise the right they hold. Almost always the argument is about whether the right was ever there to exercise. That question is settled on the day the document is signed, and nothing done afterwards can cure it.
The Key Already Cut
Why an option is a contract the law will enforce, and an agreement to agree is not
Think of a true option as a key already cut. The lock is fixed, the key sits in your pocket, and the only thing left for you is to decide when to turn it. Turning it asks nothing of the other side. They agreed to everything the day they handed you the key, and whatever they feel about the bargain later has no part to play. An agreement to agree is a different creature entirely. It is a promise that one day, if the two of you can settle on the shape of the key, someone will cut you one. Until that day arrives, and until you agree, you hold a promise and not a key.
Some of the largest empowerment transactions this country has seen were built on exactly this idea. When MTN placed shares in the hands of the black public through Zakhele Futhi in 2016, ordinary people subscribed at a fixed price of twenty Rand a share, for a fixed period, on a formula written into the scheme before anyone put pen to paper. Sasol did much the same through Inzalo and then Khanyisa. Tens of thousands of people held rights whose every material term, the price, the window, the formula, had been cut in advance. Precisely because nothing was left to be agreed, what they held was real.
Set against that the businessman who signs a lease with a right to renew it subject to agreement on the rental. He believes he has secured his premises for a further term. He has secured almost nothing. When the landlord declines to agree a rent he can live with, he learns that the renewal he was counting on was never a right at all. A grocer who leased his premises from Shoprite Checkers learnt this the hard way, in a fight that went all the way to the Constitutional Court, and I will come back to how it ended.
The lesson sits underneath both stories, and it is the nub of this article. Whether a right binds is decided when it is drafted, not when it is exercised. The dealmaker who takes a call over a partner's shares, a put on his own exit, or a right to come into the next round of funding, assumes the fight, if it ever comes, will be about exercising what he holds. The fight is almost always about whether he holds anything. By the time the other side refuses to honour the right, the question has already been answered, on the page, long before the refusal.
Is the key already cut?
Our courts settled long ago what makes an option binding, and the principle is simple enough to state at a dinner table. An option is not a plan to make a contract one day. It is itself a contract, complete from the moment it is granted, and it has two parts. The first is an offer, the offer to sell the shares or the land or the business on stated terms. The second is a promise to hold that offer open for a fixed time. When you exercise the option, you simply accept an offer that has been sitting there all along, and the sale springs into being at once. The other side agrees to nothing further, because they agreed to all of it at the start.
That is why the key is already cut. Everything that matters, the thing being sold, the price, the period within which you may take it up, was fixed at the outset. The exercise of the option is the turn of the key and nothing more. The seller cannot reopen the price when he sees you about to profit, and he cannot withdraw the offer while the option runs, because he sold that freedom when he granted it. A properly drafted option leaves you needing no further agreement from anyone at all. That is the test, and it is worth holding onto, because the instruments that fail all fail against it.
Does a right of first refusal change the lock?
Much of the confusion in practice comes from a second instrument that looks like an option and is not. A right of first refusal feels, to the person who holds it, like a guarantee that the asset will one day be his. It is a lot weaker than that. The holder has no present right to buy anything. What he holds is a promise that the owner will not sell to anyone else without first offering the asset to him, usually on the terms a third party has put on the table. The right lies dormant. It wakes only if and when the owner decides to sell, and if the owner never sells, the holder may wait a lifetime and take nothing.
The distinction is not academic, because dealmakers routinely take the weaker instrument believing they hold the stronger. An option lets you compel the purchase on your own timing. A right of first refusal only lets you match another buyer's offer, and then only once the owner has chosen to sell at all. If what you need is the certainty of getting the asset, a right of first refusal will not give it to you, however firmly it is worded, because the trigger lies in the other man's hand. The lock is a different lock, and calling it by the grander name does not recut the key.
What is a promise to cut a key worth?
Beneath both of these sits the instrument that binds no one, the agreement to agree. Our courts have said for decades that a promise to reach agreement in the future cannot be enforced, and the reason is not a technicality. A judge's task is to hold people to the bargain they made, not to build one they proved unable to make for themselves. If the price, or the rent, or the quantity is left to be settled later, and it never is, there is nothing to enforce and nothing a judge may lawfully supply. He cannot order two businessmen to agree, and he cannot pick the number for them and call it their bargain.
English law, from which much of ours descends, reached the same place more bluntly. The House of Lords held, more than thirty years ago, that even a promise to negotiate in good faith is unenforceable, because there is nothing certain enough in it for a court to measure. This is the point businessmen find hardest to accept, so it is worth stating without softening. A term left to be agreed is not a faint version of a binding term. It is the absence of one.
Who decides the shape of the key?
None of this makes every open term fatal, and this is where careful drafting earns its fee and sloppy drafting costs millions. A term may be left for later and the agreement will still bind, provided the parties have named, in advance, the mechanism that will settle it without needing their further consent. If a rent they cannot agree between themselves is to be fixed by an arbitrator, or by an independent expert, or against an objective standard, they have not left the term to agreement at all. They have left it to a process, and a process can run whether or not the parties ever see eye to eye. Our courts enforce these clauses precisely because nobody's further consent is needed. The mechanism turns a promise to agree into a term with teeth.
This is the practical cure, and it lies within reach of anyone drafting the document. Wherever you must leave a term open, and often you must, do not leave it to the goodwill of the parties. Name the person, or the formula, that will settle it when goodwill runs out. A price to be agreed binds no one. A price to be agreed, failing which fixed by an independent expert, binds completely. The whole distance between the two is a single clause, and that single clause is the distance between a key already cut and a promise to cut one.
When will a court turn the key for you?
The temptation, when a deal has soured and a term was left open, is to ask a court to do what the parties did not, and to force the other side to negotiate in good faith. That is what the grocer in the Shoprite matter asked for. His lease said the renewal rent would be agreed, the landlord simply declined to agree anything, and he asked the Constitutional Court to make honest bargaining a legal duty. The Court found the idea attractive, said so, and then declined to decide it, leaving the door ajar. No court has walked through it since. Our courts have made it clear in the years that followed that fairness and good faith, whatever work they do elsewhere in the law, do not let a judge force two businessmen to the table or rewrite what they signed.
That does not leave dishonesty unpunished. A party who lies during negotiations, or stays silent about something he was bound to disclose, answers for it under the ordinary rules of misrepresentation, and once a contract exists, our law expects it to be performed honestly. What no court will do is force you to keep negotiating, or make an agreement where there is none. The law polices how you bargain. It will not bargain for you.
There is one reader for whom all of this cuts against instinct, and that is the investor from abroad, above all from China. In many countries, including his, the law itself imposes a duty to negotiate honestly, and a party who walks away from a signed understanding in bad faith can be made to pay for the loss he causes. He arrives assuming the signed page carries that weight here as well. It does not. He is safe under his own law and exposed under ours, and the moment to see that gap is before he signs, not after the deal has turned.
So let’s come back to the key. The dealmaker who prospers is not the one with the thickest file or the firmest handshake. He is the one who knows, before he signs, whether the thing being placed in his hand is a key already cut or a promise to cut one. The option, the well-drawn call and put, the open term tied to a mechanism that will settle it, these are keys. They open the door on the day he chooses, and the other side's later reluctance changes nothing. The agreement to agree, the renewal subject to agreement, the price to be settled by a goodwill that has since evaporated, these are promises, and a promise is not a key.
A key that is already cut opens the door. A promise to cut one opens nothing.
Written by:
Wessel Badenhorst
August 2026
