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Some additional facts might help:

Who owns the mine? Was the balance ($5 mil) paid? Did the transaction completely fall apart?

Paul Tredoux wrote:

G'day all

Is anyone aware of any decided cases which provide authority for the decision of the following problem:

A and B enter into an agreement of sale in terms of which A sells and B purchases a mine for $7,000,000.00. The entire purchase price is payable on signature of the contract.

The contract is signed on 1 September 1999, and a cheque for $2,000,000.00 is issued by B and delivered to A as part-payment of the purchase price. A banked the cheque but same was dishonoured and returned marked "Refer to Drawer" that same day.

The relevant legislation provides that there is a three year limitation period in respect of the obligations arising out of the agreement of sale, but a six-year period in respect of the claim based on the cheque.

A took no steps to enforce the agreement, or to claim payment on the cheque for a period of three years. After the expiry of the three year period he institutes action on the cheque.

(Accept that A and B are immediate parties on the cheque, and that there are accordingly no special rules relating to negotiable instruments which prevent B from raising defences which are relevant to the underlying equities)

Is A entitled to enforce payment on the cheque (notwithstanding that he is no longer able to enforce the agreement of Sale)?