Commercial Law Index

The claimant/appellant purported to buy a property offered to it by the defendant/first respondent and consolidate the transaction with its purchase of another of the latter’s properties. This was proposed via counter-offer. The appellant proceeded to pay a down-payment for both properties after the agreed time-period, the bulk of which was unilaterally appropriated by the respondent towards payment for only one of them in reverting to the terms of the original agreement. Aggrieved, the appellant approached the High Court seeking layered relief to uphold the consolidated sale. The trial court found that, on the facts, the consolidation agreement was valid but conditional on the specified time-frame. It was therefore aborted as time was of the essence and payment had not been made in the required period. Judgment was entered in favour of the first respondent.

Challenging the trial court’s decision, the appellant argued that a binding agreement had been created, and the respondent had waived the issue of timeous payment when it accepted the appellant’s performance beyond the stipulated time-period. The court dismissed this claim, finding in concurrence with the court below that the failure to meet the time requirement – a term that was accepted by the appellant – thwarted the consolidation. No waiver had occurred.

Specific performance was unavailable to the appellant as the respondent had not breached their existing agreement. Its claim attacking the trial court’s jurisdiction to make an order regarding the transfer and registration of the property – directed at the second respondent – also failed.

The appeal was accordingly dismissed.
 

The issue was whether the unilateral withdrawal of a bank guarantee by the appellant amounted to breach of contract.

The appeal emanated from judgement of trial court which found that the withdrawal of a bank guarantee by the appellant
was in breach of contract. The appellant had advanced a bank guarantee to the respondent to guarantee its trading capacity with MTN, a communications company for which it was a distributor. The parties agreed that the contract can only be terminated by giving 60 days’ notice period. The appellant unilaterally terminated the contract. 

The respondent successfully challenged the termination in a lower court and was awarded damages amounting to ten million Naira with pre-trial interest. The appellant appealed the decision on the basis that it withdrew the bank guarantee after the respondent breached the agreement. It argued that the respondent’s claim was premised on negligence which had not been proven.

The respondent maintained that the appellant breached the contract by withdrawing the bank guarantee resulting in MTN cancelling its distribution agreement with the respondent. It further argued the delivery of termination was never proved. 

The court held there was no evidence to show that the termination notice was delivered to the respondent. It found that the withdrawal of the bank grantee amounted to a breach of contract. The court ruled that it has no power to interfere with damages awarded by the lower court unless special circumstances exist. It found that the ten million award was too excessive warranting it to intervene.

The appeal was dismissed. General damages were reduced from ten million Naira to five million Naira.

The plaintiff/appellant unsuccessfully sued the defendant/respondent for breach of contract following the latter’s refusal to accept delivery of the relevant goods. Curtailing the appellant’s sizeable claim for special damages, the High Court awarded only nominal damages – an order later confirmed by the Court of Appeal.

At the Supreme Court, the scope of section 48 of the Sale of Goods Act (the act) was elucidated: the computation of damages thereunder may be either general or special depending on the circumstances of each case. General damages refer to those which are foreseeable without proving that special circumstances were brought to the breaching party’s attention. Special damages are those which are foreseeable by the parties at the time of contracting because certain circumstances have been highlighted which render the damages within the realm of the signatories’ reasonable contemplation. These must be pleaded and proved at trial.

The plaintiff’s claim for special damages for the losses suffered by the breach was not proven before the High Court and were subsequently abandoned. The Supreme Court thus took the plaintiff to be entitled only to general damages under section 48 of the act. To this end, the plaintiff did not lead any evidence on the multipliers which would entitle the court to award enhanced damages. Section 48 caters to the contract price/market price differential and not to a computation of lost profits. The plaintiffs failed to adduce sufficient evidence to merit the proposed determination of damages and so the nominal award made by High Court in terms of s 48 was adequate.

The appeal was dismissed.

The parties entered into a business transaction for the supply and installation of a saw-mill. However, the transaction was not covered by a properly drawn up contract. Furthermore, it became apparent that the plaintiff provided the defendant with a plant which was defective and not fit for the purpose it was intended.

This case considered whether the Court of Appeal had misdirected itself to the defects contained in the machinery, whether there was a breach of a fundamental obligation and whether the goods sold were fit for the purpose which they were intended to be used.

The court considered the Sale of Goods Act, 137 of 1962 (the act) and found that the breach of a promise under the act depends on the category of promise; either a fundamental obligation, condition or a warranty. Breach of a fundamental obligation or a condition entitles the party not in default to repudiate the contract of sale and if it is the seller who is in breach, the buyer can reject the goods. The breach of a warranty cannot lead to a repudiation or rejection of the goods but will entitle the party not in breach to damages. However, a party entitled to repudiation and rejection may waive their right and opt for damages.

The court considered whether the goods were fit for the purpose that they were provided for. The plaintiff sold the machinery in the course of its business on condition that it will be fit for the purpose of saw milling. A machine is fit for purpose if it is able to perform the task for which it was acquired, safely and for a reasonable period, before defects appear. The court found that a saw mill should not break down after 11 days of operation and therefore did not meet the standard of the purpose for which it was intended. The court found that as a result of the defect, the defendant was entitled to general damages as a result of the failure of the saw mill being fit for purpose.

Appeal upheld.

The first issue was whether the appellate court erred in law and in fact to conclude that the respondent could not be sued. The court observed a difference in the extent of immunity accorded in the domestic act and that granted in the Eastern and Southern African Trade and Development Bank Charter of the Preferential Trade Area (PTA) for Eastern and Southern African States (the charter) and Eastern and Southern African Trade and Development Bank Act (the act), with the charter providing for absolute immunity whilst the act offered functional immunity. It reasoned that the intention of the act is to govern the relationship between Uganda and the respondent. Applying the ejusdem generis rule (that a general term describing a list of specific terms denotes other things that are like the specific elements) to interpret the objectives of the act, the court concluded that immunity was not intended to extend to third party relationships as these are not covered by the functionality principle underpinning the act. The court held the appellate court erred in its finding and instead concluded against immunity.

The second question was whether it was a procedural requirement to obtain a waiver before instituting suit against the respondent. Reiterating the functionality basis of the respondent’s immunity and the fact that it did not extent to suits from third parties for contractual breach, the court reasoned that the waiver requirement was inapplicable and unnecessary. It thus concluded that there was no need to obtain a waiver before commencing suit and allowed the appeal. 

The plaintiff sued the defendant state organ for the balance of payment for construction services rendered in respect of a government-owned school premises. It contended that the defendant had failed to pay the agreed-upon amount timeously; his sum claim was therefore the unpaid balance plus compound interest. The defendant contended that the plaintiff had been paid in full – the principal amount plus simple interest for the period of delay. As the agreement was unwritten, the court had to establish its terms. The determination of the type of interest was integral as the parties had not considered this at the time of contracting.

That the defendant was in breach due to its prolonged delay in effecting payment was quickly established by the court. Considering the nature and purport of contractual damages, it established that compound interest was apposite. Examining the plaintiff’s exhibits of standard industry lending rates sourced from the Bank of Uganda, the court determined the correct rate of interest at 22% p.a. and ruled in favour of the plaintiff. It held further that the award of compound interest sufficiently compensated the plaintiff for its restitutionary and expectation interests, thereby obviating the need for general damages.

This case involved an allegation that the defendant had not paid fully for services stipulated within an advertising agreement with the plaintiff. This case illustrates the importance interpreting the terms within a contract in line with what the parties to that contract had agreed.

The court held that the court’s duty is to interpret clause 4 of the contract in order to determine what the parties had agreed to. The court had regard to statements of English authority on the interpretation of commercial contracts. In particular, 
 that ‘[t]here must be ascribed to the words a meaning that would make good commercial sense … and not some meaning imposed … that no businessman in his right senses would be willing to incur.’ 

The court was satisfied that the according to the terms of the contract, the plaintiff as the ‘landlord’ had provided the defendant as the ‘advertiser’ space for advertising, and undertaken the contested printing activities for its benefit. The court held that the only sensible interpretation of the contract was that the cost of this printing was to be borne by the defendant because the alternative view would lead to a conclusion that ‘flouts common business sense’. 

The court ruled that the defendant was supposed to pay the 3.5 million Ugandan shillings for the printing.
 

This case involved a memorandum of understanding that was departed from orally by both parties. This case illustrates how an oral variation leaves the written contract enforceable.

The court considered three issues, whether there was a valid contract, whether the counter-defendant had breached the contract, and if the counterclaimant is entitled to the remedies available.

The court held that the burden of proving misrepresentation rests on the party alleging it. Secondly, a breach of a contract arises when a party to a contract fails to meet its contractual obligation. However, where a party waives its rights, it cannot claim damages for breach on the same contract. Lastly, the court held that a party must take all reasonable steps to mitigate loss following a breach.

The court was satisfied that there was no proof of misrepresentation on the part of the counterclaimant. The court found that though there was breach of the contract by the counter-defendant, the counter-claimant had waived its rights and could not claim damages for breach on the same contract. The court was satisfied that the counter-claimant did not mitigate its loss and was therefore not entitled to any special damages.
 

Each of the parties accused the other of breach of contract. The plaintiff alleged breach in terms of non-payment for services conducted. The defendant counter-claimed breach in terms of failure to comply with the set completion time and providing substandard quality work.

The defendant also contended that should it be found liable, it should be indemnified by a third party as it has been negligent in doing its work.This court held that the defendant is not entitled to indemnity or any contribution from the third party.

The court found that there was no breach of contract by the plaintiff in so far as completion time is concerned. The defendant waived the right to complain about completion time and was estopped from raising the issue. The defendant was found to not be entitled to monies claimed in the counterclaim, as there was no basis for it and this court had already held that the defendant waived its rights.

The plaintiff was found to be entitled to the monies reflected on two certificates. The plaintiff was not awarded the contractual interest claimed because the court held that the the defendant was justified in not paying contractual interest for an erroneously issued certificate.

Following its non-payment for construction services rendered, the plaintiff sued the defendant for breach of contract. A counter-claim was lodged alleging that the plaintiff breached the parties’ agreement through a significant delay in performance and sub-standard discharge of its obligations. Insofar as the third party had issued unqualified certificates of completion for the plaintiff’s/counter-defendant’s alleged malperformance, the defendant/counter-claimant contended that it was negligent and therefore liable for a degree of indemnification.

The defendant/counter-claimant was found to have impliedly waived its right to liquidated damages for late performance and consequently estopped from enforcing it. The court found further that the plaintiff’s/counter-defendant’s performance, while flawed in some respects, was not materially defective. The issuing of a certificate of completion marks the close of liquidated damages liability and commences the period of defects liability, where errors in performance are identified and submitted to the contract debtor for rectification. Failure to rectify does not give a right to sue for breach but rather gives the employer the right to refuse to release retention monies.

The third party was found to have conducted its work competently, barring one erroneously issued certificate, and was under no obligation to indemnify the defendant. The defendant was therefore indebted to the plaintiff for the outstanding amounts stipulated by the lawfully issued certificates. Because the defendant had accepted and made use of the plaintiff’s performance, despite the erroneously issued certificate of completion, the court found that it was liable to compensate the latter under the law of unjustified enrichment. Judgment was entered for the plaintiff with costs.

The plaintiff company brought a suit against the defendant school and its deputy headmaster for breach of contract stating that the defendants failed to pay for services rendered by the plaintiff. 

There were two issues before the court: whether there was a valid contract between the parties and whether the plaintiff carried out their services in accordance with local purchase orders 1941 and 1942.

The court held that there was a valid contract between the parties. It was also held that in rendering services, the plaintiff did not supply and install certain items in accordance with local purchase orders 1941 and 1942. 

Regarding the validity of the contract, the court found that the second defendant had apparent authority to sign the local purchase orders meaning the contract was valid and that there was no express provision in the legislation stating that non-compliance vitiates legality of contract. In addition, the court found that the first defendant accepted the goods when they were delivered to it and had to pay accordingly. 

The court’s judgement relied on a report by the Ugandan National Bureau of Standards which found that some of the items installed by the plaintiff were substandard. 

The court awarded the plaintiff Shs 216,000 for delivery of goods and Shs 84,000 for general damages. In addition, the court awarded the plaintiff interest on the above amounts until payment was made in full. 
 

The plaintiff supplier sued the defendant – its Local Technical Representative (LTR) in accordance with the National Drug Authority Act for the distribution of pharmaceutical products – for breach of contract. The defendant failed to pay the plaintiff for the assorted products it supplied. The plaintiff consequently claimed for loss of income, damages, interest and costs of suit. The defendant lodged a counter-claim alleging that the plaintiff/first counter-defendant had breached the memorandum of understanding concluded between the parties and had, through various means, attempted to cripple the defendant’s/counter-claimant’s enterprise. It alleged further, as the basis of its challenge to the legality of the arrangement between the first and second counter-defendants, that the just-mentioned parties had colluded in this endeavour so as allow the latter to become the new LTR. 

The defendants/counter-claimants successfully raised the procedural bar of res judicata – which prohibits judicially-decided matters from being heard afresh a second time – concerning the plaintiff’s claim, given that the matter of their indebtedness thereto had been resolved in the settlement of antecedent winding-up proceedings. To what extent ought the defendant’s/counter-claimant’s challenge have been raised as part of the previous lawsuit? Suggesting that res judicata was applicable to both parties’ claims, the court nevertheless considered the counter-claimant’s’ case in respect of the first and second counter-defendants and found no measure of illegality or bad faith on the evidence. The counter-claimant was additionally time-barred from seeking review of the National Drug Authority’s decision over the LTR change. 

The plaintiff’s suit and defendants’ counter-claims were accordingly dismissed with costs.
 

The plaintiff brought an action for breach of contract, for the defendant to pay the balance of the money paid by the plaintiff to the defendant in terms of their contract, and for interest on the amount.

The sourt held that on the evidence the defendant failed to deliver all the sugar within the seven weeks. The defendants did not adduce any evidence to the contrary, and the plaintiff was entitled to refund of the money paid for the sugar. The issue was whether general damages ought to be awarded in addition to interest on the outstanding amount.

Section 50 of the Sale of Goods Act provided that the remedy for wrongful non-delivery was damages. The measure was the estimated loss directly and naturally resulting in the ordinary course of events from the seller’s breach of contract. General damages will usually be awarded to place the plaintiff in as close a position as possible they would have been had the injury not occurred. Where interest is awarded for deprivation of monies to be paid, then general damages will not be awarded in addition to interest. The award of interest would place the plaintiff in its original position. 

The court held that the plaintiff did not adduce evidence of what loss was suffered to warrant an award of general damages. Interest was therefore awarded in lieu of general damages. 
 

The plaintiff instituted an action against the defendant to recover a sum of money owed to the plaintiff for the construction of a television complex constructed by the plaintiff on the defendant’s premises. The defendant submitted a counterclaim. 

The court was faced with a number of issues to resolve, namely: whether the deed of variation entered into by the parties was void for illegality; whether the plaintiff breached he contract; whether the plaintiff is entitled to any remedies and whether the defendant is entitled to their counter claim. 

The court held that (i) the deed of variation was enforceable; (ii) the plaintiff was not in breach of contract; (iii) the counter claim by the defendant must fail and that the plaintiff was entitled to remedies for the sum withheld. 

The court relied on existing legislation to distinguish between variation and amendment- the former dealt with changes in the contract relating to the price, completion date or statement of requirements of the contract and the latter related to changes in terms and conditions of the awarded contract. The court relied on witness testimonies from which it determined that the plaintiff was not in breach of contract. 

The defendant’s counterclaim was dismissed, and the plaintiff awarded Shs 749,884,386 being the money owed to it by the defendant. Interest was set at 19% p.a. Costs were ordered in favour of plaintiff.
 

The dispute emanated from the arrest of the plaintiff’s workers on the instruction of defendant, the National Forestry Authority on allegation of illegally felling trees. This was despite the fact that the plaintiff was licensed to harvest the trees. The plaintiff was forced to pay 150 000 shillings for the tools and logs impounded by the police.

The plaintiff claimed compensation amounting to 3 million shillings for mistreatment, mental health and psychological torture at the hands of the defendant. She further claimed special damages for loss of income. The plaintiff submitted that the defendant breached the license awarded to the plaintiff to harvest abandoned logs

The defendant contended that that the plaintiff breached her license by illegally harvesting timber beyond what was permitted by the license. It argued that the plaintiff’s claim was outrageous in view of the fact that she abandoned the license and that the allegations of mistreatment was frivolous. On special damages, the defended argued that the plaintiff failed to produce evidence to show any loss.

In deciding the matter, the court held that the defendant was in breach of its obligations towards the plaintiff and awarded damages of 3 million shillings for breach of the contract, lost opportunities and inconveniences suffered. The claim for special damages was dismissed.