Commercial Law Index

The appeal emanated from the advance of a loan by the first respondent to the appellant. The appellant deposited with appellant bank a certificate of occupation and a share certificate as security. The appellant then failed to repay the loan resulting in the sale of the appellant’s shares deposited as security. The appellant instituted legal proceedings against the respondent claiming that it was not indebted to the first respondent for any amount because the arrangement between the parties was a joint venture agreement and that the sale of the second appellants shares was done mala fide and without their consent. 

The challenge was dismissed. The appellant appealed against the dismissal arguing that the trial court erred. It pointed out that the deed of mortgage was not properly executed and that the contract between the parties was invalid. 

The respondent argued that the appellant was raising new issues not canvassed in the court below. It argued that there was a valid contract between the parties.

The court held that there was a loan agreement between the parties and the appellants did not complain of anomalies in the contract hence it waived any right it may have had. The court ruled that a party cannot raise new issues in an appeal and dismissed the appeal.

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.