Wakilii

Bank of Uganda v Banco Arabe Espanol (Civil Appeal 1 of 2001)

Supreme Court · [2002] UGSC 3 · 2002 Appeal Dismissed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Second appeal from the Court of Appeal, which had dismissed an appeal from a High Court judgment entered against the appellant guarantor.
Decision
Appeal dismissed; appellant bound to pay the loan, interest and damages awarded by the Court of Appeal.

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Cited — treatment unverified cited in 1 (treatment unverified) Derived from citing cases in the Wakilii corpus — not an assertion that this case is good law.

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Holding

The Supreme Court dismissed the appeal, holding that the loan agreement signed by the Bank of Uganda's agent under a duly sealed power of attorney was validly made and enforceable, even without the Bank's seal on the agreement itself. The Attorney-General's legal opinion, a contractual condition precedent confirming validity, bound the Bank and entitled third parties to rely on it. The Bank's telex admitting the debt estopped it from denying liability under Evidence Act s.113. Extensions of the repayment dates, of which the Bank as principal financial adviser was aware and which it never protested, did not discharge it as guarantor, particularly given the unconditional terms of the clause 18 guarantee.

Facts

On 11 November 1987 the Government of Uganda signed a US$1,000,000 loan agreement with the respondent bank in Madrid, Spain, to finance the supply of tank wagons. The Bank of Uganda's representative, George Nteeba, signed as guarantor under a power of attorney granted by the Bank's Governor and sealed in accordance with the Bank's bye-laws. The agreement was governed by English law under clause 16, and clause 3 made the Attorney-General's legal opinion a condition precedent; the Attorney-General duly opined the agreement was valid and enforceable. The loan was repayable in seven instalments. Only the first instalment, with accrued interest, was paid on 21 May 1991. No further instalments were paid despite demands. In a telex dated 15 February 1991 the Bank's Ag. Director EDMO stated it did not dispute the claim, attributing delay to foreign exchange constraints. The respondent sued the appellant as guarantor under clause 18 after the Government was found statute-barred.

Issues

  1. Whether the validity and enforceability of the loan agreement against the appellant as guarantor was governed by the Corporate Bodies Contracts Act 1960 of the United Kingdom or by the Bank of Uganda Bye-Laws of 1968.
  2. Whether the loan agreement was enforceable against the appellant as guarantor despite not being executed under the appellant's seal.
  3. Whether the appellant's telex admitting the claim estopped it from contesting the validity and enforceability of the guarantee.
  4. Whether the appellant's liability as guarantor was discharged by the extension and variation of the loan repayment dates without its consent.

Orders

  • Appeal dismissed with costs to the respondent in this Court and in the courts below.
  • Judgment and decree of the Court of Appeal upheld and confirmed.

Key headnotes

Contract Law — Corporate Contracts — Execution by Agent under Power of Attorney without Corporate Seal
Where a corporation grants a duly signed and sealed power of attorney to its authorised agent to conclude a contract abroad, the agent may bind the corporation to a valid and enforceable agreement without affixing the corporate seal to the contract itself.
Contract Law — Conditions Precedent — Legal Opinion as Validating Condition
Where parties make a satisfactory legal opinion a condition precedent to a contract's operation, the opinion, once given in writing, becomes the authoritative determinant of the agreement's legality and enforceability and binds the parties accordingly.
Administrative Law — Attorney-General's Opinion — Reliance by Third Parties
The legal opinion of the Attorney-General on the laws of Uganda and their effect on an agreement must be accorded the highest respect, and third parties are entitled to rely on it without further enquiry; it is improper for the Government or a public institution to later question its correctness so far as it affects third parties' rights.
Evidence — Estoppel by Conduct — Admission of Liability
Under section 113 of the Evidence Act, where a party by its declaration or act intentionally causes another to believe a thing to be true and that other acts on the belief, the party may not later deny the truth of what it admitted; a telex admitting indebtedness estops the debtor from denying liability.
Banking & Finance — Guarantee — Discharge of Guarantor by Variation of Terms
A guarantor who, with knowledge of extensions and variations to the repayment terms, fails to protest or claim discharge cannot afterwards rely on those variations to escape liability, particularly where the guarantee is expressed to be unconditional and payable on first demand regardless of the circumstances of the principal's default.

Legislation cited (6)

  • Evidence Act s.113
  • Bank of Uganda Act (Act 5 of 1966)
  • Bank of Uganda Bye-Laws 1968 (Statutory Instrument No. 157 of 1968) Rule 2
  • Corporate Bodies Contracts Act 1960 (United Kingdom)
  • Constitution of Uganda 1995 Article 126(2)
  • Rules of the Supreme Court Rule 93(1) and (2)

Cases cited (7)

  • A.R. Wright and Sons Ltd v Romford Borough Council [1957] QB 431
  • Hunt v Wimbledon Local Board (1878) 3 CPD 208
  • Chatney v The Brazilian Submarine Telegraph Co. Ltd., (1890) 10B 97
  • General Parts (U) Ltd v Non-Performing Assets Recovery Trust (Civil Appeal No. 5 of 1999)
  • Powis and Byran Ltd v. Bonquet DV People (1967) IALR Comm 323
  • J.S. Mayanja Nkangi v National Housing Corporation (1972) ULR 37
  • Holm v. Brunkshill (1878) Q.B. 495
Source: this page presents Wakilii’s issue analysis and metadata for a publicly reported Ugandan judgment. Any AI-generated summary is marked as such. Judgment text is sourced from the Uganda Legal Information Institute (ulii.org). Wakilii is not affiliated with ULII.