Wakilii

Uganda Telecom Ltd v Tanzanite Corporation (CIVIL APPEAL NO.17 OF 2004)

Supreme Court · [2005] UGSC 34 · 2005 Appeal Allowed ✦ AI-generated summary ↓ Download
Jurisdiction
Uganda
Case Type
Second appeal to the Supreme Court from the Court of Appeal, which had reversed the High Court and awarded the respondents the full heads of claim
Decision
Appeal allowed; the Court of Appeal's awards set aside; cross-appeal dismissed; costs to the appellant in this Court and the courts below

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Holding

The Supreme Court allowed the appeal, holding that no contract existed for the supply of 30,000 telephone sets. A proforma invoice is ordinarily a mere formal offer to treat, and the appellants' letter stating their capacity to purchase 30,000 sets was part of negotiation, not a counter-offer capable of acceptance; the essential terms were never agreed. As no contract existed, no breach arose. The respondents had in any event failed to specifically plead and strictly prove their special damages — loss of profits, unused materials and the unpaid bank loan — and the Court of Appeal erred in relying on sections 49(1) and (2) of the Sale of Goods Act while disregarding section 49(3). The awards were set aside and the cross-appeal dismissed.

Facts

Tanzanite Corporation, a locally registered telecommunications firm, negotiated to supply telephone sets to Uganda Telecom Ltd. A 1993 commitment letter from UPTCL was followed by the respondents' proforma invoice offering 10,000 model TA-101 sets at US$44.75 each, signed by both parties in January 1995. An earlier letter from the appellants stated they had capacity to purchase up to 30,000 sets on the proforma invoice's terms. Relying on an alleged contract for 30,000 sets, the respondents established a workshop, ordered materials from Hong Kong and took a Co-operative Bank loan in connection with which the appellants wrote to the bank. The appellants ultimately ordered and paid for only 3,000 sets through separate local purchase orders, leaving the respondents with unsold sets, unused materials and an unserviced loan. They sued for breach of contract, claiming loss of profits, loss of unused materials, the unpaid bank loan, general damages and interest.

Issues

  1. Whether there was a contract between the appellants and the respondents for the supply of 30,000 telephone sets.
  2. Whether, if such a contract existed, the appellants breached it.
  3. Whether the respondents specifically pleaded and strictly proved their claimed special damages for loss of profits, unused materials and the unpaid bank loan.
  4. Whether the Court of Appeal erred in applying the Sale of Goods Act without regard to section 49(3) and the principles on proof of special damages.

Orders

  • Appeal allowed.
  • The judgment and orders of the Court of Appeal set aside.
  • Cross-appeal dismissed.
  • Costs of the appeal and of the courts below awarded to the appellant.
  • Costs of the cross-appeal awarded to the appellant.

Key headnotes

Contract Law — Formation — Proforma Invoice as Offer to Treat
A proforma invoice is ordinarily a mere formality and an offer to treat rather than a contractual offer; a party's statement that it has the capacity to purchase a stated quantity is part of negotiation and does not constitute a counter-offer capable of acceptance.
Contract Law — Formation — Certainty of Essential Terms
Unless the essential terms of a contract — including quantity, time for delivery and mode of payment — are agreed upon, there is no binding and enforceable obligation.
Civil Procedure — Second Appeals — Concurrent Findings of Fact
A second appellate court will not interfere with concurrent findings of fact by the lower courts; but where the trial court and the first appellate court reached inconsistent findings on the issue, no concurrent finding exists and the rule against interference does not arise.
Damages & Quantum — Special Damages — Pleading and Strict Proof
Special damages cannot be recovered unless they are specifically claimed and strictly proved, or unless the best available particulars have been communicated before trial to the party against whom they are claimed.
Commercial Law — Sale of Goods — Measure of Damages for Loss of Profits
In a claim for damages for breach of a contract for the sale of goods, the provisions of the Sale of Goods Act (especially section 49(3)) and the common-law principles on pleading and proof of special damages both apply and are not mutually exclusive; where there is an available market, the measure of damages is prima facie the difference between the contract price and the market price at the time the goods ought to have been accepted.

Legislation cited (6)

  • Sale of Goods Act s.49(1)
  • Sale of Goods Act s.49(2)
  • Sale of Goods Act s.49(3)
  • Sale of Goods Act s.50(3)
  • Sale of Goods Act s.52
  • Rules of the Supreme Court rule 97(a)

Cases cited (9)

  • May and Butcher Ltd v The King [1934] 2 KB 17
  • Erisafani Mudumba v Wilberforce Kuluse (Civil Appeal No. 9 of 2002)
  • Lutaya v Attorney General (Civil Appeal No. 70 of 2002)
  • Milly Masembe v Sugar Corporation and Another (Civil Appeal No. 7 of 2000)
  • Banco Arabe Espanol v Bank of Uganda (Civil Appeal No. 8 of 1998)
  • Siree Vs Lake Turkana
  • Bagg v Amand (1846) 8 QB 610
  • Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989
  • Cehave NV v Bremer Handelsgesellschaft mbH [1975] QB 44
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.