Wakilii

Africana Clays Ltd v Herm Enterprises U (Ltd) (Civil Suit 708 of 2016)

High Court · [2017] UGCOMMC 289 · 2017 Preliminary Objections Upheld — Suit Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Ruling on preliminary objections in first instance civil suit for breach of contract
Decision
Suit dismissed on preliminary objections

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the plaintiff had locus standi to sue as it was privy to the asset sale agreement and the creditors were not parties to that agreement. However, the plaintiff had no cause of action because the agreement contained no timelines for the defendant to pay the listed creditors, and the defendant was therefore not in breach. The suit was premature and misconceived because the defendant had not yet completed payment of all creditors under the payment schedule and one creditor's claim remained subject to pending litigation.

Outcome

Suit dismissed on preliminary objections

Facts

On 30 December 2013, the plaintiff sold its assets including land and machinery to the defendant for UGX 3,725,391,469. The defendant paid UGX 2,500,000,000 but did not pay the balance of UGX 1,225,391,469. The sale agreement required the defendant to pay certain listed creditors of the plaintiff as part of the consideration. The plaintiff sued for the unpaid balance. The defendant raised preliminary objections that the plaintiff lacked locus standi, disclosed no cause of action, and that the suit was premature because the agreement contained no timelines for payment of creditors and one creditor's claim was still pending in court.

Issues

  1. Whether the plaintiff had locus standi to bring the suit.
  2. Whether the plaint disclosed a cause of action against the defendant.
  3. Whether the suit was premature and misconceived.

Orders

  • Preliminary objections raised by the defendant upheld.
  • Suit dismissed with costs to the defendant.

Rules and key headnotes

Contract Law — Privity of Contract — Locus Standi to Sue
Only a person who is party to a contract has locus standi to sue upon it. A stranger to a contract cannot take advantage of the provisions of the contract even where some provision was intended to benefit that stranger, unless given a statutory right to do so.
Contract Law — Privity of Contract — Third Party Beneficiaries
Where a contract between two parties provides for payment to be made to third party creditors, those creditors do not acquire privity of contract with the paying party unless they are signatories to the agreement or there is express or implied consent from the creditors assenting to assignment.
Contract Law — Breach of Contract — Time for Performance
Where a contract contains no specific timelines for performance of an obligation, a party cannot be held to be in breach of that obligation until a reasonable time has passed or until performance becomes impossible or until the creditor has made demand and a reasonable time thereafter has elapsed.
Civil Procedure — Cause of Action — Essential Elements
For a plaint to disclose a cause of action, three elements must be present: the plaintiff enjoyed a right, the right has been violated, and the defendant is liable for that violation. The absence of any element means no cause of action exists.
Civil Procedure — Preliminary Objections — Premature Suits
A suit is premature where it is brought before the conditions precedent to liability under a contract have been fulfilled, or where essential obligations under the contract have not yet fallen due for performance.

Legislation cited (2)

Cases cited (8)

  • Uganda Government Pensioners Cooperative Society Ltd v Attorney General (HCCS No. 269 of 2008)
  • Auto Garage and others v Motokov [1971] EA 514
  • Kiga Lane Hotel Ltd v Uganda Electricity Distribution Co (HCCS No. 557 of 2004)
  • Major General David Tinyefuza v Attorney General of Uganda (Constitutional Appeal No. 1 of 1997)
  • Francis Xavier Muhoozi t/a Kabale Kobil Station v National Bank of Commerce (U) Ltd (HCCS No. 303 of 2006)
  • Kayanja v New India Assurance Company Ltd [1958] EA 295
  • Jeraf Shariff & Co v Chotai Fancy Stores [1950] EA 374
  • Arinaitwe Harriet v Africana Clays Ltd (HCCS No. 376 of 2013)

Full judgment

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The original judgment as reported. Read the original PDF before relying on any passage.

Africana Clays Ltd v Herm Enterprises U (Ltd) (Civil Suit 708 of 2016) [2017] UGCommC 289 (14 June 2017)
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.