Wakilii

Desai v Bhatt (Civil Appeal No. 2 of 1948)

East African Court of Appeal · [1948] EACA 6 · 1948 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Appeal from decision of H.M. High Court of Uganda
Decision
Appeal dismissed; Respondent entitled to the difference between the option price and the contract price

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court held that the original agreement of 30th March 1946 was not rescinded either by mutual consent or by misrepresentation. The Respondent, who held an option to purchase a tea estate for £8,000, was entitled to transfer that option at a profit of £2,000 without disclosing the vendor's price to the Appellant. The subsequent direct transfer from the vendor to the company for £8,000 was merely a variation in the mechanics of performance, not a rescission of the original contract requiring payment of £10,000.

Outcome

Appeal dismissed; Respondent entitled to the difference between the option price and the contract price

Facts

The Respondent held an option to purchase a tea estate from Mr. Senior for £8,000 (160,000 shillings), having deposited £500 (10,000 shillings) to secure the option until 30th April 1946. On 30th March 1946, the Appellant contracted with the Respondent to purchase the estate for £10,000 (200,000 shillings), with the Respondent to receive 25% of shares in a company to be formed. After inspecting the estate and declaring himself satisfied, the Appellant discovered that the vendor's price was only £8,000. The Appellant sought to withdraw from the agreement. Following a conference at the office of advocate Mr. Haribhai Patel on 3rd or 4th April 1946, a direct agreement was made between the vendor and the Appellant for £8,000. The Respondent was present and privy to this arrangement. On 5th April 1946, the estate passed directly from Mr. Senior to the newly formed company, with the Appellant paying £8,000. The Respondent was never paid the £2,000 difference and brought suit to recover it.

Issues

  1. Whether the original agreement dated 30th March 1946 between the parties was rescinded by mutual consent.
  2. Whether the original agreement was rescinded on account of misrepresentation by the Respondent.
  3. Whether the subsequent agreement of 5th April 1946 constituted a novation of the earlier contract.

Orders

  • Appeal dismissed with costs.

Rules and key headnotes

Contract Law — Rescission — Mutual Consent — Burden of Proof
A contract is not rescinded by mutual consent where one party never agreed to forego the consideration due under the original agreement and was assured that payment would be made, even though the mechanics of performance were varied.
Contract Law — Misrepresentation — Non-Disclosure — Duty to Disclose
A party holding an option to purchase property is under no obligation to disclose to a prospective purchaser the price at which he holds that option, and may transfer the option at a profit without such disclosure constituting misrepresentation.
Contract Law — Novation — Variation of Contract — Distinction
A subsequent agreement that varies the mechanics of performance of an original contract does not constitute a novation or rescission where the essential obligation to pay the agreed consideration remains unchanged and was understood by all parties to remain in force.
Company Law — Promoters — Fiduciary Duty — Disclosure
A promoter of a company is not in a fiduciary position to the company before it is formed and is not obliged to account to the company for profit made on the resale of property to the company where the persons forming the company knew that he was both promoter and vendor.

Full judgment

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

Desai v Bhatt (Civil Appeal No. 2 of 1948) [1948] EACA 6 (1 January 1948)
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.