Wakilii

Edmund Akatukwasa v Gershom Kanyaruju and Anor - (HCT-00-CC-CS 1017 of 2004)

High Court · [2006] UGCOMMC 23 · 2006 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of debt arising from breach of contract of sale and guarantee
Decision
Judgment entered for the plaintiff against both defendants for the sums claimed with interest and costs

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that where parties orally varied a written contract following the seller's breach and agreed on a reduced refund amount, the agreement is enforceable where the variation is consistent with the original contract's penalty clause and supported by evidence. Held further that a third party who voluntarily guarantees payment of another's debt in writing and makes part payment is bound by the doctrine of novation to pay the balance, and cannot unilaterally withdraw from the commitment without consent of all parties. Dishonoured cheques create an immediate right of recourse against the drawer for the debt they were intended to settle.

Outcome

Judgment entered for the plaintiff against both defendants for the sums claimed with interest and costs

Facts

The plaintiff and 1st defendant entered a written contract for the sale of a vehicle for Shs.30,000,000, with Shs.10,000,000 paid upfront. The contract provided that if the seller failed to deliver, he would refund all deposits plus 30% interest per month. The seller defaulted after receiving Shs.15,000,000. The parties orally agreed the seller would refund Shs.28,000,000 (a reduction from the contractual entitlement of Shs.37,500,000). The seller arranged for the 2nd defendant, to whom he had leased the vehicle, to pay Shs.22,000,000 to the plaintiff. The 2nd defendant confirmed this commitment in writing and paid Shs.15,000,000 but refused to pay the balance of Shs.7,000,000. The 1st defendant issued two post-dated cheques totalling US $4,000 to cover the remaining Shs.6,000,000, but both cheques bounced. The plaintiff sued both defendants for the outstanding amounts.

Issues

  1. Whether the plaintiff is entitled to payment of US $4,000
  2. Whether the 2nd defendant is liable to pay Shs.7,000,000 to the plaintiff
  3. Whether the plaintiff is entitled to other reliefs sought

Orders

  • Judgment for the plaintiff against the 1st defendant in the sum of Shs.6,000,000 (equivalent of US $4,000 at the exchange rate of Shs.1,500 per dollar).
  • Judgment for the plaintiff against the 2nd defendant in the sum of Shs.7,000,000.
  • Interest at 25% per annum on the sum of Shs.6,000,000 from 28 September 2004 (date of dishonour of the last cheque) until payment in full.
  • Interest at 25% per annum on the sum of Shs.7,000,000 from 6 July 2004 (date of default by 2nd defendant) until payment in full.
  • Taxed costs of the suit to be paid by the defendants, one half by the 1st defendant and the other half by the 2nd defendant.

Rules and key headnotes

Contract Law — Oral Variation — Enforceability of Oral Agreement Following Written Contract
Where parties to a written contract agree orally to vary their obligations following breach, the oral variation is enforceable if proved by evidence, if it is consistent with the written contract's terms, and if the variation is not contrary to law. Where a contract is made orally, the terms of it can be proved by oral evidence, normally by the person claiming that there is a contract.
Banking & Finance — Dishonoured Cheques — Right of Recourse
When a bill or cheque is dishonoured by non-payment, an immediate right of recourse accrues to the holder. Where a debtor opts to settle a debt by cheque and the cheque is dishonoured, the creditor is entitled to recover the value of the dishonoured cheque as a debt owed.
Contract Law — Novation — Substitution of Debtor
Novation is a transaction by which, with the consent of all parties concerned, a new contract is substituted for one that has already been made. Where a third party promises the creditor to pay the debtor's debt, and this promise is confirmed in writing and acted upon by part payment, the third party becomes bound to pay the full amount and cannot unilaterally withdraw from the commitment without the consent of all three parties.
Contract Law — Guarantees — Application of Section 3(1) Contract Act
Under section 3(1) of the Contract Act, no suit is maintainable on a guarantee or special promise to answer for the debt of another unless the agreement is in writing and signed by the party to be charged. This provision applies whether the liability guaranteed is contractual or tortious, and applies where a third party promises the creditor to pay the debt.
Damages & Quantum — Interest — Basis for Award
The basis of an award of interest is that the defendant has kept the plaintiff out of his money and has had the use of it himself, and therefore ought to compensate the plaintiff accordingly. Where a plaintiff has been wrongfully denied the use of money that was rightfully his in a business transaction, an award of interest is necessary to compensate for that loss.

Legislation cited (1)

  • Contract Act Cap. 73 s.3(1)

Full judgment

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

Edmund Akatukwasa v Gershom Kanyaruju and Anor - (HCT-00-CC-CS 1017 of 2004) [2006] UGCommC 23 (29 May 2006)
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.