Wakilii

National Medical Stores v Karnag International Ltd (HCT-00-CC-CS 347 of 2002)

High Court · [2012] UGCOMMC 36 · 2012 Judgment for Plaintiff AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for recovery of special damages arising from breach of contract for supply of drugs
Decision
Judgment entered for plaintiff with special and general damages awarded. Defendant's counterclaim dismissed.

Observed later treatment

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Holding

Held that a notification of award containing additional terms constitutes a counter-offer requiring acceptance. Where the defendant accepted the award without reservations, the additional terms including NDA registration requirements became part of the contract. Drugs rejected for failing to comply with registration requirements justified recovery of sums paid under the letter of credit. Special damages must be strictly proved with supporting evidence.

Outcome

Judgment entered for plaintiff with special and general damages awarded. Defendant's counterclaim dismissed.

Facts

In 1998, the defendant was awarded a tender to supply 50,000 units of erythromycin powder to the plaintiff. A letter of credit for USD 175,700 was opened and USD 21,693,336 (80% of the CIF value) was paid upon presentation of shipping documents in May 1999. The notification of award dated 22nd October 1998 contained a term requiring goods to be registered with the National Drug Authority (NDA) and subject to NDA quality inspection. The defendant accepted the award on 25th October 1998. When the drugs arrived, NDA rejected them in September 1999 on grounds that the labeling did not match the registered names. The registered drug was 'Bacimmycin-P' (drug name) and 'Erythromycin Stearate' (generic name), but the imported drugs were labeled 'Erythromycin Powder for oral suspension 125 MG/5ML'. NDA directed re-exportation within one month. The defendant failed to re-export the drugs, which subsequently expired and were destroyed. The plaintiff sought recovery of the payment made, plus destruction and storage costs.

Issues

  1. Whether the notification of award letter dated 22nd October 1998 and especially paragraph 3 thereof formed part of the contract between the parties.
  2. Whether the parties are entitled to the remedies pleaded.

Orders

  • Plaintiff awarded special damages of USD 21,693,336 being the value of the letter of credit paid to defendant.
  • Plaintiff awarded general damages of USD 2,000.
  • Interest awarded at 4% per annum on special damages from date of filing suit until payment in full.
  • Interest awarded at 2% per annum on general damages from date of judgment until payment in full.
  • Costs of the main suit awarded to the plaintiff.
  • Defendant's counterclaim dismissed with costs.
  • Claims for Ushs 6,610,500/= (destruction costs) and Ushs 12,162,185/= (demurrage and storage) dismissed for lack of proof.

Rules and key headnotes

Contract Formation — Invitation to Tender — Offer and Acceptance
An invitation for tenders for the supply of goods or services is generally not an offer but an invitation to treat. The offer comes from the person who submits the tender, and there is no contract until the person asking for tenders accepts one of them.
Contract Formation — Acceptance — Qualified Acceptance as Counter-Offer
An acceptance must be unqualified. A notification of award that introduces additional terms not contained in the bidding documents does not constitute an unqualified acceptance of the tenderer's offer but operates as a counter-offer which requires acceptance by the tenderer before the terms become binding.
Incorporation of Terms — Acceptance by Conduct
Where a notification of award contains additional terms and expressly invites the tenderer to indicate acceptance within a specified time, and the tenderer replies accepting the award without any reservations, the additional terms in the notification become part of the contract between the parties.
Breach of Contract — Non-Conforming Goods — Rejection
Where a contract for the supply of goods stipulates that goods shall not be accepted unless registered with the National Drug Authority and subject to NDA quality inspection, goods which fail to comply with registration requirements by having labeling that differs from the registered names may be lawfully rejected, entitling the buyer to recover payments made.
Special Damages — Strict Proof Required
Special damages must be specially pleaded and strictly proved. While documentary evidence is not required in all cases, there must be some credible evidence establishing the quantum claimed. Claims for destruction costs and demurrage charges will be dismissed where no evidence beyond unsubstantiated demands is adduced.

Legislation cited (2)

Cases cited (2)

  • Spencer v Harding (1870) LR 5 CP 561
  • Kyambadde v Mpigi District Administration [1983] HCB 44

Full judgment

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

National Medical Stores v Karnag International Ltd (HCT-00-CC-CS 347 of 2002) [2012] UGCommC 36 (30 April 2012)
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.