Wakilii

Nsereko and Another v Kanjeyo and Another (HCCS 702 of 2021)

High Court · [2023] UGHCLD 350 · 2023 Judgment for Defendant AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for breach of contract of sale of land and specific performance
Decision
Contract of sale frustrated and terminated; plaintiffs to refund purchase monies paid and retain land

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

Held that the contract of sale was frustrated by the COVID-19 pandemic and subsequent national lockdown which made it impossible for the defendants to make the scheduled payment of UGX 40 million by 27 March 2020. The contract terminated on 27 March 2020 due to frustration. Under sections 66(1) and (2) of the Contracts Act, sums paid after termination were void and the initial deposit was recoverable. The plaintiffs were ordered to refund UGX 52 million to the defendants and retain the land. Each party to bear their own costs.

Outcome

Contract of sale frustrated and terminated; plaintiffs to refund purchase monies paid and retain land

Facts

The plaintiffs, registered proprietors of land in Kyaddondo Block 250 Plot 284 at Bunga Hill, sold the land to the defendants on 13 March 2020 for UGX 100 million. The defendants paid UGX 10 million as deposit. The contract required payment of UGX 40 million by 27 March 2020 and the final UGX 50 million upon the plaintiffs clearing the land for vacant possession by 15 April 2020. The defendants did not pay the UGX 40 million by 27 March 2020. On 18 March 2020, Uganda entered a COVID-19 lockdown restricting movement. The defendants later paid UGX 15 million on 15 June 2020 and UGX 27 million on 3 March 2021, totalling UGX 52 million paid. The plaintiffs sued for breach of contract and specific performance. The defendants pleaded frustration of contract due to COVID-19 and lockdown preventing timely payment.

Issues

  1. Whether the defendants were in breach of contract of sale of land.
  2. Whether defendants committed any acts of fraud.
  3. What are the remedies available?

Orders

  • The plaintiffs should pay a sum of UGX 52 million to the defendants being a refund of the purchase price for land comprised in Kyaddondo Block 250 Plot 284 at Bunga Hill.
  • Each party shall meet their costs for this suit.

Rules and key headnotes

Frustration of Contract — COVID-19 Pandemic and Lockdown
A contract may be frustrated when an unforeseen event occurs after formation that makes performance impossible, unlawful, or radically different from what was undertaken. The outbreak of COVID-19 and subsequent national lockdown constituted an unforeseen event that frustrated a land sale contract where the lockdown prevented the purchaser from physically accessing banks to make the scheduled payment by the agreed date.
Frustration — Burden of Proof and Self-Induced Frustration
The burden of proving frustration rests on the party alleging it. Once frustration is established, the onus shifts to the other party to prove the frustration was self-induced. An event relied upon to invoke frustration must not be self-induced.
Effect of Frustration — Automatic Termination
Where a contract is frustrated, it automatically terminates, releasing the parties from future obligations. Frustration discharges the contract as to the future but does not rescind it ab initio. Where a contract becomes impossible to perform or is frustrated and a party cannot show the other assumed the risk of impossibility, the parties are discharged from further performance under section 66(1) of the Contracts Act 2010.
Recovery of Payments After Frustration
Under section 66(2) of the Contracts Act 2010, any sum paid before the time the parties are discharged under subsection (1) is recoverable as money received for use, and any sum payable ceases to be payable. Payments made after a contract has terminated due to frustration are void and of no legal consequence, particularly where made without consulting or obtaining consent from the other party.
Fraud — Mistaken Belief in Ownership Rights
An act does not constitute fraud where the party acts under an honest but mistaken belief in their rights. A purchaser who writes to tenants introducing themselves as the new landlord after making substantial payments, though annoying to the vendor, does not act fraudulently where they hold an honest but mistaken belief that they have acquired an equitable interest in the property.

Legislation cited (5)

Cases cited (6)

  • Ronald Kasibante v Shell Uganda Ltd (HCCS No. 542 of 2006)
  • Davis Contractors Ltd v Fareham Urban District Council [1956] 1 All ER 145
  • Monday Eliab v Attorney General (Civil Appeal No. 16 of 2010)
  • Fredrick Zaabwe v Orient Bank Ltd and 5 Others (Civil Appeal No. 4 of 2006)
  • Kampala Bottlers Ltd v Domanico (U) Ltd (SCCA No. 22 of 1992)
  • Hirji Mulji Cheong Yue Steam ship Co. Ltd, 74926 AC 497

Full judgment

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

Nsereko_and_Another_v_Kanjeyo_and_Another_(HCCS_702_of_2021)_[2023]_UGHCLD_350_(27_October_2023)
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.