Wakilii

Tanzanite Corporation v Uganda Posts and Telecommunications Corporation Limited and Another (HCCS 710 of 2000)

High Court · [2002] UGHC 149 · 2002 Judgment for Plaintiff (Partial) AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
First instance civil suit for breach of contract and damages
Decision
Plaintiff awarded USD 260,000 with interest but claims for lost profits on 27,000 sets and bank loan guarantee rejected

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The High Court held that no contract existed for the supply of 30,000 telephone sets. The defendant's letter stating capacity to purchase up to 30,000 sets was information on future requirements, not a binding order. Only separate contracts for 10,000, 500, and another 10,000 sets were established. The court rejected the plaintiff's claims for lost profits and bank loan indemnity but awarded USD 260,000 for proven unused materials ordered from Hong Kong suppliers based on the actual standing orders.

Outcome

Plaintiff awarded USD 260,000 with interest but claims for lost profits on 27,000 sets and bank loan guarantee rejected

Facts

Tanzanite Corporation, a US company registered in Uganda, claimed breach of contract against Uganda Posts and Telecommunications Corporation (UPTC) for failure to purchase 30,000 telephone sets. The plaintiff issued a proforma invoice for 10,000 sets at USD 44.75 per set dated 27 September 1994. UPTC responded on 23 December 1994 stating it had capacity to purchase up to 30,000 sets and welcomed the plaintiff as an approved vendor. Both parties signed the proforma invoice for 10,000 sets on 21 January 1995. The plaintiff established a workshop in Kisugu, Kampala, imported raw materials, obtained a bank loan guaranteed by UPTC, and began assembling telephone sets. UPTC took delivery of only 3,000 sets. The plaintiff claimed USD 1,049,755 in damages comprising lost profits on 27,000 sets, unused materials worth USD 260,000, and an unpaid bank loan. The defendants contended that correspondences were mere negotiations, not a binding contract for 30,000 sets, and that telephone sets supplied had technical shortcomings.

Issues

  1. Whether there was a contract between the parties for the supply of 30,000 telephone sets.
  2. Whether the 2nd Defendant breached the contract.
  3. Whether the Plaintiff suffered any damage as a result of the breach.
  4. Whether there was a guarantee of the loan from the Co-operative Bank Ltd to the Plaintiff by the 1st Defendant.
  5. Whether the Plaintiff is entitled to the remedies sought.

Orders

  • Judgment entered in favour of the Plaintiff for USD 260,000.
  • Interest at 8% per annum from date of filing till payment in full.
  • Half the costs of the suit awarded to the Plaintiff.

Rules and key headnotes

Contract Law — Formation of Contract — Offer and Acceptance — Distinction Between Binding Order and Expression of Future Requirements
A letter from a prospective buyer stating that it has capacity to purchase up to a specified quantity and welcoming the supplier as an approved vendor constitutes information on future requirements and an invitation to future dealings, not a binding contract for that quantity, where no acceptance of a specific order for that quantity is executed.
Contract Law — Interpretation of Commercial Correspondence — Response to Inquiry on Demand Market
Where a buyer responds to a supplier's inquiry about demand market by stating its capacity to purchase and likelihood of additional future needs, such statement does not convert into a binding purchase order unless followed by formal acceptance of a specific quantity through execution of contractual documentation.
Contract Law — Guarantee — Elements of Valid Guarantee — Undertaking to Pay Another's Debt Upon Default
A guarantee is a collateral agreement to answer for payment of another's debt or performance of another's obligation if the person liable in the first instance fails to perform. A letter undertaking to pay amounts due to a creditor directly to a bank to satisfy financing does not constitute a guarantee to pay the creditor's loan in event of default by the creditor.
Damages & Quantum — Special Damages — Proof Requirements — Lost Profits
Special damages must be pleaded and strictly proved. A claim for lost profits on undelivered goods fails where the plaintiff adduces no documentary evidence showing the profit margin per unit or how the claimed figure was calculated, and merely states a lump sum without supporting books of account or detailed computation.
Damages & Quantum — Special Damages — Proof of Loss — Unused Materials Ordered From Suppliers
Where a plaintiff claims special damages for unused materials ordered from overseas suppliers in anticipation of fulfilling orders, the claim is proved to the required standard by production of letters from the suppliers confirming that the plaintiff's account has been debited with the specified amount for the materials.
Contract Law — Mitigation of Loss — Duty to Mitigate — Imprudent Expansion in Uncertain Market
A party claiming damages for breach of contract is under a duty to mitigate its loss. It is imprudent for a supplier to establish an entire factory and invest heavily in production when experiencing serious quality problems with an initial batch and receiving complaints from the buyer, particularly where the market is uncertain and dependent on a single customer.
Evidence — Burden of Proof — Special Damages — Necessity of Documentary Proof
It is insufficient for a plaintiff claiming special damages to merely write down particulars and present them to the court without proving them. Documentary evidence such as receipts, invoices, or books of account must be adduced to substantiate the claimed amounts and demonstrate how figures were calculated.

Legislation cited (2)

Cases cited (5)

  • Senyakazana v Attorney General [1984] HCB 48
  • Kibimba Rice Company Ltd v Umar Salim (SCCA No. 7188)
  • DAPCB v Benjamin Anyadra (Civil Appeal No. 8 of 1989)
  • John Nagenda v Sabena Belgian World Airlines (CS No. 1148 of 1988)
  • Bonham v Hyde Park Hotel Ltd 44 T.I.R (1943) 178

Full judgment

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Tanzanite Corporation v Uganda Posts and Telecommunications Corporation Limited and Another (HCCS 710 of 2000) [2002] UGHC 149 (19 December 2002)
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.