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Tanzanite Corporation v Uganda Telecommunications Corporation Ltd (Civil Appeal No. 44 of 2003)

Court of Appeal · [2004] UGCA 45 · 2004 Appeal Allowed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil appeal from High Court judgment partially dismissing suit for breach of contract, with a cross-appeal by the respondent
Decision
Appeal allowed; respondent ordered to pay general damages, loss of unused materials, unpaid bank loan and loss of profits; cross-appeal dismissed

Observed later treatment

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Holding

The Court of Appeal held that a detailed pro forma invoice signed by both parties, read together with a subsequent confirmatory letter, constituted a binding contract for the supply of 30,000 telephone sets, reversing the trial judge's finding that the correspondence amounted only to negotiations. The respondent breached the contract by refusing delivery; alleged technical faults amounted at most to breach of warranty, for which refusal to accept goods was not a proper remedy under the Sale of Goods Act. The court awarded loss of profits as estimated loss under section 49(2), the unpaid bank loan induced by the respondent, and upheld the award for unused materials. The appeal was allowed and the cross-appeal dismissed.

Outcome

Appeal allowed; respondent ordered to pay general damages, loss of unused materials, unpaid bank loan and loss of profits; cross-appeal dismissed

Facts

Tanzanite Corporation, a Ugandan company, negotiated to supply telephone sets to Uganda Posts and Telecommunications Corporation, whose telecommunication assets were later taken over by the respondent, Uganda Telecommunications Ltd. Tanzanite issued a pro forma invoice on 27 September 1994 offering to supply 10,000 Model TA-101 sets at US$44.75 each. On 23 December 1994 the corporation wrote a letter confirming capacity to purchase up to 30,000 sets under those terms. The pro forma invoice was signed by both parties on 21 January 1995. Relying on this, Tanzanite established a workshop, ordered raw materials from abroad and obtained a bank loan from the Co-operative Bank, which the respondent had induced through a letter of financing support. The respondent took delivery of only about 3,000 sets, later complaining of technical faults, leaving Tanzanite with unsold sets, unused materials and an unpaid loan. Tanzanite sued for breach of contract claiming special and general damages, interest and costs.

Issues

  1. Whether there was a contract between the parties for the supply of 30,000 telephone sets.
  2. Whether the respondent breached the contract.
  3. Whether the appellant suffered damages as a result of the breach.
  4. Whether there was a guarantee of the loan from the Co-operative Bank Ltd.
  5. Whether the appellant was entitled to the remedies sought.

Orders

  • Appeal allowed and cross-appeal dismissed.
  • Respondent to pay Uganda shillings eight million five hundred thousand as general damages for breach of contract.
  • Respondent to pay USD 260,000 for loss of unused materials.
  • Respondent to pay Uganda shillings 108,683,330 as the unpaid bank loan.
  • Respondent to pay USD 722,259 for loss of profits.
  • Costs of the appeal and cross-appeal and the court below to the appellant.
  • Interest on general damages and loss of profits at 8% from the date of judgment till payment in full.

Rules and key headnotes

Contract Law — Formation — Pro Forma Invoice as Binding Contract
Although a pro forma invoice is ordinarily a mere formal offer, where it is detailed in nature and signed by both parties specifying their acceptance to be bound, and is read together with a confirmatory letter referring to it, it constitutes a binding contract of sale.
Contract Law — Offer and Acceptance — Counter Offer
A letter in which a buyer confirms capacity to purchase a specified quantity of goods at the seller's quoted price under the terms of a pro forma invoice constitutes a counter offer that, once accepted, creates a binding contract for that quantity.
Sale of Goods — Breach of Warranty — Remedies
Where goods delivered under a contract of sale have defects amounting to breach of warranty, the buyer is not entitled to reject the goods but may set up the breach in diminution of the price or maintain an action for damages, pursuant to section 52 of the Sale of Goods Act.
Sale of Goods — Damages for Non-Acceptance — Estimated Loss
Where a buyer wrongfully refuses to accept and pay for goods, the measure of damages is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer's breach, under section 49(2) of the Sale of Goods Act, and unchallenged oral evidence of lost profit may establish such estimated loss.
Damages — Remoteness — Loss in Contemplation of Parties
Where a party is induced by the other to obtain bank financing to perform a contract, an unpaid loan resulting from the other party's breach is recoverable as damage within the contemplation of both parties at the time of contracting.
Evidence — Documentary Terms — Parol Evidence and Signed Documents
Where a document containing contractual terms is signed, then in the absence of fraud or misrepresentation the party signing it is bound by its terms, consistent with section 92 of the Evidence Act.
Damages — Special Damages — Pleading and Proof
Special damages must be specifically pleaded and strictly proved; however a trial court must apply the correct measure of damages for sale of goods and cannot reject a proven claim on the erroneous basis that no contract existed.

Legislation cited (5)

Cases cited (5)

  • Timmins Vs. Moreland Street Property Co. Ltd. 1958 Ch. 110
  • Victoria Laundry (Windsor) Ltd. V Newman Industries Ltd. 1949 All E.R 997
  • Benedicto Musisi v Attorney General (Civil Suit No. 622 of 1989)
  • Kibimba Rice Company Ltd v Umar Salluni (Civil Appeal No. 7 of 1998)
  • Bonham Vs Hyde Park Hotel Ltd 44 T.L.R. (1943) 148

Full judgment

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Tanzanite Corporation v Uganda Telecommunications Corporation Ltd (Civil Appeal No. 44 of 2003) [2004] UGCA 45 (5 February 2004)
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.