Wakilii

Uganda Baati Limited v National Insurance Corporation (Civil Appeal 13 of 1998)

Court of Appeal · [1999] UGCA 55 · 1999 Appeal Dismissed AI-generated summary ↓ Download Pin to watchlist Add to matter
Jurisdiction
Uganda
Case Type
Civil appeal from a High Court judgment dismissing a claim for payment under a security guarantee bond
Decision
Appeal dismissed; High Court judgment dismissing the claim upheld with costs to the respondent

Observed later treatment

No later-treatment classification is recorded for this judgment.

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Holding

The Court of Appeal dismissed the appeal, upholding the High Court's refusal to enforce a security guarantee bond. The court held that the appellant's demand for payment, made some 17 days after expiry of the agreed 30-day period, was not made 'immediately' as required by the bond. The court further held that, by agreeing with the principal debtor to extend the payment period by seven days without the surety's knowledge or consent, the appellant discharged the respondent surety from its obligation, applying the established common law principle that a surety is released where the creditor varies the contract without the surety's consent. The trial judge's admission of Exhibit D1 under section 153 of the Evidence Act was upheld.

Outcome

Appeal dismissed; High Court judgment dismissing the claim upheld with costs to the respondent

Facts

On 18 November 1994 Uganda Baati Ltd and National Insurance Corporation entered into a Security Guarantee Bond under which the Corporation undertook to pay up to Shs.43,150,000 on behalf of M/s Najjuma Capidev Ltd in case of default, in consideration of Uganda Baati releasing galvanised iron sheets of that value to Najjuma. The bond required that claims be sent to and received by the guarantor immediately after expiry of 30 days from receipt of the goods. The last consignment was delivered on 29 November 1994; the earliest demand should have been made by 30 December 1994. Najjuma failed to pay. On 2 January 1995 Najjuma requested an extension of time for payment, which the appellant accepted, extending the time by seven days. The appellant did not demand payment from the respondent until 17 January 1995. The respondent declined to pay, asserting that no immediate demand was made and that the appellant had varied the contract by granting Najjuma an extension without the respondent's consent.

Issues

  1. Whether the trial judge was correct to hold that the appellant failed to demand payment immediately after the expiry of 30 days as agreed in the security guarantee bond.
  2. Whether the trial judge was correct to hold that the appellant agreed to vary the terms of the security guarantee in favour of M/s Najjuma by extending the payment date without the respondent's consent.
  3. Whether the trial judge properly admitted Exhibit D1 under section 153 of the Evidence Act after having earlier rejected it twice.

Orders

  • Appeal dismissed.
  • Judgment and order of the trial judge upheld.
  • Costs of the appeal and of the court below awarded to the respondent.

Rules and key headnotes

Contract Law — Guarantees and Suretyship — Discharge of Surety by Variation Without Consent
A surety is discharged where the creditor deals with the principal debtor in a manner at variance with the guaranteed contract, including by granting the principal an extension of time for payment, without the surety's knowledge or consent, even if the surety may not be injured by the variation.
Contract Law — Construction of Contracts — Meaning of 'Immediately'
Where a contract requires an act to be done 'immediately', the act must be done with reasonable promptness having regard to all the circumstances, imposing a more stringent requirement than mere reasonable time, and a party that chooses to ignore its contractual obligation does so at its own peril.
Evidence — Powers of the Court — Admission of Documents Under Section 153 of the Evidence Act
Under section 153 of the Evidence Act, a judge may at any time, to discover or obtain proper proof of relevant facts, order the production of any document; this power is wide and is not ousted by the court's earlier rejection of the same document, provided the parties are given an opportunity to address the court.
Civil Procedure — Pleadings — No Requirement for Defendant to List Documents With the Written Statement of Defence
There is no rule requiring a defendant to annex a list of documents he intends to rely on in his defence to the written statement of defence; Order 7 rule 14(2) of the Civil Procedure Rules applies only to a plaintiff.

Legislation cited (2)

Cases cited (4)

  • Ward v National Bank of New Zealand Ltd (1883) 8 App Cas 755
  • SAMUEL V HOWORTH
  • Harilal and Co. and Another - t andar [1957] EA 512
  • R vs Francis [1735] LEE Tenp: HAR P 113

Full judgment

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

Uganda Baati Limited v National Insurance Corporation (Civil Appeal 13 of 1998) [1999] UGCA 55 (11 January 1999)
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.