Ben Kavuya & 2 Others v Wakanyira David George, SCCA No 31/2021 [2024] UGSC 13 (judgment delivered on June 18, 2024)
Background to the case
Attention!
Save for exceptional circumstances, the terms of a written contract cannot be varied by terms orally agreed upon by parties.
The respondent to this appeal filed Civil Suit No. 36/2010 in the High Court against the appellants claiming mesne profits, rent and recovery of immovable property following his eviction by the appellant from property described as Block 236 Plot 2062 Kyadondo and Plot 17 Bunyonyi Lane. This case was premised on a sum of money that the respondent had borrowed from the 2nd appellant. It is the respondent’s case that the sum of money borrowed was to the tune of UGX 170,000,000/= payable in instalments for a period of six months at an interest rate of 10% per month. The respondent and 2nd appellant executed an agreement of sale of land, and the respondent issued a power of attorney. In addition, the respondent signed further security for the amount that he had borrowed. The respondent’s case against the appellants was premised on the eviction of the respondent, upon his default in paying the money borrowed from the two properties that had been pledged by the respondent as security. He contended that the eviction was unlawful because the money lent to him amounted to a loan and did not result in a sale of the property.
The respondent further contended that the subsequent sale of the properties to the 3rd appellant was mala fide because the 2nd appellant had not passed good title to the 3rd respondent. It was the appellant’s case that the transaction between the parties conclusively resulted in a sale of the property by the appellants in the event of default by the respondent.
Judgment of the High Court
In dismissing Civil Suit No. 36/2010, the High Court held that the transaction between the respondent and the second appellant was a sale and not a loan transaction. The ratio decidendi for this was that the loan agreement that the respondent sought to rely upon was never presented in evidence and that further, the terms of the sale agreement between the parties together with the transfer forms and power of attorney which were presented as evidence pointed to a sale of the properties in issue. Being dissatisfied with this ruling, the respondent appealed to the Court of Appeal.
Judgment of the Court of Appeal
The Court of Appeal set aside the decision of the High Court and ruled that the transaction between the parties amounted to a loan transaction and not a sale transaction. The Court’s finding was premised on extrinsic factors one of which was the loan agreement whose terms the respondent heavily relied on despite having never presenting it as part of his evidence. The Court of Appeal further stated that the sale agreement, the signed transfer forms and powers of attorney were meant to act as security for a loan as advanced by the 2nd appellant to the respondent. Being dissatisfied, the appellants (who were the respondents in the Court of Appeal) appealed to the Supreme Court.
Judgment of the Supreme Court
The Supreme Court granted the appeal (overturned the Court of Appeal’s decision), and upheld the decision of the High Court that determined the transaction qualified as a sale agreement rather than a loan. The ruling of the Supreme Court was based on the following:
- That the sale agreement between the parties did not make any mention of the transaction being a loan.
- That the loan agreement relied upon by the respondent was never presented in evidence.
- That s. 91 of the Uganda Evidence Act prohibits the reliance on oral evidence in circumstances where terms between parties have been reduced into writing.
- That none of the exceptions for relying on oral evidence even where there is documentary evidence as contained in s. 92 of the Evidence Act are applicable in the instant case.
- That once parties to a contract append their signature to a contract, then they are estopped from adducing oral terms contrary to the terms of the signed contract.
That it followed the Court of Appeal erred in relying on the loan agreement and yet a written document signed by both parties and with conflicting terms had been presented as evidence.
Effects of the Supreme Court judgement
The Supreme Court has buttressed the position that parties are bound by terms of a business relationship as reduced in writing and fully executed by both parties. The Supreme Court further clearly explained the seldom referred to type of estoppel which is “estoppel by agreement”. The only exception to terms contained in a written and signed contract is where there are vitiating circumstances to the contrary falling within the exceptions of s. 92 of the Evidence Act. These include fraud, oral agreement that provide guidance on the terms of a written document in instances where a written document is silent on a particular issue and usage or customs that provide guidance in as far as they are not repugnant to the express terms of the contract.
Concluding observations
In as much as the Contracts Act (Cap 284, 7th revised Laws 2024) provides for the admissibility of oral contracts, parties to a contract should take cognizance of the fact that once the terms of their deliberations are reduced into writing, then in the absence of clearly explicit intentions to the contrary that fall within the four corners of one of the exceptions in s. 92 of the Evidence Act (Cap 8, 7th revised Laws 2024), the terms of the written contract take precedence. The parties should therefore ensure to reduce in writing, all terms as orally agreed upon. This shall cushion them from future disputes arising from unwritten expectations.
Apolo Vivian Consolate
Legal Trainee
