Monday, March 17, 2008

KENYA LAW REPORT: Contract for sale of land must be in writing!

Lawyer Monica Achode

Publication Date: 3/17/2008
Pleated Industries (K) Ltd & another vs Allied Industries Limited [2007] eKLR (www.kenyalaw.org)
Court of Appeal at Nairobi, December 20, 2007
P. K. Tunoi, E. O. O’Kubasu & W.S. Deverell JJ A

A group waving title deeds after their land was taken away at Barget Settlement Scheme in Likia. Photo/ FILE
The Court of Appeal last December upheld the decision of High Court that had dismissed a verbal contract for the sale of land between the appellant, Pleated Industries (K) Ltd, and the respondent, Allied Steal Industries Ltd.

Briefly, the case put forward by Pleated Industries (K) Ltd was that by a verbal agreement made in 1986 with Allied Steal Industries Ltd, and evidenced in various correspondences, they agreed on transfer of a parcel on Baba Dogo Road in Ruaraka within Nairobi from Allied Steal Industries Ltd to the plaintiff.

In pursuance of the agreement, Pleated Industries (K) Ltd proceeded to pay the initial deposit of Sh120,000, the amount being 10 per cent of the total purchase price to Allied Steal Industries Ltd who then later refused to transfer the property to the plaintiff. Allied Steal’s attempt to pay back the Sh120,000 to Pleated Industries (K) Ltd through their advocates was repelled as the cheque was returned.

The parties had neither entered into a written agreement with regard to the transaction nor had the plaintiff ever enjoyed vacant possession or any type of possession of the premises.

The High Court found in favour of Allied Steal Industries Ltd that there had neither been written contract for the sale of the property nor had Pleated Industries (K) Ltd taken possession of the land.

It further held that Pleated Industries had failed to prove an enforceable agreement for sale and proceeded to dismiss the suit.

Being aggrieved, Pleated Industries (K) Ltd filed moved to the Court of Appeal.

Part performance

In dealing with the grounds raised by Pleated Industries (K) Ltd, the Court of Appeal noted that the firm had based its claim on an agreement made in 1986 and that they did not allege a written agreement between themselves and Allied Steal Industries Ltd. The appellate court further noted that the plaintiff had not relied on the doctrine of part performance.

The essence of this doctrine was captured under section 3(7) of the Law of Contract. This section set out the two exceptional circumstances under which a verbal contract could be enforced in court. These were; where the intending purchaser had in part performance of the contract taken possession of the property or any part thereof or; where the intending purchaser being already in possession, continued in possession in part performance of the contract and had done some other act in furtherance of the contract.

Allied Steal Industries Ltd on their part denied an agreement of any kind between the two parties had ever been entered into in the first place. They conceded to the fact that there had been some discussions, as evidenced in various correspondence, with regard to the possible sale of the suit property at the price of Sh1,200,000 but maintained that such discussions were preliminary and they had never materialised into an agreement, verbal or otherwise.

In their view, Pleated Industries (K) Ltd had never taken possession of the property at any time before, during or after the negotiations and as a result could not rely on the doctrine of part performance. They were only entitled to a refund from Allied Steal Industries Ltd.

The Court of Appeal, in reaching its decision, examined the line of submissions on the finding by the High Court. The court had considered the fact that Pleated Industries (K) Ltd had made an initial payment of Sh120,000 and that they had been given permission by Allied Steal Industries Ltd to develop the property.

However, this arrangement had been on condition that the plaintiff would sign an agreement drawn up by Allied Steal for the sale of the property which would contain the terms and conditions regarding the purchase and payment of the said property. The court also considered the fact that Pleated Industries (K) Ltd never accepted the agreement as proposed.

The appellate court, in re-evaluating the evidence, noted the High Court’s assessment of the fact that neither of the parties involved had a meeting of the minds. Such mutual comprehension of the facts was essential to a valid contract and it was clear the parties had not even agreed on the terms of the contract.

Various letters

The appellate court agreed with the decision that the various letters of correspondence between the two parties did not constitute an agreement for the sale of the suit property as was alleged by the plaintiff. The parties could not agree on possession either.

The plaintiff refused to pay fifty per cent of the outgoings on the property which was a pre-condition that the defendant had set before allowing vacant possession.

The appellate court further agreed with an earlier ruling stating: “No suit shall be brought upon a contract for the disposition of an interest in land unless the agreement upon which the suit is founded, or some memorandum or note thereof, is in writing and is signed by the party to be charged or by some one authorized by him to sign it.”

The appellate court found no merit in the appeal on any of the grounds brought forward and were satisfied on their own assessment that the High Court had acted on the correct principles of law in reaching its decision.

The grounds argued by the appellant failed and the case was dismissed.

The author of this story is an advocate of the high court.

1 comment:

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