Michira v Gesima Power Mills Ltd [2004] KECA 61 (KLR)

The Court examined the home-made agreement clause by clause. Clause 3(ii) required delivery of vacant possession before payment of Shs 2 million, while clause 6 as read with clause 7 contemplated delivery subject to existing tenancies and delivery of title before the balance was paid. The agreement fixed no time within which the balance of the purchase price was payable and did not secure payment, and counsel for the appellant conceded two alternative periods for vacant possession. Uncertainty on the fundamental payment term infected the entire agreement.

The trial Judge found no meeting of minds and no satisfactory evidence of breach by either party. This Court agreed the agreement was void, and found no evidence that either party endeavoured to perform: the transfer was never prepared, and the appellant's demand letter of 22nd January 1997 demanded Shs 4 million rather than offering or insisting on completion. A void agreement is incapable of enforcement, so neither party could be in breach of it; the Court also declined to decide whether the Shs 4 million was a penalty or liquidated damages.

There was no evidence that either party endeavoured to perform after the agreement of 21st August 1996: the transfer to be prepared by the appellant's advocate was never prepared, and the appellant's demand letter came nearly two months after the contractual completion date. The respondent remained able to complete, selling the land on 13th March 1997 at the same price. From that complete inactivity during the 90-day life of the contract the Court inferred, alternatively, that the parties had abandoned the agreement, mutually rescinding it and discharging each party from performance.

Relying on Shah v Shah, the Court held that the home-made character of the agreement, with contradictory clauses framed in unusual terms, gave it no licence to tamper with the contract. The task is to interpret the sense of what laymen agreed without interpolating technical legal concepts; where the words are clearly expressed and the intention discoverable from the whole agreement, the court must give effect to that intention. Applying that approach, the Court nonetheless found the payment and vacant-possession terms genuinely uncertain.

Clause 7 read with clause 6 envisaged the land being transferred to the appellant before he paid the Shs 9 million balance. Citing Openda v Ahn, the Court stated that payment or tender of the purchase price at the time and place of completion is a condition precedent to specific performance of an agreement for sale of land. The agreement also fixed no time for payment of the balance and did not secure payment, so the fundamental payment term was uncertain and the entire agreement void.

Citing Selle v Associated Motor Boat, the Court reaffirmed that on a first appeal it is not bound by the trial Judge's appreciation of the evidence or his construction of the agreement, subject to the caveat that the Judge saw and heard the witnesses. The Court then undertook its own construction of the agreement and evaluation of the evidence and, while doing so, arrived at the same outcome, holding that the learned Judge had reached the correct decision.