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Court of AppealDismissedCivil Appeal No. 170 of 2013· [2017] KECA 379 (KLR)

Feba Radio (Kenya) Limited t/a Feba Radio v Ikiyu Enterprises Limited [2017] KECA 379 (KLR)

Court of Appeal
28 July 2017
RNR. N. NambuyeDMD. K. MusingaKMK. M'inoti
2,991 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal confirmed that starting construction work under agreed terms creates a binding contract, even if the formal contract is never signed.

What this practically means

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Executive summary

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The Court of Appeal at Nairobi (Nambuye, Musinga and M'inoti, JJ.A.) dismissed this first appeal against the judgment of Khaminwa, J. of 2nd July 2009 in H.C.C.C. No. 640 of 2005 (O.S.), which had directed that a construction-contract dispute be referred to arbitration. The dispute arose from a quotation by Ikiyu Enterprises for alteration and extension works at Feba Radio's premises, accepted by a letter dated 5th June 2000 which stated that the form of contract shall be the 1999 Agreement of the Architectural Association of Kenya and the Joint Building Council, while formal contract documents remained under preparation. Feba Radio terminated the works in September 2000, and Ikiyu gave notice of dispute and proposed arbitrators under Clause 45.1. The appeal argued that no binding contract existed because the 1999 Agreement was never signed and that the judge erred in referring the matter to arbitration. The Court, in a single unanimous judgment, held that although the 1999 Agreement was unsigned, the appellant's letter unambiguously incorporated it, the respondent was expressly permitted to take possession and commence works, and the appellant made payments per an agreed schedule. Adopting Duncan Wallace on building contracts, the Court held that commencement of work where all terms had been agreed is sufficient evidence of acceptance. Following Jiwaji v Jiwaji, an unambiguous agreement must be construed according to its clear words. The Court found a binding contract incorporating the 1999 Agreement and held that disputes ought to have been referred to arbitration as the impugned judgment directed. The appeal was dismissed with costs to the respondent.

Key legal issues

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01

Whether a binding contract arose notwithstanding that the 1999 Agreement was never signed by the parties

Holding

A binding contract existed; the appellant's acceptance letter permitted the respondent to take possession and commence works, payments were made per an agreed schedule, and the contract was intended to be governed by the 1999 Agreement

Reasoning

The appellant's letter of 5th June 2000 accepted the quotation, named the 1999 Agreement as the form of contract, and allowed immediate possession of the site. The respondent commenced and continued work until termination, during which the appellant made several payments per an agreed schedule. Commencement of work where all terms had been agreed, though no formal contract was executed, constitutes sufficient evidence of acceptance of the contract terms.

p. 5
02

Whether the 1999 Agreement was incorporated into the contract between the parties

Holding

The 1999 Agreement was incorporated; the correspondence left no doubt that the contract was intended to be governed by its terms and conditions

Reasoning

Although the 1999 Agreement was not signed, the appellant's letter of 5th June 2000 stated that the form of contract shall be the 1999 Agreement and Conditions of contract for building works. There was no ambiguity in the letter, and an unambiguous agreement must be construed according to its clear words. The respondent also invoked Clause 45.1 by giving notice of dispute and proposing arbitrators, demonstrating the parties were well versed with the Agreement.

p. 6
03

Whether the High Court judge erred in referring the dispute to arbitration under Clause 45 of the 1999 Agreement

Holding

The referral was proper; once a binding contract incorporating the 1999 Agreement existed, disputes ought to have been referred to arbitration under Clause 45

Reasoning

Clause 45.1 provides that any difference arising between the Employer, the Architect or the Contractor shall be notified in writing with a request to submit to arbitration and concur in appointing an arbitrator. The respondent did exactly that by its letter of 26th October 2000 giving notice of dispute and proposing arbitrators. The impugned judgment directing referral to arbitration was therefore correct.

p. 6
04

The appellant's contention that the parties were not well versed with the terms of the 1999 Agreement and did not comply with clauses 1-44

Holding

Rejected; the parties were well versed with the Agreement, and the respondent acted in accordance with Clause 45.1

Reasoning

The Court found the Agreement well known to both parties. The respondent's conduct matched Clause 45.1: it gave written notice of dispute and proposed three arbitrators for the appellant's consideration. The Court could not accept the contention that the parties were unfamiliar with the terms and conditions set out in the 1999 Agreement.

p. 5

Legal principles established

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  • Where a contractor commences work when all terms have been negotiated and agreed upon but no formal acceptance has been recorded, that is sufficient evidence of acceptance of the contract terms
  • An agreement that is not ambiguous must be construed according to the clear words used by the parties, even where no formal agreement has been executed
  • Where parties' correspondence shows their contract was intended to be governed by a named standard-form agreement, that agreement is incorporated into the binding contract though never formally signed

Court orders

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  1. 1.Appeal dismissed with costs to the respondent

Authorities

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Legislation

  • Civil Procedure RulesOrder 36 rule 5
  • Civil Procedure ActSection 3A
  • Evidence ActSections 107 and 108

Cases cited (11)

  • Selle and Another v Associated Motor Boat Company Ltd and Others
    [1968] E.A. 123
  • East African Fine Spinners Ltd and others v Bedi Investment Ltd
    Civil Appeal 72 of 1994
  • Corn Products Kenya Ltd v Eldo City Ltd
    [2014] eKLR
  • Mumias Sugar Company v Freight Forwarders (K) Ltd
    [2005] eKLR 403
  • National Bank of Kenya v Pipelastic Samkolit (K) Ltd & another
    [2001] eKLR
  • Associated Motors Ltd and J.M. Githongo and 2 others
    [1995] eKLR
  • Tiverton Estates v Wearwell Ltd
    [1974] 2 WLR 176
  • Kipkoech Kangogo and other v Board of Governors, Sacho High School and 5 others
    [2015] eKLR
  • Tumaini v Republic
    [1972] E.A 441
  • Brodgen Vs Metropolitan Rly Co
    (1876-77) L.R. 2 APP CAS 66
  • JIWAJI v JIWAJI
    [1968] E.A. 547
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 640 of 2005 (O.S.)
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal procedure (memorandum of appeal dated 25th July, 2013); no specific constitutional or statutory provision stated in the judgment

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (17)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Feba Radio (Kenya) Limited t/a Feba Radio v Ikiyu Enterprises Limited [2017] KECA 379 (KLR)", Case Analysis (2017). Civil Appeal No. 170 of 2013. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2017/379/eng@2017-07-28

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.