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ELCDismissedELC Case No. 499 of 2018 (Formerly HCCC No. 499 of 2005)· [2019] KEELC 263 (KLR)

Merlin Management v National Social Security Fund Board of Trustees [2019] KEELC 263 (KLR)

Environment and Land Court
13 December 2019
KBK. Bor
1,727 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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The Environment and Land Court held that ongoing price negotiations are not a binding contract, so the buyer lost its claim to the Karen land and must pay NSSF's costs.

What this practically means

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Executive summary

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The Plaintiff offered on 5/8/2005 to purchase 50 acres near Karen Shopping Centre (L.R. No. 20587) from the Defendant for Kshs. 205,000,000/=. The Defendant responded with conditions requiring a 10% deposit of Kshs. 20,500,000/= on execution of a sale agreement and completion within 12 months, with the balance paid in 12 equal instalments. The Plaintiff sought 18 months to complete and disputed payment by instalments; the Defendant then declined the offer on 19/8/2005. The Plaintiff sued, seeking a declaration that a valid and enforceable contract existed and that the Defendant's later sale of the property to Lancaster Limited on 4/12/2007 was pendente lite, plus general damages and costs. The Defendant denied any contract, asserting the correspondence was a mere negotiation and that it was free to sell to the highest bidder. Both parties led evidence through single witnesses and filed submissions. The court framed one issue: whether the Plaintiff had proved its claim. Applying the contractual elements of offer, acceptance and consideration, the court found the parties were still negotiating the mode of payment; no sale agreement was executed and no deposit paid. Consequently no enforceable contract existed, the doctrine of lis pendens could not assist the Plaintiff, and its claim failed on a balance of probabilities. The suit was dismissed with costs to the Defendant.

Key legal issues

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01

Whether a valid and enforceable contract existed between the Plaintiff and the Defendant for the sale of L.R. No. 20587

Holding

No contract was concluded; the parties were still negotiating the mode of payment, no sale agreement was executed and no deposit was paid

Reasoning

The court examined the correspondence: the Defendant's letter of 16/8/2005 required a 10% deposit within 7 days and payment of the balance in 12 equal instalments; the Plaintiff's reply of 18/8/2005 confirmed completion within 12 months but disputed payment in equal instalments. The Defendant then declined the offer on 19/8/2005. Since no agreement was executed and no payment made, the correspondence only evidenced negotiations, not a concluded contract capable of specific performance.

p. 2
02

Whether the transfer of the Suit Property to Lancaster Limited breached the doctrine of lis pendens

Holding

The doctrine could not avail the Plaintiff as no enforceable contract or right over the property existed

Reasoning

The Plaintiff relied on Section 52 of the Indian Transfer of Property Act, arguing that the sale pendente lite defied the court's authority. However, lis pendens presupposes an existing right in the suit property. Having found that no contract was concluded between the parties, the court held there was nothing capable of enforcement, and the transfer to Lancaster Limited did not defeat any right of the Plaintiff.

p. 2

Legal principles established

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  • A contract for sale of land is not formed where negotiations remain incomplete and no sale agreement is executed; an enforceable contract requires offer, unconditional acceptance and consideration

Court orders

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  1. 1.Suit dismissed
  2. 2.Costs to the Defendant

Authorities

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Legislation

  • Indian Transfer of Property ActSection 52

Cases cited (1)

  • NIC Bank Limited v Victor Ochieng Oloo
    [2018] eKLR

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Merlin Management v National Social Security Fund Board of Trustees [2019] KEELC 263 (KLR)", Case Analysis (2019). ELC Case No. 499 of 2018 (Formerly HCCC No. 499 of 2005). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2019/263/eng@2019-12-13

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