Swanya Limited & 2 others v Homebay Property Limited (Environment & Land Case E250 of 2021) [2024] KEELC 4121 (KLR)
The bottom line
#A Kenyan court ruled a signed letter of offer counts as a binding property sale contract, and ordered the developer to transfer the apartments once buyers pay the balance.
What this practically means
#Executive summary
#Key legal issues
#Existence of a binding contract notwithstanding non-execution of a formal sale agreement
The letter of offer dated 6th April 2020 constituted a binding contract; it would cease to bind only upon execution of a formal sale agreement, which never occurred, and the writing satisfies Section 3(3) of the Law of Contract Act
The clause in the letter of offer provided it would be superseded by a formal agreement 'until then the terms of this letter are binding when both parties have signed it'. Adopting the reasoning in Branca v Cobarro, the word 'until' is not words of condition; the document bound the parties in the interim. DW1 admitted the letter remained binding, and no sale agreement was executed. The Defendant's subsequent conduct - retaining deposits, joint snag inspection, and the 21st March 2022 letter - confirmed the existence of the contract, engaging estoppel and waiver.
Whether the contract was breached and by whom
The contract remains in existence and binding; neither party effectively terminated it. The Defendant's alleged termination notices were not proved, as PW1 denied receiving them and the Defendant produced no termination notice among its 12 exhibits
The letter of offer had no termination clause; termination without express clause required reasonable notice, which was not proved. The parties' joint snag inspection of 1st August 2020, the Defendant's letters of 1st September 2020 and 21st March 2022, the Defendant's own statement of defence seeking payment of balances, and DW1's evidence all showed mutual understanding that the contract still subsisted. Each party must therefore perform their respective obligations.
Entitlement to specific performance
Specific performance granted; the Plaintiffs paid over 75% of the purchase price and demonstrated readiness and willingness to complete, and a valid enforceable contract exists
Specific performance is discretionary but founded on a valid enforceable contract. The Plaintiffs paid more than 75% of the agreed purchase price; PW1 confirmed readiness, willingness and ability to complete; and the Defendant's own correspondence showed it too was keen to see the transaction through. Neither the damages alternative nor hardship was shown to displace the remedy.
Ancillary monetary reliefs
Claims for rental income, loss of bargain, repair costs, general and exemplary damages all refused for want of pleading, proof, entitlement or evidential basis
Rental income accrues only to a lawful owner and the Plaintiffs' title remained inchoate; the claim was also unparticularized and supported by a document with no probative value. Loss of bargain had no foundation. The binding 'as-is' clause of the letter of offer barred repair claims and costs of engaging PW2 and PW3. General damages are unavailable in contract, and exemplary damages lacked evidence.
Legal principles established
#- A letter of offer which by its terms is binding until a formal sale agreement is signed constitutes a binding contract, and non-execution of the formal agreement does not invalidate it, provided the writing satisfies Section 3(3) of the Law of Contract Act
- Parties are bound by the terms of their contract and a court cannot rewrite it
- Conduct and representations inconsistent with an asserted position give rise to estoppel and waiver
- Specific performance is discretionary and based on the existence of a valid enforceable contract
- A claim for rental income is special/liquidated damages which must be pleaded, particularized and specifically proved
Court orders
#- 1.An order of specific performance compelling the Defendant to execute the requisite subleases and transfer instrument and transfer the suit apartments to the Plaintiffs
- 2.1st Plaintiff to pay Kes. 2,847,000/= in respect of apartment A21 with interest per the letter of offer dated 6th April 2020 with effect from February 2022
- 3.2nd and 3rd Plaintiffs to pay Kes. 2,297,000/= in respect of apartment B29 with interest per the letter of offer dated 6th April 2020 with effect from February 2022
- 4.Payments to be made within six months from the date of judgment, being a precondition to specific performance
- 5.Plaintiffs to bear costs of preparation of sublease, stamp duty and registration
- 6.In default of payment within six months, the order of specific performance shall automatically lapse
- 7.Upon lapse, Plaintiffs entitled to refund of monies paid less 10% forfeiture per clause 18 of the letter of offer, payable within 30 days of due date
- 8.Any other relief not expressly granted dismissed
- 9.Each party to bear their own costs
- Jurisdiction invoked
- Original civil jurisdiction over a claim for specific performance of a contract for sale of apartments (letter of offer over L.R No. Nairobi/Block 2/421 Kirichwa Road, Nairobi)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Swanya Limited & 2 others v Homebay Property Limited (Environment & Land Case E250 of 2021) [2024] KEELC 4121 (KLR)", Case Analysis (2024). Not stated in the judgment as provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/4121/eng@2024-05-06
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.