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Case Brief · caselaw.co.ke
High CourtPartially Allowed· [2020] KEHC 1350 (KLR)

Star Flowers International BV, Star Flowers (K) Ltd & Another v Mohammed Hassanali Abdulla & Another

High Court of Kenya
26 November 2020
5,555 words in judgment
View original judgment Watch case
AI-assisted case brief
·~22 min to read original · ~4 min brief

The bottom line

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Your actions, not just your signature, can create a legally binding contract in Kenya.

What this practically means

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Executive summary

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The plaintiffs, shareholders and the company itself (Star Flowers entities), sued the defendants, Mohammed Hassanali Abdulla and his son, over a failed sale of 100% of the shares in Star Flowers (K) Ltd at an agreed price of 2.1 million Euros, of which 1.6 million Euros was to settle creditors and 500,000 Euros paid to the sellers. Negotiations proceeded through a Memorandum of Understanding; a deposit of 165,000 Euros was held in escrow by the vendors' advocates, but the formal sale agreement was never signed, the completion date of 30 September 2008 passed, and the deposit was later refunded on demand. The plaintiffs alleged the defendants took over the farm, removed plastic sheeting, uprooted plants, installed new software and diverted marketing, and claimed damages of 500,000 Euros, a declaration of breach, restitution and accounts. The defendants denied any enforceable contract, asserting the MOU was subject to contract and due diligence, and counterclaimed for 378,629.38 Euros paid to suppliers, the landlord and for operations in good faith. The court framed four issues and held that although the agreement was unsigned, the defendants' conduct - paying suppliers and the landlord and marketing flowers before and after the completion date - showed willingness to proceed, estopping them from reneging and constituting breach. However, the plaintiffs were denied damages because they contributed to the delay and benefited from the defendants' funding. The counterclaim succeeded in full. Judgment was entered for the defendants for 378,629.38 Euros with interest from the date of judgment, and each party was ordered to bear its own costs.

Key legal issues

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01

Whether an enforceable contract existed despite the unsigned sale agreement

Holding

Yes - the defendants' conduct in making payments before and after the completion date, paying the landlord, marketing flowers and installing software demonstrated intention to proceed; they were estopped from reneging and were in breach

Reasoning

The MOU set negotiations in motion and the sale agreement was never signed. However, the defendants admitted making payments before and after the 30 September 2008 completion date, paid the landlord, organised overseas marketing through Lake Flowers, and installed software. The court found such conduct inconsistent with a claim that the transaction had lapsed for delay, and held the defendants estopped from reneging and in breach of the contract.

p. 6
02

Whether plaintiffs were entitled to damages for breach of contract

Holding

No - plaintiffs did not come to court with clean hands as they contributed to the delay and benefited from the defendants' funding of the farm

Reasoning

The court found the plaintiffs failed to comply with set timelines and delayed availing audited accounts, contributing to doubt about the company's soundness. The defendants' injection of funds boosted production and helped resolve the farm's financial challenges, enabling its later sale. The plaintiffs therefore benefited from the defendants' contributions and were denied damages.

p. 6
03

Whether defendants were entitled to reimbursement under the counterclaim

Holding

Yes - judgment for Euro 378,629.38, as the payments to suppliers and the landlord assisted the plaintiffs to continue running the farm and the plaintiffs did not show the payments benefited the defendants

Reasoning

The court accepted as undisputed that the defendants injected funds into the flower farm and paid debts totalling Euro 378,629.38, which PW2 confirmed. The payments to suppliers enabled the plaintiffs to keep running the farm, and the plaintiffs failed to demonstrate that those payments benefited the defendants. Reimbursement of all monies paid to keep the plaintiffs' farm running was therefore ordered.

p. 6

Legal principles established

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  • An agreement need not be in writing or any special form unless statute expressly provides; a binding contract may be formed where consideration is present and acceptance has been offered
  • A contract may be accepted by the conduct of a party (Brodgen principle)
  • A party whose conduct demonstrates willingness to proceed with a transaction despite the completion date passing is estopped from reneging on the transaction

Court orders

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  1. 1.Plaintiffs' claim for damages for breach of contract against the defendants dismissed
  2. 2.Defendants' counterclaim allowed; judgment entered for the defendants for a sum of 378,629.38 Euros
  3. 3.Interest on the judgment sum from the date of judgment till payment in full
  4. 4.Each party to bear own costs

Authorities

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Legislation

  • Law of Contract ActSection 3(1)

Cases cited (5)

  • Charles Mwirigi Miriti Vs Thananga Tea Growers Sacco Ltd & Another
    [2014] eKLR

    Essential requirements of a valid contract: offer, acceptance and consideration

  • Karmali Tarmohammed & Another Vs I.H Lakham & Company
    [1958] EA 567

    Offer and acceptance supported with consideration equate to a contract

  • Mamta Peeush Mahajan [Suing on behalf of the estate of the late Peeush Premlal Mahajan] Vs Yashwant Kumari Mahajan
    [2017]

    A contract is formed where parties agree on all essential terms; intention to create legal obligations and consideration are the legal minimum

  • National Bank of Kenya Ltd v Pipe Plastic Samkolit (K) Ltd & Another
    [2002] EA 503

    The court will not re-write the contract for the parties

  • Brodgen v Metropolitan Railway Company
    [1876-77] L.R 2 App Cas 666

    A contract can be accepted by the conduct of a party

Jurisdiction invoked
Original civil jurisdiction of the High Court (contract/counterclaim suit by plaint)

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, "Star Flowers International BV, Star Flowers (K) Ltd & Another v Mohammed Hassanali Abdulla & Another", Case Analysis (2020). . Source: 

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