Kenya Breweries Limited v Kiambu General Transport Agency Limited
The bottom line
#Kenya's Court of Appeal threw out a Kshs 241 million award against Kenya Breweries, ruling an informal letter could not vary a written distribution contract.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the letter of 17th October 1980 (Exhibit 4) was admissible and, if so, whether it varied the 1980 distribution agreement by fixing a ten-year notice period for termination
- 2.Whether the Hobson letter bound the appellant, given it was written on East African Breweries Ltd letterhead by its Managing Director
- 3.Whether the ten-year notice could amend the written letters of appointment of 12th June 1980 and 8th July 1996
- 4.Whether the respondent's execution of the 1996 agreement created estoppel, waiver or acquiescence
- 5.Whether the 1996 agreement was procured by undue influence
- 6.Whether the damages awarded (winding-up costs, loss of profits, general damages) were properly assessed and legally sustainable
Key legal issues
#Whether the Hobson letter of 17 October 1980 varied the distribution agreement to provide a ten-year notice period
By majority, it did not. The letter was written on East African Breweries Ltd letterhead by its Managing Director, not for the appellant; it lacked consideration, was a mere voluntary indulgence, and was superseded by the 1996 agreement.
Gicheru JA held the letter had no bearing on exhibit 3 and looked towards exhibit 2, which had been abrogated; the undertaking to perform satisfactorily was already required by clause 18(b)(v) and so constituted no consideration. Akiwumi JA held Hobson could not legally bind the appellant and that no clear and unambiguous intention to replace the 12-month and 90-day notice periods was shown.
Whether a written contract can be amended by an implied stipulation
No - only where the stipulation is mutually intended and necessary to give business efficacy to the contract, following Mburu Matiri & Sons v Nithi Timber Co-operative Society Ltd.
Akiwumi JA applied the Court of Appeal's earlier unanimous holding: the ten-year notice, even if granted, could not apply to future letters of appointment and would undermine rather than give efficacy to the agreements allegedly breached.
Whether the 1996 agreement was procured by undue influence
By majority, no. Karume, an astute businessman, did not establish that Wanjama's assurances induced him to sign; the burden lay on the respondent to prove its case.
Akiwumi JA found Karume's evidence vague and evasive, noted he had astutely obtained a written assurance from Hobson in 1980 but asked for none from Wanjama, and held the trial judge misapprehended the evidence on this issue.
Assessment of damages for wrongful termination of a distribution agreement
The loss-of-profits award failed for want of proof; general damages do not lie for breach of contract. Lakha JA would have retained only the winding-up costs of Kshs 70,962,296.90 with interest.
The expert's ten-year forecast ignored mitigation, discounting for early receipt, and commercial risk. The majority agreed with the appellant's 98th ground that the entire award of Kshs 241,586,711.58 lacked factual and legal basis.
Legal principles established
#- A variation of an existing contract must itself possess the characteristics of a valid contract, including agreement (ad idem) and consideration; a nudum pactum gives no cause of action.
- A written contract cannot be amended by an implied stipulation unless mutually intended and necessary to give business efficacy to the contract.
- An appellate court will not lightly interfere with findings of fact, especially those founded on the trial judge's assessment of witness credibility.
- A party bears the burden of proving its claim for damages as pleaded; particulars alone are insufficient.
- Special defences such as waiver, acquiescence or estoppel not pleaded, urged or relied on in the superior court are not open to a party on appeal.
Court orders
#- 1.Appeal allowed
- 2.Judgment and decree of the superior court (Aluoch J dated 27th October 1999) set aside
- 3.Costs of the appeal and of the trial in the superior court awarded to the appellant
The bench
#Judges wrote separately. A dissent does not bind; a concurrence may narrow the ratio.
Wrote the judgment
Held the Hobson letter of 17 October 1980 had no bearing on the 1980 appointment (exhibit 3); it lacked consideration and was a mere voluntary indulgence, and it was superseded by the 1996 agreement. Would allow the appeal and set aside the judgment and decree.
Consequently, I would allow the appellant’s appeal, set aside the judgment and decree of the superior court and award the costs of this appeal and of the trial in the superior court to the appellant.p. 15
Wrote the judgment
Held Hobson, writing for East African Breweries Ltd, could not bind the appellant; the ten-year notice could not amend the written appointments absent mutual intention and business efficacy; undue influence was not established; allowed the appeal and set aside the judgment with costs.
I agree entirely with this ground and allow the appeal and set aside the judgment of the learned judge. The appellant will have its costs of this appeal and in the High Court.p. 12
Wrote the judgment
Would have admitted the Hobson letter, held the assurance binding as an estoppel, and found the ten-year notice varied the agreement; but would have disallowed loss-of-profits damages for failure to mitigate/discount and set aside general damages, substituting winding-up costs only.
It is for these reasons that I am reluctantly compelled to propose to allow the appeal to the extent of deleting paragraph 3 of the decree appealed against and substituting therefore the following:p. 5
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.S. No. 1567 of 1997
- Jurisdiction invoked
- First appeal to the Court of Appeal from the judgment and decree of the High Court (superior court)
Relief refused
#Respondent's claim for loss of profits (Kshs 169,624,414.68)
Even in the dissent, the expert forecast ignored mitigation, discounting and business risk and bore no relation to reality; the majority found the whole award lacked factual and legal basis
General damages of Kshs one million for breach of contract
General damages cannot lie for breach of contract
Claim based on undue influence
Karume's own evidence did not establish undue influence; the trial judge misapprehended the evidence
Alternative claim for loss of commission
Neither pleaded nor urged at trial and no decision was made on it
Costs
The appellant will have its costs of this appeal and in the High Court (per the majority of Gicheru and Akiwumi JJ.A). Lakha JA dissenting would have ordered each party to bear its own costs of the appeal.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
Consequently, I would allow the appellant’s appeal, set aside the judgment and decree of the superior court and award the costs of this appeal and of the trial in the superior court to the appellant. As Akiwumi, JA agrees, there will be a majority judgment of the court in these terms.
I agree entirely with this ground and allow the appeal and set aside the judgment of the learned judge. The appellant will have its costs of this appeal and in the High Court.
A variation of an existing contract involves an alteration as a matter of contract of the contractual relations between the parties. Hence, the agreement for variation must itself possess the characteristics of a valid contract.
no stipulation can be implied in a written contract unless it can be said to be mutually intended and necessary to give business efficacy to the contract
Without reliance on it, that judgment would tumble down like a house of cards.
Plaintiffs must understand that if they bring actions for damages it is for them to prove damage, it is not enough to write down particulars and, so to speak throw them at the head of the Court
None of these special defences was pleaded, urged or relied on in the superior court and are therefore not open to the defendant before this Court.
Issues in the judgment
#Loss-of-profits figure appears inconsistently as Kshs 169,624,414.68 and Kshs 169,634,414.68
Conclusions numbering jumps from '(1) Liability' to '(3) Caveat' with no '(2)'
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
Cite this brief
#Cite this brief
Caselaw, "Kenya Breweries Limited v Kiambu General Transport Agency Limited", Case Analysis (2000). Civil Appeal No. 9 of 2000. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2000/417/eng@2000-08-11
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.