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Court of AppealPartially AllowedCivil Appeal No. 290 of 2000

B.A.T. Kenya Limited v MEA Limited [2001] KECA 198 (KLR)

Court of Appeal of Kenya
30 November 2001
RKR.O. KwachASA.B. ShahMKM. Ole Keiwua
2,149 words in judgment
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The bottom line

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Kenya's Court of Appeal threw out a Kshs.16 million currency-fluctuation claim because the signed contract said nothing about exchange rates and the claimant couldn't prove them.

What this practically means

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Executive summary

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B.A.T. Kenya Limited appealed against a High Court decision (Rimita, J, dated 19th January 1999 in H.C.C.C. No. 337 of 1995) which held MEA Limited entitled to Kshs.16,463,491.20 on the basis that a currency fluctuation clause formed an integral part of a fertilizer supply contract. The Court of Appeal, in a single judgment of the court delivered by Kwach, Shah and Ole Keiwua, JJ.A, allowed the appeal. The court held that the fax message of 4th August 1992 was merely a quotation or invitation to treat and was never accepted; the concluded contract was founded on the offer of 8th September 1992 at Shs.604/75 per 50 kg bag ex-factory Nakuru, accepted on 11th September 1992, which contained no fluctuation clause. The appellant had expressly sought a Kenya shilling contract, and the respondent's own finance director conceded in cross-examination that there was no fluctuations clause. The court further held that, even assuming such a clause existed, the respondent failed to prove the exchange rate prevailing on 17th February 1993, the burden being on the party asserting the claim. The authorities relied on by the respondent, including Ghulam Kadir v B.O.E.C., were distinguished. The Court of Appeal set aside the judgment and decree of the High Court, substituted an order dismissing the respondent's suit with costs, and awarded the appellant the costs of the appeal. This decision binds subordinate courts on the treatment of pre-contractual correspondence, invitation to treat, and burden of proof in contract claims.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the contract between the parties incorporated a currency fluctuation clause
  2. 2.Whether the fax message of 4th August 1992 was a binding offer or merely an invitation to treat/quotation
  3. 3.Whether there was evidence of the exchange rate prevailing on 17th February 1993 to support the award

Key legal issues

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01

Whether a currency fluctuation clause formed part of the contract

Holding

It did not; the concluded contract was the accepted offer of 8th September 1992 at a Kenya shilling price, which contained no fluctuation clause

Reasoning

The fax of 4th August 1992 was only a quotation/invitation to treat and was never accepted. The subsequent offer of 8th September 1992 at Shs.604/75 per bag was accepted without any fluctuation term. The appellant had expressly wanted a Kenya shilling contract, and the respondent's own finance director conceded in cross-examination there was no fluctuations clause. The learned Judge erred by importing pre-contractual discussions and intentions into a fully written contract.

p. 4
02

Whether the exchange rate finding of Kshs.61.5764 was supported by evidence

Holding

No; there was no evidence of the exchange rate on 17th February 1993, and the respondent bore the onus of proving it

Reasoning

The respondent's finance director (PW1) did not know the exchange rate on the material date, and although the respondent had the money by 10th February 1993 it did not remit it to its bankers. Even assuming a fluctuation clause existed, the respondent failed to discharge the burden of proving the value of the shilling against the dollar, so the Judge's finding had no evidentiary foundation.

p. 4
03

Distinguishing Ghulam Kadir v B.O.E.C. on fluctuation clauses

Holding

That case was distinguishable because there the contract itself expressly contained the words 'subject to fluctuation', whereas here the appellant kept the clause out ab initio

Reasoning

In Ghulam Kadir the contract contained an express 'subject to fluctuation' term, which the court held introduced no uncertainty. In the present case there was no such express term; the appellant wanted and obtained a Kenya shilling contract. The other exchange-rate authorities (Life Insurance Corporation v Valji; Khaury v Khayat) concerned the applicable date of exchange conversion and did not assist the respondent.

p. 4

Legal principles established

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  • Pre-contractual correspondence is not admissible to vary or add terms to a concluded written contract except to clarify ambiguity; a quotation not accepted does not import its terms into the contract
  • A party alleging entitlement under a contractual term bears the burden of proving it, including proof of the factual basis of the claim

Court orders

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  1. 1.Appeal allowed
  2. 2.Judgment and decree of Rimita, J set aside
  3. 3.Substituted order dismissing the respondent's suit with costs in the High Court
  4. 4.Appellant awarded costs of the appeal

The bench

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One judgment of the whole court — no separate or dissenting opinions.

RK
majority
AS
majority
MK
majority
On appeal from
High Court of Kenya at Nakuru
H.C.C.C. No. 337 of 1995
Jurisdiction invoked
First appeal to the Court of Appeal under the Kenyan appellate framework (statutory appeal from High Court decree); no specific constitutional provision stated in the judgment

Relief refused

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Respondent's claim for Kshs.16,463,491.20 on account of currency fluctuation

No fluctuation clause was incorporated into the concluded contract, and no evidence proved the exchange rate at the material time

p. 4

Costs

The respondent's suit dismissed with costs in the High Court; the appellant to have the costs of the appeal.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

It is trite that in deciding what was exactly agreed between the parties correspondence prior to the formation of the contract is not to be looked at unless for ascertaining clarification of an ambiguity.
p. 3Pre-contractual correspondence and contract formation
The fax message of 4th August, 1992 was only an invitation to treat but the learned Judge relied on it to spell out a concluded contract.
p. 4Invitation to treat versus offer
It is for a party stating its case to prove it. The onus was on the respondent to show what was the value of the shilling against the dollar on 17th February, 1993.
p. 4Burden of proof
We allow the appeal, set aside the judgment and decree of Rimita, J and substitute therefor an order dismissing the respondent's suit with costs. The appellant will also have the costs of the appeal.
p. 4Final orders/disposition

Issues in the judgment

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minor

Internal inconsistency in the arithmetic of payments: the judgment lists a payment of Shs.4,173,379/75 as made on 27th January, 1992, which predates the contract concluded in September 1992 and appears to be a typographical error for 1993

minor

The judgment refers to a fax message of 4th August, 1992 as the basis of the respondent's claim, but the respondent's letter of 29th March, 1993 cites its fax No. 108/92 dated 4th August, 1992 while the narrative earlier describes the offer correspondence as the letter of 8th September, 1992; the sequence of the 4th August fax in the chronology is not fully set out in the judgment

minor

The exchange rate figure appears variously as Kshs.61.5164 and Kshs.61.5764 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 (8)

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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, "B.A.T. Kenya Limited v MEA Limited [2001] KECA 198 (KLR)", Case Analysis (2001). Civil Appeal No. 290 of 2000. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2001/198/eng@2001-11-30

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