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Court of AppealDismissedCivil Appeal 166 of 2005

Kilimani Junior Academy Ltd v Mildred Machanga T/A Learn IT [2013] KECA 354 (KLR)

Court of Appeal of Kenya
12 April 2013
PKP. Kihara KariukiJMJ. W. MweraFSF. Sichale
1,901 words in judgment
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The bottom line

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Kenya's Court of Appeal confirmed that rejecting reasonable solutions to a problem can amount to breach of contract, forcing the school to pay the full agreed sum.

What this practically means

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Executive summary

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The Court of Appeal at Nairobi (Kihara Kariuki, Mwera and Sichale, JJA) delivered a single unanimous judgment dismissing this appeal against a High Court decision (Mugo, J, 27 May 2005) awarding the respondent Kshs.3 million plus interest and costs for breach of contract. The parties had a three-year agreement under which the respondent was to install and maintain 12 computers at the appellant's school for Kshs.400,000 per term, terminable summarily on payment default. After full payment for the first term, the appellant stopped payment of a second-term cheque and, citing nationwide power rationing, purported to suspend the contract and ordered removal of the computers. The respondent offered alternative power sources (generator, solar, inverters) at her own cost and adjusted lesson schedules, but the appellant rejected these and repudiated the agreement. The Court upheld the trial judge's findings on all 12 grounds: electricity availability was neither a fundamental nor implied term; the force majeure defence failed because alternative sources were available; the power shortage did not frustrate the contract; and the appellant's refusal of the respondent's proposals was unreasonable, indicating a pretext to terminate. On quantum, the Court held the respondent entitled, under clause 15, to the whole contract sum as liquidated damages, declining to re-write the contract and rejecting the unjust enrichment argument. The appeal was dismissed with costs, affirming the judgment and decree below.

Questions the Court framed

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

  1. 1.Whether the availability of electric power was a fundamental or implied term of the agreement
  2. 2.Whether the appellant was precluded from raising force majeure as a defence where the agreement made no provision for it
  3. 3.Whether the power rationing frustrated the contract
  4. 4.Whether computer lessons could have been accommodated within the rationing schedule
  5. 5.Whether the appellant's refusal of alternative power sources was unreasonable
  6. 6.Whether the respondent was entitled to the whole contract sum as liquidated damages upon repudiation, and whether the award was excessive or amounted to unjust enrichment

Key legal issues

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01

Whether availability of electricity was a fundamental or implied term

Holding

It was neither a fundamental term nor an implied term, since alternative power sources were available and the respondent was ready, able and willing to provide them at her own expense.

Reasoning

The court examined the agreement and found no restriction on the source of power. The respondent had offered generators, solar systems and inverters at her own cost, and her teacher had adjusted lesson schedules to the rationing regime. Because performance remained possible through alternatives, availability of mains electricity could not be treated as fundamental or implied.

p. 2
02

Whether force majeure/frustration excused the appellant

Holding

The force majeure defence could not prevail on the evidence, and the power shortage did not frustrate the contract.

Reasoning

The court accepted the definition of force majeure as an unforeseeable cause excusing performance, but found that the defence failed on the facts: credible evidence showed alternative power sources could have kept the computer classes running. The appellant had dismissed the respondent's proposals out of hand even though it had nothing to lose, showing it had simply decided to terminate.

p. 2
03

Whether the liquidated damages award of Kshs.3 million was proper

Holding

The award was the exact amount payable as liquidated damages under clause 15, and the unjust enrichment argument was rejected.

Reasoning

Clause 15 of the agreement provided for liquidated damages equal to the whole contract sum upon repudiation. The court held it could not re-write the contract, and that the appellant, having rejected all efforts to keep the agreement alive, could not complain that no services were rendered or that the respondent was unjustly enriched.

p. 3

Legal principles established

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  • Frustration will not be found where the contract does not restrict the source of performance and the affected party was offered feasible alternatives that it unreasonably rejected; a party who declines cooperation cannot rely on the impossibility it created.
  • Upon repudiatory breach, the innocent party is entitled to recover the whole contract sum as liquidated damages where that is provided for in the agreement, and courts will not re-write the parties' bargain.

Court orders

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  1. 1.The appeal is dismissed with costs

The bench

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

PK
majority
JM
majority
FS
majority
On appeal from
High Court of Kenya at Nairobi
H.C.C.C. No. 2126 of 2000
Jurisdiction invoked
First appellate jurisdiction under the former Constitution/seniority of the Court of Appeal over High Court decisions (not expressly stated in the judgment)

Relief refused

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All 12 grounds of appeal challenging liability, frustration, force majeure and quantum

No substance in any ground; the trial judge made no misdirection and the contract sum was payable as liquidated damages under clause 15

p. 3

Costs

The appeal is dismissed with costs (costs to the respondent)

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.

the agreement did not restrict the sourcing of power to the Kenya Power & Lighting Co. Ltd. The respondent in order to overcome the difficulty which had arisen offered alternative sources of power which the appellant peremptorily rejected.
p. 2Frustration and force majeure
the appellant's refusal to allow the respondent to install a generator or solar panels to run the computers was unreasonable
p. 3Reasonableness of refusal of mitigation
the respondent was entitled to recover as liquidated damages the whole of the contract sum which the respondent would have earned had the appellant not repudiated the agreement.
p. 3Liquidated damages on repudiation
Accordingly, and for the reasons we have given, this appeal must fail and it is hereby dismissed with costs.
p. 3Final orders - disposition

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (4)

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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, "Kilimani Junior Academy Ltd v Mildred Machanga T/A Learn IT [2013] KECA 354 (KLR)", Case Analysis (2013). Civil Appeal 166 of 2005. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2013/354/eng@2013-04-12

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