Valentino’s Footwear Manufacturers Ltd v Bata Shoe Company Limited [2018] KECA 256 (KLR)
The bottom line
#Kenya's Court of Appeal ruled that a business which fails to fulfil its own contractual obligation cannot blame the other party for the deal collapsing.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.The proper interpretation of clauses 3(a) and 5(a) of the Exclusive Manufacturing Agreement
- 2.Whether clause 5(a) was a condition precedent to the respondent fulfilling its obligation
- 3.Whether the appellant’s expectation to receive sufficient orders and consideration from the respondent was equitable
- 4.Whether the appellant incurred losses as a result of the respondent’s alleged failure in fulfilling its obligations under the agreement
- 5.Whether the appellant proved its case on a balance of probabilities
Key legal issues
#Whether clause 5(a) of the Exclusive Manufacturing Agreement was a condition precedent to the respondent's obligation to purchase the appellant's full output
Yes. Clause 5(a) placed the obligation to apply for and obtain import permits and foreign exchange allocations solely on the appellant, and its failure rendered the entire contract unenforceable; the respondent could not be blamed for failing to supply raw materials or place orders.
The court read clauses 3(a) and 5(a) together. Clause 3(a)'s obligation to purchase the full output was expressly qualified by 'subject as hereinafter provided', making it conditional. The anticipated chronology required the appellant to first obtain the import licence and foreign exchange allocation before financing, importation, storage and supply of raw materials could follow. Having failed to set the ball rolling, the appellant could not shift the blame for non-performance to the respondent.
Whether the appellant could rely on negotiations and the respondent's later letter of 1st December 1988 to found an expectation of sufficient orders
No. The parties were bound by the written contract; the letter was written six months into the contract and could not found the appellant's expectations at the time of contracting.
Applying National Bank Kenya Ltd v Pipeplastic Samkolit, the court held that a court cannot rewrite a contract and, absent pleaded and proved coercion, fraud or undue influence, parties are bound by the written terms. The contract resulted from negotiations condensed into writing, and the assurance letter postdated the contract by six months, so it could not ground the appellant's expectation under clause 3(a).
Whether the appellant proved its claim for loss of revenue and profits of Kshs. 13,392,109.60
No. The tabulated accounts were projections of full-capacity production, not anchored on actual production, and were insufficient to prove the special damages claimed.
The court adopted the reasoning in Five Continents Ltd v Mpata Investments Ltd that an accounts analysis prepared for use in a suit is not a book of account regularly kept in the course of business and cannot alone charge a defendant. No production of contract goods occurred because the appellant failed to import raw materials, so no basis existed for fixing the factory price, production expenses or profit margin under clause 8.
Legal principles established
#- A court of law cannot rewrite a contract between parties; unless coercion, fraud and undue influence are pleaded and proved, the parties are bound by the terms of their contract.
- An accounts analysis prepared for use in a suit is not a book of account regularly kept in the course of business, and even if it were, such a statement alone is not sufficient evidence to charge a defendant with liability.
- On a first appeal, the appellate court reviews the evidence with caution: where there is evidence to support a conclusion, or the trial judge plainly went wrong, the appellate court will decide.
Court orders
#- 1.Appeal dismissed with costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C No. 3558 of 1989
- Jurisdiction invoked
- First appellate jurisdiction over the High Court under the applicable appellate framework (appeal as of right on facts and law from a first-instance decree); no specific provision is quoted in the judgment.
Relief refused
#The appellant’s claim for damages for breach of contract, loss of goodwill and loss of revenue and profits
The appellant failed to satisfy the condition precedent to import raw materials and failed to prove its case or its special damages on a balance of probabilities
Costs
The appeal was dismissed with costs to the respondent.
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.
We come to the conclusion that the appellant failed to meet its obligation to import the raw materials and this was a condition precedent, which rendered the entire contract unenforceable.
a court of law cannot rewrite a contract between parties and therefore unless coercion, fraud and undue influence are pleaded and proved, the parties are bound by the terms of their contract.
That accounts analysis was apparently prepared by the plaintiff for use in this suit. It is not itself a book of account regularly kept in the course of business. Even if it were, such a statement would not alone be sufficient evidence to charge the defendant with liability
Accordingly, we find no merit in this appeal and do therefore dismiss it with costs.
Issues in the judgment
#Paragraph numbering is duplicated: two consecutive paragraphs are both numbered 23, and paragraph 29 is missing (numbering jumps from 28 to 30).
The judgment states 'the respondent's contrary contention' where the context indicates the appellant's contrary contention on whether clause 5(a) was a condition precedent.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Valentino’s Footwear Manufacturers Ltd v Bata Shoe Company Limited [2018] KECA 256 (KLR)", Case Analysis (2018). Civil Appeal No. 115 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2018/256/eng@2018-10-12
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.