Court name
High Court of Tanzania

M/S Kanyarwe Building Contractor vs Attorney General & Another () [1986] TZHC 17 (31 July 1986);

Law report citations
1985 TLR 161 (TZHC)
Media neutral citation
[1986] TZHC 17
Coram
Mwalusanya, J.

Mwalusanya, J:  The plaintiff M/S Kanyarwe Building Contractors Ltd. D is suing the two defendants namely the Attorney General (1st Defendant) and the Regional Engineer of Works, Kagera Region (2nd Defendant) for damages for breach of contract.  He is claiming a total sum of shs. 3,250,111/= as damages.  Both defendants have denied that they were in breach of the contract in question and prayed that the suit be dismissed with costs. E
In view of the pleadings, the first issue that was framed was as to whether the contract was lawfully terminated by the defendants in August 1983.  In other words were the defendants entitled in law to read the plaintiff's behaviour as anticipatory breach as to F release them from further obligations?  And that leads me to briefly summarise the evidence on the matter.  It is common ground that the plaintiff company entered into contracts with the 2nd defendant on 20/1/1983.  The first contract for a sum of shs. 9,193,100/= was for the plaintiff company to build T.P.D.F. staff residential quarters, consisting of four big blocks and four small units at Biharamulo.  And the second G contract for Shs. 1,426,100/= was for the plaintiff company to construct a T.P.D.F. office block and repairing some 19 residential quarters at Rwamishenye in Bukoba District.  According to the terms of the two contracts Exh. A1 and Exh. A2, both projects were to be completed within 20 months effective from 20/1/1983; which means H they were to be completed by 20/8/1984.  The plaintiff did not complete the contracts as it was terminated by 2nd defendant in August 1983 on the ground that plaintiff had repudiated the contracts or that the contracts were at an end due to the doctrine of frustration.
The circumstances which led the 2nd defendant to terminate the two contracts were as I follows.  The plaintiff company proceeded with its part of the contract until 9/4/1983 when one of the directors of the plaintiff

company Mr. Haji Yusuf Amir (P.W.1) was detained as an economic saboteur under A the Economic Sabotage (Special Provisions) Acts No. 9 and 10 of 1983.  By then a great part of the contracts had been executed.  This is evidenced by the uncontroverted evidence to the effect that by 5/4/1983 at Rwamishenye Project some 50% of the work had been done and the plaintiff was duly paid by the 2nd defendant for that work; and B for the Biharamulo Project by 19/2/1983 some 6% of the work had been executed and the plaintiff company was duly paid Shs.587,846/40 for that work done.  According to the testimony of PW.1 when he started to execute the contract on 20/1/83 he had bought a lot of building materials for the two projects and these included cement, bricks, C stones, timbers and nails etc.  He also said that the plaintiff company had two tipper lorries for the projects.  Not that after the detention of PW.1 work on the projects was at a stand still, because the other director of the plaintiff company Mr. Haji Alli Kakurwa continued with the work.  In any case at both projects the actual construction of the D buildings was assigned to sub-contractors.  At Biharamulo there was a sub-contractor named Alfred s/o Isack (PW.2) who continued with the job until he was stopped in August 1983 by the 2nd defendant.  And at Rwamishenye the sub-contractor was one Wilfred s/o Kazimoto (PW.4) who testified that he continued the construction with his labourers until he was stopped in August 1983.  And according to the storekeeper of the E plaintiff company Mr. Lobenti s/o Mshahili (PW.3) he was in August 1983 chased away from both building sites without being allowed to take away the building materials of his employer.
The 2nd defendant does not dispute the fact that it was he who had ordered the F plaintiff's sub-contractors to stop work in August 1983.  He said that he was justified to do so as the plaintiff had repudiated the contract or else the contract was at an end due to frustration as disclosed in the plaintiff's letter dated 20/8/1983 which was accepted as Exh. B at the trial.  The letter is written in Kiswahili and when freely translated into G English it reads:
   That I would like to inform you that Mr. Haji Yusuf Amir one of our directors of our company has been arrested and detained as an economic saboteur under the Economic Sabotage (Special H Provisions) Act of 1983.  Among the property of our company that has been taken by the government on suspicion that it belongs to the detained director are:  Corrugated iron sheets, cement, nails, paints and several other minor building materials.  Besides being deprived of those essential items for our two building projects, the bank account of our company has I been stopped from operation

   by the government such that we can't withdrawal our Shs.507,111/45 lying in the bank so that A we use it in our projects.  Moreover it should be noted that costs keep on rising considerably whenever any delay is made in executing the contracts.  And mind you the company has to pay the sub-contractors and its employees who carry on the work at the two B projects.  This company is willing and capable if the government will open the company's Bank Account; and if the company is given back its building materials confiscated and for which we are ready to produce cash sale receipts to establish that it is company property and not personal property of the detained director.  As we do not know when the detained company C director will have his case disposed of, we fear that there might be a delay in finishing our part of the contract.  So we pray that our company's bank account be immediately opened and the company's building materials as well as vehicles used in the construction business be released please. D
The letter was written to the Regional Tender Board which had awarded the two contracts to the plaintiff company and was inter alia copied to the 2nd defendant.  And according to the 2nd defendant Peter s/o Kajuna, in July 1983 he once visited both E building sites and found that work had stopped or as he said no work was in progress at the sites.  So he testified that when he received the letter quoted above and his own observations at the site in July 1983, he came to the conclusion that the plaintiff company had repudiated the contract or else the contract was at an end due to the doctrine of F frustration.  So he advertised another tender for a new building contractor.
Let me first deal with the issue as to whether on the facts of this case there was a 'frustration of the contract'.  It was argued by the defendants that because one of the directors of the plaintiff had been detained and the company's building materials had G been confiscated, then the contract was at an end due to the doctrine of frustration.  The doctrine of frustration states that where events occur that make the performance of the contract impossible and these frustrating events are not the fault of either party then the contract is brought to an end with neither party at fault.  That doctrine is contained in s. H 56 (2) of the Tanganyika Contract Act, Cap, 433 which states:
   A contract to do an act which after the contract is made becomes impossible, becomes void when the act becomes impossible. I

At the outset let me point out that our courts do not readily invoke the doctrine of A frustration unless it is shown that the contract as originally conceived, bears little or no resemblance to the new state of things.  It is not sufficient merely to show that conditions have changed so that one party is in a more onerous position, financially or personally.  It should be shown that it is now impossible to perform the contract not merely more B difficult or expensive.  In Twentsche Overseas Co. Ltd v Uganda Sugar Factory Ltd. (1945) 12 E.A.C.A. -1 (P.C.) Lord Wright of the Privy Council had expressed the matter in much more eloquent terms when he said: C
   It (frustration) is a sort of shorthand: it means that a contract has ceased to bind the parties because the common basis on which by mutual understanding it was based has failed.  It would be more accurate to say, not that the contract has been frustrated, but that there has been a failure of what in the contemplation of both parties would be the essential condition or D purpose of the performance.
Then in Alibhai Gulam v Mohamed Yusuf (1946) 13 E.A.C.A. 25 (K) Sir Joseph Sheridan C.J. cited with approval the passage of Viscount Simon L.C. in Febrosa v Fairbairns Lauson Combe Barbour Ltd. [1943] A.C. at p. 40 where in referring to E frustration he said:
   The principle is that where supervening events, not due to the default of either party, render the performance of a contract indefinitely impossible and there is no undertaking to be bound in F any event, frustration ensues.
I have underlined the phrase 'indefinitely impossible' for emphasis.  Then we have Sir Samuel Quashie - Idun P. who expressed the doctrine in much more telling terms in the case of Howard & Co. (Africa) Ltd. v Burton [1964] E.A. 540 (C.A.) (K.) where G after citing with approval the decision of the House of Lords in Isakiroglou & Co. Ltd. v Noblee Thorl [1962] A.C. 93 he stated that:
   The fact that it has become more onerous or more expensive for one party than he thought is H not sufficient to bring about a frustration.  It must be more than merely more onerous or more expensive.  It must be positively unjust to hold the parties bound.  It is often difficult to draw the line.  But it must be done.  And it is for the courts to do it as matter of law. I

With those few examples articulating what circumstances amount to frustration, I think A now it is crystal clear that the doctrine was wrongly invoked by the 2nd defendant.  With the factors that plaintiff company had disclosed in his letter the execution of the contract would have been more onerous but not impossible.  A much more close example is the B Kenyan case of Maclaine Watson & Co. Ltd. v Kanji Meghji Shahs (1956) 23 E.A.C.A. 366.  That was a contract for selling rice.  The government refused to issue an import licence for rice.  With the ban it became very expensive to execute the contract.  The buyer argued that the contract was frustrated but the court thought not even though it agreed that it had become more expensive to execute it. C
There is also a further ground supporting a view that there was no frustration.  The plaintiff is a corporate body with a certificate of incorporation No. 10191.  So it is a separate legal entity quite distinct from its members.  And as a company works through D its members and employees, then the detention of a member or director, would not deter the company to continue to  work through its other members and directors.  I am therefore not persuaded that the 2nd defendant was entitled to invoke the doctrine of frustration.
Next let me now consider the second point as to whether the plaintiff company had at E any time repudiated the contract.  Repudiation occurs where one party either expressly or impliedly intimates that he will not honour his side of the bargain.  This happens before the end of the contract period.  The doctrine is contained in s. 39 of the Tanganyika Law of Contract Act, Cap. 433 which provides: F
   When a party to a contract has refused to perform or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance. G
The test for repudiation where there has been no expressed intention to repudiate, is:  was the conduct such as to have caused a reasonable person to come to the conclusion that the person did not intend to or was unable to fulfil his contract?  A clear example is demonstrated by the case of Rashid Moledina & Co. (Mombasa) Ltd. V. Hoima H Ginners Ltd. [1967] E.A. 645 (C.A.)(K).  In that case X contracted to sell coffee to Y.  X was in short supply and unsuccessfully tried to come to some agreement with Y.  X failed to deliver to other parties and Y, knowing of this failure claimed it amounted to repudiation.  It was held by Court that X's behaviour could be treated by Y as I repudiation.  In the words of Duffus J.A.:

   The test must be whether ... the conduct of the respondent through its representatives was A such as to have caused a reasonable person to come to the conclusion that the company did not intend to or was unable to fulfil its contracts.
Applying that test to the facts of this case, I am unable to agree that the plaintiff company B had repudiated the contract either expressly or by  conduct.  The letter that I quoted above does not in so many words state that the plaintiff company would not go on with the contract but it states simply that they would find it more difficult to perform or rather that there may be a delay in completion of the same.  After all the director was detained C on 9/4/1983 and some building materials confiscated on the same day, and yet construction at both projects continued in full swing until the sub-contractors were stopped in August 1983.  I don't agree with the testimony of the 2nd defendant that in July 1983 work at both building sites had come to a stand still.  On the whole no D reasonable person could, on reading the letter Exh. BI, have come to the conclusion that the plaintiff company intended or was unable to fulfil its part of the contract.  The 2nd defendant was wrong to have had reached that conclusion.
In any case even if 2nd defendant had reached the conclusion that the plaintiff had E repudiated the contract yet as correctly submitted by plaintiff's counsel Mr. Kahangwa, the 2nd defendant was precluded from making preemptory determination of the contracts as it was contrary to the agreed stipulations contained in the General Conditions of Contracts and both contracts Exh. AI and Exh. A2 clearly provide that the F two contracts are subject to the General Conditions of the Contract.  Now clause 32 of those General Conditions of the Contract provides:
   32. Determination of Contract by Employer. G
   (a)   Default:  If the Contractor shall make default in any of the following respects, viz:
      (i)   If without reasonable cause he wholly suspend the works before completion;
        (ii)   If he fails to proceed with the works with reasonable diligence; H
   and if he shall continue such default for fourteen days after a notice by registered post, specifying the default has been given to him by  the Principal Secretary (works), the Employer I may without prejudice to any other rights or remedies, thereupon by notice by

   registered post determine the employment of the Contractor under this Contract: A
   Provided that notice in pursuance of this clause shall not be given unreasonably or vexatiously. B
Those conditions clearly provide that in case of default the employer has to write a notice by registered post to the contractor informing him the particulars of the default.  And if within 14 days after the first notice the contractor says that he is unable to continue with the contract or the default that was pointed out persists then the employer C may determine the contract  and this has to be done by registed post.  However none of that procedure was followed by the 2nd defendant.  The 2nd defendant acted unreasonably in determining the contract without notice to the contractor.  The notice would have put him in the clear picture if the contractor was willing and capable of going D on with the contract despite the temporary drawbacks that had cropped up.  In the event then I hold that there was no repudiation of the contract by the plaintiff company.  It was the 2nd defendant who was in breach of the contract and so liable in damages.  So issue No. 1 is answered in favour of the plaintiff company.
For the moment we skip issue No. 2 and proceed to issue No. 3.  Now issue No. 3 E concerns compensation payable to the plaintiff company for the work done and not paid for, up to the time the contract was put to an end by the defendants.  The defendants conceded at the commencement of the trial that they were liable for not more than F shs.179,840/40 for the work done at Biharamulo Project but that they were not liable for any work done at Rwamishenye Project.  However evidence was brought by  the plaintiff company concerning the work done at both projects and that evidence was given by PW.2, PW.2, PW.3 and PW.4.  There was unchallenged evidence adduced for the Biharamulo Project indicating that the buildings under construction had all G reached four feet high at the time of the determination of the contract and this is about 20% of the contract sum of shs.9,193,100/= and that comes to Shs. 1,838,620/= and less Shs. 587,846/40 paid out to the plaintiff on 19/2/1983 there remains Shs. 1,238,620/= which plaintiff company now claims.  I can see no valid reasons as to why H the defendants concede to pay Shs.179,840/40 only for the Biharamulo Project and not the full sum of shs 1,238,620/=.  It is my finding that shs. 1,238,620/= claimed for the Biharamulo Project is a reasonable sum and so I accept it.  As for the Rwamishenye Project there was uncontroverted evidence from the witness PW.1, PW.2., PW.3 and PW.4 that about 70% of the contracted work had been done, in that 17 of the 19 I residential staff quarters had been substantially repaired as

contracted; and as regards the office block the same had already been erected only A awaiting the finishing touches.  In view of the fact that defendants did not offer any challenge to that evidence I accept it and agree that it was 70% of the whole work.  As on 5/4/1983 he had done 50% of the work and got paid half of the contracted sum of shs. 1,426,100/= for the Rwamishenye Project, now he is entitled to shs. 285,220/= B being the 20% of the work done between April 1983 and August 1983.  I accordingly award shs.285,220/= as compensation for the Rwamishenye Project. Total award for both projects is Shs1,523,840/=
Issue No. 4 and 5 concern compensation payable to the plaintiff company for the building materials  (issue No.4) and building tools (issue No.5) that had been left behind C at both building sites after the plaintiff company had been chased away from there.  As regards issue No. 4 and 5 the plaintiff's counsel Mr. Kahangwa submitted that compensation was payable as there was enough evidence indicating that tools and building materials to the tune of shs. 123,391/= were left behind.  According to PW.1 D and the storekeeper Libent s/o Mshahili (PW.3) the building materials and tools left behind at both sites was as per the list Exh. A3 prepared by the plaintiff company on 29/5/1984.  The two sub-contractors PW.2 and PW.4 corroborated that fact.  The defendants did not offer any evidence on the matter but in the written statement of E defence it is alleged that building materials were paid for by the 2nd defendant and that as for building tools the same are in custody of the Commander of Biharamulo T.P.D.F. Camp.  No evidence was led as to how the building materials were paid for and so I reject outright that contention.  As regards the building materials, the defendants cannot F escape liability by claiming that a third party might be having them.  When notice to sue was sent it was the duty of the defendants to collect those building tools if they were there and hand them over to the plaintiff company in order to avoid liability.  Otherwise they are liable in law.  I accordingly award the plaintiff company the sum of G shs.123,391/= as indicated in the list which is Exh. A3 in court.
Now issue No. 2, 6 and 7 concern the quantum of damages that plaintiff company is entitled to, after having won the case.  For issue No. 2 the plaintiff company claims shs. 1,585,380/= or ordinary damages being 15% of the total sum of the contract sum and that being the anticipated reasonable profit that plaintiff company would have got on the H two projects.  Issue No. 6 is a claim also of ordinary damages for shs. 17,500/= for the installation of a water tank at the Biharamulo.  And issue No. 7 concerns any other relief that plaintiff company may be entitled to. I
I will start with issue No. 6 concerning ordinary damages of shs.

17,500/= for the water tank that was installed.  It is uncontroverted that the plaintiff A company built a water tank at the Biharamulo Project because water there is scarce.  The defendant did not dispute the fact that shs. 17,500/= was a reasonable sum for constructing a water tank, but contended that the damages were not payable because B they were remote.  But plaintiff company submitted those damages were not remote.  It is trite knowledge that our law draws a line somewhere and says that damages incurred beyond a certain limit are too remote to be recovered.  Damages in contract must therefore be proximate.  The modern law regarding remoteness of damages in contract is C founded upon the English case of Hadley v Baxendale (1854) 9 Exch. 341 which case is authority for the statement that damages in contract will be too remote to be recovered unless they are such that the defendant, as a reasonable man, would have foreseen them as likely to result, according to the usual course of things or because of D special facts made known to him.  That decision is incorporated in s. 73 (1) of our Tanganyika Contract Act Cap. 433.  And the doctrine received explicit judicial recognition in East Africa through the decision of E.A.C.A. in Woodruff v Dupont [1964] E.A. 404.  Applying the above doctrine, it is my considered view that the building of  a water tank, because of the scarcity of water at Biharamulo, was a matter E which defendant knew or as a reasonable man should have known as likely to happen, and so defendant is liable.
Concerning the ordinary damages of Shs. 1,585,380/= on issue No. 2, I think there is little controversy on the principle of law applicable.  Damages are intended to put the injured party in the same financial position as he would have been if the contract had F been performed according to its terms.  Therefore the plaintiff company as of right has a claim to the profit that would accrue to him after deducting his expenses, if the contract had been fulfilled.  The plaintiff company has put the profit that would have accrued at G 15% of the contract sum. It was the plaintiff's case that normally for building contracts 15% of the contract sum accrue to the contractors and that it is reasonable sum.  In my considered view the claim appears a reasonable sum, more so that the defendants did not offer any evidence to contradict that point.  The plaintiff's advocate Mr. Kahangwa H cited the English case of Suisse Atlantique Societe de Armement Martime S.A. v N.V. Rotterdamsche Kolen Centrale [1966] 2 W.L.R. 944 in support of his contention on this leg.  But I am afraid the case is of no assistance as it concerned a matter of remoteness of damages - that is whether loss of profits was reasonably foreseeable or not.  That was a case where plaintiff hired out his ship for carrying of goods for two years and it was agreed that he would be paid a certain sum per trip I made.  The ship was to make a number of trips for the two years of

contract.  The ship failed to make up an anticipated number of trips in the two years and A plaintiff alleged that it was due to the negligence of the defendants.  He claimed inter alia loss of profits he would have made if the anticipated number of trips for two years, damages for loss of profits would have been payable but not in the present case where there was no such contract and so no profit  was payable.  That case is distinguishable B from the present case in that, that case concerned the issue of remoteness of damages that is whether loss of profits was reasonably foreseeable or not; but in our case at hand the issue is simply one of assessment of a quantum of damages which are conceded not to be remote.  And as I said earlier I am satisfied that a claim of 15% of the contract C sum amounting to shs. 1,585,380/= is a reasonable sum and I awarded that sum on this head.
Before I sign off I should put on record that it was conceded by the 1st defendant that if the 2nd defendant was in breach of the contract, then 1st defendant would be vicariously liable for the sins of his employee the 2nd defendant because it is common knowledge D that 2nd defendant throughout acted in the usual course of his employer's business.
Be that as it may, the plaintiff company succeeds in toto in its claim.  I enter judgment for the plaintiff in the sum of shs. 3,250,111/= as claimed plus costs of the suit. E
Order accordingly.

F