Court name
High Court of Tanzania

M/s Southern Highland vs M/s Tanzania Oxygen Limited () [1989] TZHC 41 (13 October 1989);

Law report citations
1989 TLR 187 (TZHC)
Media neutral citation
[1989] TZHC 41
Coram
Mwaikasu, J.

Mwaikasu, J.: By the defendant's standard form of contract, Exhibit P.1, on 16th day of October 1978, the plaintiff entered into and executed a contract of agency for the distribution of the defendant's full gas cylinders, to its customers in Mbeya, at an agreed fee. The gas was oxygen for welding and medical purposes. D
The contract continued to be in force for seven years until it was terminated by the defendant as from 31st August 1986, by a purported three month's notice dated 19/5/86.
It is now the contention of the plaintiff that such contract was wrongfully terminated and E therefore breached by the defendant for want of the contract three months' notice as clearly stipulated under clause one of the contract. Hence the plaintiff's claim for the reliefs as prayed in his plaint.
That, however, has been categorically denied by the defendant.
Thereupon the following issues were agreed by the learned counsel for the parties: F
(a) Whether or not the defendant had issued to the plaintiff notice of termination of the agency relationship on 19/5/86; G
(b) Whether or not, if such notice had been so issued the same was in accordance with the procedure agreed under the contract between the parties;
(c) If agency relationship was then still existing, whether the defendant paid the plaintiff the agreed commission. H
(d) What reliefs, if any, are the parties entitled to.
The case for the plaintiff company centres on the only evidence of its proprietor, the P.W.1, one Mr. Vinod K. Babla, a businessman resident of the Municipality of Mbeya, I at short street, Block L. Plot 52.

His evidence is to the effect that he is the proprietor of the Plaintiff Company, known as A Southern Highlands Motors Ltd., situated along Karume Avenue, within the Municipality of Mbeya, registered as Limited Company in 1982.
While the contract in question between the parties was still in operation, in March 1986, B the P.W.1 went abroad for marriage, and returned in August 1986. In his absence his business through the plaintiff company was then left in the hands of his secretary one Miss Mourine Nyondo. It is further his testimony that on his return from abroad, he did not receive any notice of termination of the plaintiff company's agency relationship with C the defendant, nor was he aware that in his absence his secretary received such notice. He has added that on his departure for his marriage abroad, he wrote a letter to the defendant company and personally handed it to an official of the Defendant Company in D Dar es Salaam, one Rwegoshora notifying them of his absence, and that he would be back in three months time. It would also appear that the defendant company was also informed that in his absence his office would remain open and taken care of by his friend one Thaker. On the P.W.1's return the said Thaker could not inform him anything as to E whether a notice or the termination of the agency relationship between the plaintiff and the defendant company had been received from the defendant business transactions did then continue as usual until sometime in August 1986, when a truck carrying full cylinder gas that called at the company premises had to be diverted by an official of the F defendant company called one Nkondo, (D.W.1) and sent the consignment to another person; within the Municipality. That is when the plaintiff company came to know that the agency had been terminated by the defendant company. He went on to testify that he Gused to get a commission for the sale of the defendants gas, dependant upon the amount of gas cylinders supplied by the defendant company. That, however, is said to have ranged between shs.4,000/= and shs. 8,000/= paid monthly.
On the other hand, it is the defence case, inter alia, as testified the D.W.l, one Juma s/o H Nkondo, a Mechanical Engineer working with the defendant company, and the D.W.2, one Dr. Asajile s/o Kapungu, being the medical officer i/c., of Isoko Hospital, that following the absence of the P.W.1, while abroad for marriage, there developed deteriotion in the agency services rendered by the plaintiff company because the plaintiff I company could not make regular distribution of full gass cylinders particularly for hospital oxygen, as the person left to act for the P.W.l called at the premises part

time, leaving the plaintiff company's office premises closed often times. That then forced A the medical customers, as the D.W.2 once did, to follow the gas to the Head quarters in Dar es Salaam. According to the D.W. 2, such problem of supply became more acute between the months of March, April and May 1986.
Thereupon on account of such deteriotion in the plaintiff company's agency service with B the defendant company, on 19/5/86 the defendant company issued a three months' written notice to the plaintiff company for the termination of such agency contract between the parties. Such notice was tendered before this court as Exhibit D.1, and is C also Annexure "C" to the written Statement of Defence. According to the D.W.1, such notice is unreferenced; it was not addressed to the plaintiff company, but to one Mr. Babla, the P.W.l in person, of Southern Highlands Motors, P.O. Box 252, Mbeya, it was sent by post but the D.W.1 could not tell whether it was by ordinary or registered post. D
It was then on the basis of such notice that on the expiration of the three months period of notice, on 31st August, 1986, the contract was brought to an end.
On being cross-examined, the D.W.1 has maintained that such termination of the contract was justified on the ground that the plaintiff company had committed several E breaches contrary to the provisions under clauses Nos. 4, 5, 9 and 21. The D.W.1, however, admitted that there was no evidence to show that the notice had SOUTHERN HIGHLAND v. T.O.L. (Mwaikasu, J.)been received by the plaintiff company, and that F Mr. Babla (P.W.1) was not a party to agency agreement, adding that before the P.W.1 went abroad, there was no business problem with the Plaintiff company. He went on to say that there was no prior communication between the plaintiff company and the defendant company regarding dissatisfaction of the defendant company's customers, with G the plaintiff company's agency services rendered. He could not also tell how much earnings had been lost by the defendant company during the absence of the P.W.1. Neither could he say how many deliveries had been made to the plaintiff and sales made during the absence of the P.W.1 as he had no documents to support the same, nor could H he produce any when time was given to the purpose.
From the above evidence it is evident that the contracting parties to the contract of agency the subject of this suit were Southern Highlands Motors Ltd., a limited company registered under Companies Ordinance and Tanzania Oxygen Ltd. The contract was I concluded on 16/10/78 and continued to be in force up to 31/8/86.

It is also common ground that in March 1986, the P.W.1, one Vinod K. Babla, the A proprietor and managing director of the plaintiff company had to travel abroad for his marriage, leaving his business in the hands of his secretary one Miss Maurine Nyondo, and Thaker, who worked part time. I also find as an established fact that during the B P.W.1's absence while he was abroad, his business premises were not regularly kept open to his customers. However, in absence of any documentary evidence to show the volume of business in respect of the oxygen gas, between the plaintiff and defendant companies, this court is unable to accept the evidence for the defendant and say that any C of the alleged breaches of the agency agreement clauses were actually so committed by the plaintiff company.
Nevertheless, any party was at liberty to terminate the contract at any time after giving a D three months notice to the other as provided for under clause I of the agreement.
Under Clause I of the agreement the parties agreed in the following terms and I quote:
I. This agreement shall be deemed to have commenced on the 16th day of October 1978 and shall continue until terminated by either party giving to the other three months E notice in writing of its intention so to do or as provided in clauses 23 and 24.
Clause 23, of the agreement provides: F
If there shall be any breach by the Distributing Agent of any provision of this Agreement or if the Distributing Agent shall commit an act of bankrupting the company may forthwith terminate this agreement.
Under Clause 24 of it is there provided as follows: G
In the event of either party thereto selling or ceasing to carry on its business they shall have the right to terminate this agreement by giving one month's notice in writing.
In my view, the import of the above clauses is that, the contract could be terminated in I either one of the three situations: first, on the decision of either party, as he pleases, to end the contract agreement, when, in terms of clause I, he would then be required to give a three months' notice to the other party; second, whenever the Distributing Agent, in this case the plaintiff, breached any of

the provisions of the agreement, in which case in terms of clause 23, the Principal, in this A case the Defendant company, would be entitled to terminate the agreement immediately without prior notice to the Distributing Agent; and third, whenever either party happened to sell or cease to carry on his business, in which case the other party would be entitled to terminate the contract after giving a one month's notice. B
It is clear in the instant case that it is the first option under Clause I of the agreement that the defendant invoked in terminating the contract of agency with the plaintiff company.
The issue in respect of such three months' notice is whether the same was properly and C actually served upon the plaintiff company.
According to the evidence that is before this court, it is clear and undisputed that the purported notice dated 19/5/86 was not addressed to the plaintiff company as the D contracting party as such, but was addressed to one Mr. Bable of Southern Highlands Motors, P.O. Box 252. As such notice, if it ever reached its destination in the absence of the P.W.1, the Company's managing director, was and it must have been treated as a private affair by those left to look after the P.W.1's business in respect of the plaintiff company. For it was not addressed in the business name of the contracting plaintiff E company. So that should that have come to the knowledge of the P.W.1 on his return, it could not be properly taken as a proper business communication with the plaintiff company, and therefore would be entitled to ignore it. F
On the other hand it is the P.W.1's contention which could not be effectively challenged by the Defendant company that such alleged notice was not brought to his notice and he did not in fact receive it.
The defendant company has been unable to prove that such notice was actually received G by the plaintiff company or that it was aware of it in any way. For no proof could be offered as to how the posting of such notice was effected, and whether it actually reached the plaintiff company.
Yet in terms of s.160 of the Law of Contract Ordinance Cap. 433, the termination of the G authority of an agent does not so far as regards the agent, take effect before it comes known to him. The burden to prove that such notice of termination of the agency had come to the knowledge of the agent, in this case, the plaintiff company, rests with the principal, in this case, the defendant company. That the defendant company has failed to I discharge. It

follows, therefore, that the termination of the agency contract with the plaintiff company A must be regarded as wrongful.
The consequence of such wrongful breach of such contract of agency between the parties is to be found under the provisions of s.157 of the Law of Contract Ordinance. It is there provided thus: B
157. Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent ... for any previous revocation or renunciation of the agency without sufficient cause. C
I also accept as an established fact, as it was not at all challenged by the Defendant Company during the trial of this suit and as also laid down in Clause 19 of the agreement, that the plaintiff company used to be paid a commission by the Defendant D Company for the oxygen gas cylinders sold. It does not appear that such commission was paid to the plaintiff company for the period of September 1986 to October 1987, when this suit was instituted following such wrongful termination of the contract by the defendant company. E
I now proceed to consider the reliefs claimed. The first is for shs.56,000/= being loss of profits. I consider the same to be founded and it is accordingly granted. Then there is the second relief of shs.4,000/=, per month as loss of profits from the second relief of shs.4,000/=, per month as loss of profits from the month of November 1987, a month F following the institution of this suit to the day of judgment. That as well appears to be merited. It is accordingly granted. On the other hand, I find it hard to understand the basis for the relief of shs.300,000/= as prayed in item (c). For no evidence has been led G for the plaintiff company to show how such amount of loss has been arrived at. Nor does the agreement have any provision to such effort. The only reasonable amount to be claimed as relief in lieu of notice must be the amount which ought to have been due to the plaintiff company by way of commission. Thus for the requisite three months' notice the H plaintiff company is entitled to shs.18,000/=, in lieu of such notice, being the average of commission of between shs.4,000/= and shs.8,000/= that could be paid to the plaintiff per month.
In the final analysis judgment is entered for the plaintiff and it is hereby ordered that the defendant do pay the plaintiff as follows: I

(a) Shs.56,000/= being loss of profit for the period of 14 months from September 1986, to A October 1987, at the rate of shs.4,000/= per month.
(b) Shs.76,733/= being loss of profits for the period of November 1987 to 13th October 1989, at the rate of shs.4,000/= per month, for 24 months and 13 days. B
(c) Shs.18,000/= being payment in lieu of three months' notice.
(d) Interest at the rate of 12% on the decretal amount from date of judgment to full settlement of the decretal amount.
(e) Costs of the suit. C
Order accordingly

D
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