Benedikt & Another v Ssentumbwe James (Civil Suit 1092 of 2022) [2024] UGCommC 125 (6 March 2024)

### THE REPUBLIC OF UGANDA

## IN THE HIGH COURT OF UGANDA AT KAMPALA

## [COMMERCIAL DIVISION]

## **CIVIL SUIT NO 1092 OF 2022**

#### 1. BENEDIKT THOMAS KONSTANTIN SCHRAMM 2. HOPE OYUNGRWOTH **!::::PLAINTIFFS**

#### VERSUS

**SSENTUMBWE JAMES::::::::::::::::::::::::::::::::::::**

# Before Hon. Lady Justice Patricia Kahigi Asiimwe

## Judgment

Introduction

The Plaintiffs brought this suit against the Defendant seeking a $1\,.$ declaration of breach of contract, recovery of the sum of UGX. 88,100,000 as monies owing with contractual penalties and liquidated damages as of November 2022, a claim for contractual default penalty of 10% per month on arrears, general damages, interest at commercial rate on all outstanding amounts and costs of the suit.

## Plaintiffs' case

The Plaintiffs contend that the Defendant obtained UGX. $2.$ 62,000,000 from them for an intended joint venture dealing in billboard advertising but the Defendant never fulfilled his obligations in the joint venture. The Defendant refunded UGX 1,000,000 to the Plaintiffs. The parties later signed a memorandum of understanding wherein the Defendant undertook to refund the rest of the money but only refunded UGX. 1,000,000 leaving an outstanding balance of UGX. 60,000,000.

# Representation

The Plaintiffs were represented by Walusimbi & Co Advocates. 3. The Defendant was served but neglected to file a written statement of defence, and therefore the matter was set down for formal proof.

# Issues

- $4.$ The issues are as follows: - a) Whether the Defendant is liable for breach of Contract - b) Whether the Plaintiffs are entitled to the Remedies sought

# Plaintiffs Evidence

- 5. At the hearing the Plaintiffs called one witness, Benedikt Thomas Konstantin Schramm, the 1<sup>st</sup> Plaintiff. He testified that he and the $2<sup>nd</sup>$ Plaintiff are business partners. They gave the Defendant UGX. 62,000,000 for a joint venture dealing in billboard advertising. The Defendant did not fulfil his obligations and agreed to refund the money, however, he only paid UGX 1,000,000. - On 7<sup>th</sup> September 2022, the parties signed a memorandum of 6. understanding in which the Defendant agreed to refund the money in monthly installments of UGX 500,000 from the date of signature of the memorandum. The Defendant was also required to make a payment of UGX 1,000,000 by $10^{th}$ September 2022.

- 7. In the said memorandum of understanding, the parties further agreed that in case of default, all outstanding sums would become due for recovery, a default payment of 10% per month would accrue, and the defendant would pay liquidated damages of UGX 10,000,000. - 8. He further testified that the Defendant only paid UGX 1,000,000 in installments of UGX 700,000 and UGX 300,000 on 9<sup>th</sup> September 2022 and 13<sup>th</sup> September 2022 respectively. The Defendant failed to make good on his obligations under the memorandum of understanding and that he is therefore liable for the contractual sum of UGX. 88,100,000 as monies owing inclusive of contractual penalties as of November 2022, liquidated damages and a further contractual default penalty of 10% per month on arrears.

# Resolution

# *Issue 1: Whether the Defendant is liable for breach of Contract*

- 9. Counsel for the Plaintiffs in their submissions cited section $10(2)$ of the Contracts Act which provides that a contract may be made orally, written or inferred from the conduct of the parties. He submitted that there was a written contract between the Plaintiffs and the Defendant on 7<sup>th</sup> day of September 2022 for the repayment of the Plaintiffs' monies to the tune of UGX. 61,000,000. - 10. Counsel submitted that the Defendant is in breach of his contractual obligations to the Plaintiffs. He cited Davies on Contract 10<sup>th</sup> Edition at page 287 which states that breach of contract occurs where a party fails to perform, or evinces an intention not to perform, one or more of the obligations laid upon him by the contract.

$\mathbf{A}$

- 11. Under section 20 (1) (b) of the Contracts Act, a contract with a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor or something which the promisor was legally compellable to do is a valid contract. - 12. This therefore finds Court that the memorandum of understanding signed by the parties on the $7<sup>th</sup>$ day of September 2022 amounts to a contract under sections $10(1)$ and $20(1)$ (b) of the Contracts Act. - 13. In the case of **William Kasozi versus DFCU Bank Ltd High** Court Civil Suit No.1326 of 2000, it was held that "Once a contract is valid, it creates reciprocal rights and obligations between the parties to it. It is the law that when a document containing contractual terms is signed, then in the absence of fraud, or misrepresentation the party signing it is bound by its terms". - 14. Breach of contract is defined in **Black's Law Dictionary 8<sup>th</sup> Edition** pg 563 as a violation of a contractual obligation by failing to perform one's own promise, by repudiating it, or by interfering with another party's performance. Further, in the case of Nakana Trading Co. Ltd Vs Coffee Marketing Board Civil **Suit No. 137 of 1991** court defined a breach of contract to mean where one or both parties fail to fulfil the obligations imposed by the terms of contract. - 15. In the case of **Kabaco (U) Ltd Versus Turyahikayo Bonny Civil Suit No. 014 of 2021** Wagona J held that where a contract sets out a bundle of promises to be performed by either party to a contract, in the event the same are not performed as per the

terms of the contract without any justification as provided for under the contract, a party at fault is said to have breached the contract.

16. Under the preamble to the memorandum of understanding entered into by the parties (PE $1$ ), it is stated that the Defendant obtained UGX. 62,000,000 from the Plaintiffs and only paid back UGX.1,000,000. Under the memorandum of understanding, the Defendant undertook to pay back the outstanding balance. The $1<sup>st</sup>$ Plaintiff testified that the Defendant only paid back UGX. 1,000,000. Court finds that without evidence to the contrary, the Defendant took money from the Plaintiffs which he undertook to refund in memorandum of understanding but did not pay it back. The Defendant therefore breached the terms of the contract and is liable for breach of contract.

# *Issue 2: Whether the plaintiffs are entitled to the remedies sought*

- 17. Counsel submitted that the agreement dated 7<sup>th</sup> September 2022 contained a penalty clause of 10% on every default which by the time the suit was filed was at UGX 18,100,000. In addition, the agreement provided for liquidated damages of UGX 10,000,000. Counsel submitted that the total sum owed is UGX 88,100,000 and a further contractual default penalty of 10% per month on any amount of arrears. - 18. Section 62 (1) of The Contracts Act Cap 2010, provides that "where a contract is breached, and a sum is named in the contract as the amount to be paid in case of a breach or where a contract contains any stipulation by way of penalty, the party who complains of the breach is entitled, whether or not actual damage or loss is proved to have been caused by the breach, to receive from the party who breaches the contract,

reasonable compensation not exceeding the amount named or the penalty stipulated, as the case may be".

- 19. Court therefore grants the Plaintiffs the outstanding balance of UGX. 60,000,000, the penalty of UGX. 18,100,000 and the liquidated damages of UGX. 1O,0O0,O00. - 20. Having granted interest and liquated damages, this court declines to grant general damages and any further contractual default penalty. - 2l .ln conclusion, therefore judgment is hereby entered for the Plaintiffs against the Defendant in the following terms: - a) A principal sum of UGX 60,000,000. - b) Interest of UGX 18,100,000. - c) Liquidated damages of UGX. 10,OOO,OOO. - d) Interest on the sum of money in (a), (b), and (c) above at 15%o per annum from the date of judgment until payment in full. - e) Costs of this suit.

# Dated this 6e day of llf.arcla 2o.24

.hs

# Patricia Kahigi Asiimwe

JUDGE

# Delivered on ECCMIS