https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/10498

Musaje t/a Alison Builders v Al-Maamiry (Civil Appeal E577 of 2024) [2026] KEHC 10498 (KLR) (Civ) (14 July 2026) (Judgment) Neutral citation: [2026] KEHC 10498 (KLR) Republic of Kenya In the High Court at Nairobi (Milimani Law Courts) Civil Civil Appeal E577 of 2024 LP Kassan, J July 14, 2026 Between Abutalib B Musaje T/A Alison Builders Appellant and Munira Al-Maamiry Respondent Judgment A. Introduction 1.This is a first appeal arising from the judgment of the Principal Magistrate delivered on 5th April 2024 in Civil Suit No. E1347 OF 2005 in which the learned trial magistrate partly allowed the appellant's claim arising from an oral construction contract entered into between the parties. 2.The dispute before the trial court revolved around the construction of a residential house by the appellant for the respondent on plot No. 121/112 Runda. It was common ground that the agreement between the parties was oral and that the appellant undertook to construct the respondent's house for an agreed consideration of Kshs 9,361,975 which was paid out gradually over the period of construction. The Appellant received a total of Kshs 8,601,880/= for work done and a balance of Kshs 760,095 was owing. It was equally common ground that during the course of the project, the respondent issued several cheques in favour of the appellant representing what the appellant alleged to be the outstanding balance of the contract price. 3.The evidence before the trial court further disclosed that the parties had executed a written undertaking dated 23rd January 1999 signed by the respondent to the effect that in the event any cheque issued by her was dishonoured upon presentation, she would be liable to pay an additional twenty per cent (20%) of the value of such dishonoured cheque. 4.It subsequently transpired that when the appellant presented the cheques for payment, they were dishonoured. Consequently, the appellant instituted proceedings before the subordinate court seeking, inter alia:-a.payment of the outstanding balance of the construction contract;b.payment of Kshs 150,019 being twenty per cent (20%) of the value of the dishonoured cheques pursuant to the written undertaking;c.interest and costs of the suit. 5.Upon hearing the parties, the learned trial magistrate found that the Appellant had failed to complete the construction works in accordance with the parties' agreement and consequently held that the balance of the contract price had not become due and payable. The trial court noted that the construction was 95% complete and the Appellant did not dispute the fact that the work was incomplete. 6.Nevertheless, the learned magistrate proceeded to award the Appellant twenty per cent (20%) of the value of the dishonoured cheques together with costs of the suit and interest at court rates from the date of filing suit until payment in full, subject to the in duplum rule but denied the claim for the outstanding balance. 7.Being dissatisfied with the refusal to award the outstanding balance of the construction price as per the contract, the appellant lodged the present appeal. B. The Memorandum Of Appeal 8.The Memorandum of Appeal dated 5th May 2024 at page 2-3 of the record of appeal dated 15th July 2024 contains several grounds which, when carefully considered, may conveniently be condensed into the following complaints: -i.That the learned trial magistrate erred both in fact and in law by holding that the outstanding balance of the construction contract had not become due despite finding that the respondent had voluntarily issued cheques representing the said balance.ii.That the learned trial magistrate failed to appreciate that the issuance of the cheques constituted an unequivocal acknowledgment of indebtedness on the part of the respondent.iii.That having found that the respondent had executed a written undertaking to pay an additional twenty per cent (20%) in the event of dishonour of the cheques, the learned magistrate ought to have found that the underlying debt had crystallized.iv.That the learned magistrate erred in law in failing to award the appellant the outstanding balance of the construction contract together with the attendant reliefs sought in the plaint.v.That the learned magistrate failed to properly evaluate the evidence tendered before the court and consequently arrived at findings unsupported by the evidence. 9.The appellant therefore urges this Court to set aside the whole of the judgment of the lower court and to re-access the award afresh and grant a fair and just award together with other orders the court may deem fit. 10.The respondent opposes the appeal and supports the judgment of the trial court. It is contended that the appellant did not complete the construction works as agreed and therefore failed to satisfy the contractual condition precedent upon which the final payment was dependent. Consequently, it is argued that the respondent was entitled to refuse payment of the balance and that the learned trial magistrate correctly declined to award it. C. Duty Of A First Appellate Court 11.This being a first appeal, this Court is enjoined to reconsider the entire evidence that was presented before the subordinate court, evaluate it afresh and draw its own independent conclusions while bearing in mind that it neither saw nor heard the witnesses testify. 12.The principles governing the jurisdiction of a first appellate court are well settled. 13.In Selle & Another v Associated Motor Boat Co. Ltd & Others [1968] EA 123, the former Court of Appeal for East Africa stated:“An appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts are that it must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect." 14.The same principle has consistently been reaffirmed by the Court of Appeal. In Peters v Sunday Post Limited ([1958] E.A. 424), the Court observed that although an appellate court has jurisdiction to review the evidence and reach its own conclusions, it should not lightly interfere with findings of fact by a trial court unless it is satisfied that the trial court acted on no evidence, misapprehended the evidence or applied wrong principles in arriving at its findings. 15.More recently, the Court of Appeal reiterated the same position in Abok James Odera T/A A.J Odera & Associates v John Patrick Machira T/A Machira & Co. Advocates [2013] eKLR - Civil Appeal 161 of 1999 where it held that a first appellate court is under a duty to re-analyse and re-assess the evidence before drawing its own conclusions while according due deference to the findings of the trial court on matters of credibility. 16.Guided by those well-established principles, I have carefully read the pleadings, the proceedings, the documentary exhibits, the judgment appealed from, the memorandum of appeal and the submissions filed by the parties. I have also independently re-evaluated the evidence on record with a view to determining whether the conclusions reached by the learned trial magistrate were supported by the evidence and the applicable law. D. Summary Of The Evidence Before The Trial Court 17.The evidence before the trial court established that the parties entered into an oral agreement under which the appellant undertook to construct a residential house for the respondent for an agreed consideration. 18.It was not disputed that construction commenced and progressed substantially. The appellant's position was that the works had reached approximately ninety-five per cent (95%) completion with minor works to be completed for which the Respondent had taken mitigating steps. During the hearing PW1 gave contradicting evidence that the project was complete and handed over to the respondent on 26th January 1999 but also acknowledged the unfinished and defective works were very minor and would not amount to failure of consideration. 19.On her part, the respondent maintained that the appellant failed to complete the agreed works and that completion of the project was a prerequisite to payment of the outstanding balance. According to the respondent, the cheques issued in favour of the appellant were intended to be presented only upon completion of the project and not before. 20.It was common ground that the respondent subsequently issued several cheques in favour of the appellant. It was equally undisputed that she executed a written undertaking providing that she would pay an additional twenty per cent (20%) should any of those cheques be dishonoured. 21.The appellant nevertheless presented the cheques for payment before the project had been completed. The cheques were dishonoured, whereupon the appellant instituted a suit in court seeking recovery of the outstanding balance together with the agreed twenty per cent (20%), costs and interest. 22.Having considered the evidence, the learned trial magistrate found that although the respondent had indeed issued the cheques and signed the written undertaking, the appellant had failed to complete the construction works as agreed. The learned magistrate therefore held that the contractual condition for payment of the outstanding balance had not arisen due to the pending works and declined to award that portion of the claim. 23.The learned magistrate, however, proceeded to award the appellant twenty per cent (20%) being Kshs 150,019/= of the value of the dishonoured cheques together with costs and interest at court rates from the date of filing suit until payment in full, subject to the in duplum rule. 24.It is those findings that have precipitated the present appeal. E. Issues For Determination 25.Having carefully considered the record of appeal, the judgment of the subordinate court, the memorandum of appeal and the rival submissions by the parties, it is my respectful view that the appeal falls for determination on the following issues:i.Whether the learned trial magistrate erred in finding that the appellant had not completed the construction works in accordance with the parties' agreement.ii.Whether, in the circumstances of this case, the outstanding balance of the contract price had become due and payable.iii.Whether the issuance and subsequent dishonour of the cheques constituted an independent acknowledgment of indebtedness entitling the appellant to recover the outstanding balance notwithstanding the incomplete construction works.iv.Whether the learned trial magistrate properly exercised his discretion in awarding the appellant twenty per cent (20%) of the value of the dishonoured cheques while declining to award the outstanding contract sum.v.Whether the learned trial magistrate properly invoked section 44A of the Banking Act in qualifying the award of interest. 26.It is convenient to consider the first three issues together as they concern the parties' respective contractual obligations. F. Whether The Outstanding Balance Of The Contract Price Had Become Due 27.It is common ground that the construction agreement between the parties was oral. Equally undisputed is the fact that there was no written building contract stipulating the parties' respective obligations or the stages at which payment was to be made. 28.The absence of a written contract, however, does not diminish the enforceability of the parties' agreement. An oral contract is enforceable provided its terms are proved on a balance of probabilities. The Court's duty is to ascertain, from the conduct of the parties and the evidence adduced, the obligations each party undertook and whether those obligations were performed. 29.The learned trial magistrate found, as a matter of fact, that although substantial construction had been undertaken, the appellant had not completed the works in accordance with the parties' agreement. Consequently, the court held that the balance of the contract price had not become payable. 30.The appellant faults that finding, arguing that the parties were in agreement as to the balance and that any defects were capable of being quantified. 31.The starting point in determining contractual liability is the bargain reached by the parties themselves. Courts do not create contracts for litigants; they merely enforce those which the parties freely entered into. 32.The Court of Appeal firmly settled that principle in National Bank of Kenya LTD V Pipeplastic Samkolit (K) LTD Another (Civil Appeal 95of1999) 2001KECA362 (KLR) (8june2001) (Judgment)where it held:“A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleaded and proved." 34.That principle is founded upon the doctrine of pacta sunt servanda, namely that agreements freely entered into must be honoured according to their terms. 35.In the present appeal, the evidence accepted by the trial court was that the respondent issued the cheques on the understanding that they would be presented upon completion of the construction works. The appellant gave contradictory evidence on one hand stating that the work was done and he had handed over the complete project while on the other he acknowledged that the work was not complete and that the minor defects therein should not deny him the full pay. The Respondent maintained that the balance was due after the defects had been corrected. The Appellant did not demonstrate that the court’s finding therefore was unsupported by the evidence or that the learned magistrate misapprehended the testimony presented before the court. 36.This Court, as a first appellate court, will not lightly interfere with findings of fact unless it is demonstrated that the trial court acted upon no evidence, misunderstood the evidence, or applied the wrong legal principles. 37.In Peters v Sunday Post Ltd (supra) the appellate court cautioned that although an appellate court has jurisdiction to review the evidence, it should exercise restraint before disturbing findings of fact made by the trial court. 38.Having independently re-evaluated the record, I am not persuaded that the learned magistrate's finding regarding non-completion was either unsupported by the evidence or plainly wrong. G. Whether The Appellant Could Enforce Payment While Himself In Breach 39.The evidence accepted by the trial court established that the appellant had not completed the construction works as agreed by the parties. That finding has significant legal consequences. 40.Contracts involving reciprocal obligations impose corresponding duties upon both parties. Where performance by one party is expressly or impliedly conditional upon prior performance by the other, the latter cannot ordinarily insist upon payment while remaining in default of his own obligations. 41.The common law has long recognised that a party who seeks enforcement of a contract must demonstrate either performance of his own obligations or a lawful excuse for non-performance. 42.This principle accords with the equitable maxim that no person should be permitted to benefit from his own default. 43.The appellant urged this Court to find that completion of the project was substantially achieved, the works having reached approximately ninety-five per cent (95%) . No report was provided to show the representation of that percentage of construction works. 44.It is upon the appellant to proof that it was not a requirement for him to be paid the balance after completion of the work and correction of the defects noted during the handover. 45.In the present appeal, the learned trial magistrate found that completion of the construction works was the agreed event upon which the respondent's obligation to pay the outstanding balance would arise. The Appellant did not dispute that the work done was incomplete. That finding has not been displaced on appeal. 46.Consequently, even assuming that the project had reached approximately ninety-five per cent (95%) completion, that fact alone did not automatically entitle the appellant to receive immediate payment where the agreed contractual condition remained unfulfilled. It is worth noting that out of the construction price of Kshs. 9,361,975 and the house being approximately 95% complete as indicated, then 5% of the remaining balance would have been Kshs. 468,098.75/= and not Kshs 760,095/= as claimed. The appellant had already received Kshs 8,601,880/= being 91.88% of the construction price. 47.To compel payment in those circumstances would amount to varying the parties' bargain by judicial intervention, a course expressly discouraged by the Court of Appeal in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another(supra) 48.I therefore find no error in the learned trial magistrate's conclusion that the outstanding balance of the construction contract had not become contractually due. H. Whether The Issuance Of The Cheques Altered The Parties' Contractual Obligations 53.The appellant nevertheless contends that once the respondent voluntarily took possession of the house, it was deemed complete even with the outstanding defects and with the impugned cheques issued, she unequivocally admitted liability for the outstanding balance and thereby waived any right to rely upon the appellant's failure to complete the works. 54.That submission, attractive though it may appear at first glance, overlooks the commercial context in which the cheques were issued. 55.The evidence before the trial court was that the cheques were not intended to operate as unconditional payment immediately upon delivery. Rather, they were issued on the understanding that they would be presented after completion of the construction project. 56.In those circumstances, the cheques constituted the agreed mode of payment, not an agreement varying the condition upon which payment would become due. 57.A negotiable instrument cannot ordinarily be divorced from the transaction giving rise to its issuance where the evidence demonstrates that its presentation was itself conditional. 58.Accordingly, the mere issuance of the cheques did not extinguish or waive the appellant's obligation to complete the construction works before claiming the outstanding balance. 59.Had the evidence demonstrated that the respondent voluntarily abandoned the completion requirement and elected to treat the debt as immediately payable, the position might well have been different. 60.That, however, is not the evidence accepted by the learned trial magistrate, nor has this Court found any basis upon which to interfere with that factual finding. 61.It follows that the appellant cannot rely upon the issuance of the cheques to enforce payment of a debt which, under the parties' own agreement, had not yet matured. I. Whether The Dishonoured Cheques Constituted An Independent Acknowledgement Of Indebtedness 62.The appellant's principal contention is that the learned trial magistrate erred in declining to award the outstanding balance after finding that the respondent had voluntarily issued cheques representing the said balance and had further executed a written undertaking to pay an additional twenty per cent (20%) in the event that the cheques were dishonoured. 63.According to the appellant, the issuance of the cheques constituted an unequivocal admission that the outstanding balance had become immediately due and payable and that the learned magistrate therefore fell into error by treating the debt as one that had not crystallised. 64.That submission necessitates an examination of the legal effect of the dishonoured cheques within the context of the parties' contractual relationship. 65.There is no dispute that the respondent voluntarily issued the impugned cheques. Equally undisputed is the fact that the respondent signed a written undertaking agreeing to pay an additional twenty per cent (20%) should any of those cheques be dishonoured upon presentation. 66.The question, however, is whether the issuance of those cheques, without more, extinguished the condition precedent contained in the oral construction agreement. 67.In my respectful view, it did not. 68.A cheque is ordinarily a negotiable instrument issued in satisfaction of an existing or anticipated obligation. However, where parties expressly or impliedly agree that the cheque shall only be presented upon the occurrence of a specified event, the negotiable instrument remains subject to that underlying agreement. 69.The learned trial magistrate found as a fact that the parties had agreed that the cheques would be presented after completion of the construction works. 70.Having independently reviewed the evidence on record, I find no basis for disturbing that finding. 71.Consequently, the respondent's liability under the cheques could only mature once the contractual condition governing their presentation had itself been fulfilled. It follows that the issuance of the cheques did not amount to an unconditional admission that the respondent was immediately indebted to the appellant irrespective of the appellant's own performance. 72.To hold otherwise would effectively sever the negotiable instruments from the very transaction that occasioned their issuance and thereby rewrite the parties' agreement. 73.Such an approach would offend the long-settled principle reiterated by the Court of Appeal in National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & Another (supra)that courts are not at liberty to rewrite contracts voluntarily entered into by parties. 74.If the appellant presented the cheques before satisfying the contractual condition precedent, he cannot rely upon the resulting dishonour as the foundation of an independent claim. K. Whether The Trial Court's Findings Were Internally Inconsistent 62.The appellant submitted that the learned magistrate's judgment was contradictory because the court declined to award the principal debt while simultaneously awarding the contractual twenty per cent (20%). There is considerable force in that observation. 63.Logically, if the respondent's obligation to honour the cheques had not yet arisen because the appellant had not completed the construction works, it becomes difficult to justify imposing contractual liability arising from dishonour of those same cheques. 64.Put differently, if the debt had not matured, one may legitimately ask whether the respondent could properly be penalised for declining payment of an obligation that had not yet become enforceable. That apparent inconsistency is not lost on this Court. 65.The respondent neither lodged a cross-appeal nor filed a notice seeking affirmation of the judgment on grounds other than those relied upon by the trial court. They only opposed it in the submissions stating that if the balance was found not to be due then the resultant penalty on the cheques could not be awarded. 66.The penalty appears to be ancillary to the alleged construction debt, and once that debt is judicially determined not to be due, there is no breach capable of triggering the penalty. 67.consequently, I find that the respondent is not liable for the contractual 20% penalty, because the penalty was incidental to payment of that balance; and the dishonoured cheques with the written undertaking cannot, without more, create liability for a debt that the court has determined was never payable. L. Whether The Learned Trial Magistrate Properly Invoked Section 44a Of The Banking Act 107.Although the principal issue before this Court concerns the appellant's entitlement to the outstanding balance of the construction contract, the appeal also raises an important question regarding the learned trial magistrate's order awarding interest at court rates from the date of filing suit until payment in full "subject to the in duplum rule." 108.The appellant contends that the learned magistrate misdirected himself in invoking the in duplum rule, while the respondent maintains that the qualification was proper. 109.The issue calls for an examination of the scope and purpose of section 44A of the Banking Act. 110.Section 44A was introduced into the Banking Act by the Banking (Amendment) Act, 2006 to codify the common law doctrine of in duplum. The provision limits the amount recoverable by a banking institution in respect of a non-performing loan by restricting the accumulation of contractual interest beyond the statutory ceiling prescribed therein. 111.In particular, section 44A(1) limits the recoverable amount to:a.The principal owing when the loan became non-performing;b.Interest not exceeding that principal; andc.Permitted recovery expenses. 112.Section 44A(4) must be read together with the preceding subsections. It preserves the operation of the section within the statutory framework governing non-performing loans and does not enlarge its application beyond transactions contemplated by the Banking Act. It neither creates a general rule applicable to all commercial contracts nor regulates court-awarded interest under the Civil Procedure Act. 113.The Court of Appeal authoritatively considered the scope of section 44A in Kenya Hotels Ltd v Oriental Commercial Bank Ltd (Formerly known as The Delphis Bank Limited) [2019] KECA 250 (KLR) The Court held that the section applies specifically to non-performing loans advanced by institutions governed by the Banking Act and was enacted to protect borrowers against the unconscionable accumulation of contractual interest on such facilities. 114.The Court further observed that the doctrine is not a general principle regulating every monetary claim but a statutory limitation applicable to the recovery of interest arising from banking transactions falling within the ambit of the Banking Act. 115.The same Court reiterated that section 44A must be interpreted within the statutory context in which Parliament enacted it and should not be extended beyond its intended field of operation. 116.In the present appeal, the dispute before the subordinate court did not arise from:i.A loan agreement;ii.A banking facility;iii.A non-performing loan;iv.A lender regulated as an institution under the banking act; orv.Contractual interest payable under a lending arrangement. 117.Instead, the dispute arose from an oral construction contract and a subsequent written undertaking concerning dishonoured cheques issued as a mode of payment for construction works. 118.The twenty per cent (20%) payable upon dishonour was not interest charged upon a loan. Equally, the decree issued by the subordinate court did not concern recovery of contractual banking interest. 119.It follows that section 44A of the Banking Act was wholly inapplicable to the facts before the trial court. 120.Having found that the 20% award fails then the issue of interest does not arise. Nevertheless, were it to be awarded then the learned magistrate would have ffallen into error by directing that the decretal interest would be payable "subject to the in duplum rule." 121.That qualification would have introduced into the decree a statutory limitation which had no legal foundation in the circumstances of this dispute. N. Disposition 133.Having independently reconsidered the pleadings, the evidence adduced before the subordinate court, the judgment appealed from and the applicable law, I arrive at the following conclusions:i.The learned trial magistrate properly found that the appellant had not completed the construction works in accordance with the parties' agreement.ii.The appellant therefore failed to establish that the contractual condition precedent to payment of the outstanding balance had arisen. That claim was pre mature.iii.The issuance of the cheques did not, in the circumstances of this case, constitute an unconditional admission that the balance of the contract price had become immediately due and payable.iv.The appellant has not demonstrated any basis upon which this Court may interfere with the trial court's refusal to award the outstanding balance of the construction contract.v.The learned trial magistrate erred in awarding the Kshs 150,019/= being 20% value of the dishonoured cheques given that the penalty was ancillary to the construction debt and therefore the subsequent award of costs subject to section 44A of the Banking Act, which provision was inapplicable to a construction contract and to judgment interest awarded under section 26 of the Civil Procedure Act therefore fails. 134.The appeal therefore fails. O. Orders 136.Consequently, I make the following orders:1.The appeal against the refusal to award the outstanding balance of the construction contract being Kshs 760,095/= is hereby dismissed.2.The claim for the balance was prematurely brought and so the lower court’ finding on the outstanding balance is hereby affirmed.3.The award of Kshs 150,019/= which is 20% of the value of the dishonoured cheques is hereby set aside.4.Claim 3 above having failed, the claim for interest therefore fails.5.Each party to bear their own costs. 137.Orders accordingly. DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS14TH DAY OF JULY 2026.L. P. KASSANJUDGEIn the presence of;Njuguna holding brief Mwaniki for the ApplicantOle Ntome for RespondentLeonard – Court Assistant