https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1615

Skycrapers Africaway Company Ltd & another v First Community Bank Ltd & another (Civil Appeal 134 of 2020) [2026] KECA 1615 (KLR) (31 July 2026) (Judgment) Neutral citation: [2026] KECA 1615 (KLR) Republic of Kenya In the Court of Appeal at Nairobi Civil Appeal 134 of 2020 W Karanja, LA Achode & SO Okong'o, JJA July 31, 2026 Between Skycrapers Africaway Company Limited 1st Appellant Enock Osoro Kinara 2nd Appellant and First Community Bank Limited 1st Respondent African Merchant Assurance Company Limited 2nd Respondent (Being an Appeal against the Judgement and Decree of the High Court of Kenya at Nairobi (Majanja J.) delivered on 21st January 2020 in Civil Suit No. 107 of 2016) Judgment 1.The instant appeal challenges the Judgment and Decree of the High Court at Nairobi delivered on 21st January 2020 by Majanja J. The Appellant filed the High Court suit through a plaint dated 7th April 2016, which was amended on 19th May 2016 and further amended on 9th August 2016. 2.The Appellants’ case, as pleaded in the further amended plaint, was that: the 2nd Appellant was at all material times the registered owner of all that parcel of land known as Title No. Ngong/Ngong/10872 (suit property); the 1st Appellant was intent on constructing a five- storey apartment block on the suit property; and the 1st Appellant approached the 1st Respondent to finance the project and also take over the loan facility in the sum of Kshs. 3,488,591, which the 1st Appellant had with Kenya Commercial Bank Limited (KCB). 3.The Appellants stated that the 1st Respondent practised Islamic compliant banking in accordance with Sharia law and rulings; that the 1st Respondent offered to finance the project through its loan product known as “Musharaka ending with Ownership Financing” (Musharaka); that the 1st Respondent explained to the directors of the 1st Appellant that Musharaka meant that the 1st Respondent would partner with the Appellants in the project and that the profits and losses would be shared proportionately to each party’s contribution to the partnership; and that the 1st Respondent’s explanation of Musharaka was also posted on its website. 4.It was the Appellants’ case that, based on the said representation by the 1st Respondent, the 1st Appellant accepted the 1st Respondent’s offer, which provided that: the 1st Respondent’s share of contribution to the project was Kshs. 39,600,000 while the 1st Appellant’s share was Kshs. 20,635,857; that the ratio of contribution between the 1st Respondent and the 1st Appellant was 66%:34%; that there would be a grace period of 12 months; that the 1st Respondent would secure its interest by creating a charge over the suit property in the sum of Kshs. 43,088,591, which charge was also to secure the loan facility, which the 1st Respondent took over from KCB; and that the 1st Appellant would provide a contractor’s all-risks insurance during construction. 5.The Appellants further averred that the disbursement of the financial facility was to be in 4 tranches to the contractor; that the 1st Respondent would be repaid by way of pre-sales; that the proceeds and/or profits from the pre-sales of the apartment units would be shared between the 1st Respondent and the 1st Appellant at a ratio of 66%:34% units, that the proceeds of sale would be deposited in an escrow account; and that the 1st Respondent’s share of the project would reduce from time to time as the 1st Appellant sells the 1st Respondent’s apartment units. 6.The Appellants contended that the 1st Respondent granted the 1st Appellant a grace period of 12 months to repay the facility, indicating that the 1st Respondent was aware that the 1st Appellant could not settle the loan during the 12-month construction period; that the 1st Respondent also knew that the repayment would only be possible after the completion of construction, using the proceeds from selling the apartments; and that the 1st Respondent’s intention was for the 1st Appellant to service the loan once the construction was finished, and from the proceeds of sale and presale of the apartments. The Appellants further claimed that the apartments and the proceeds from their sale served as the 1st Respondent’s security. 7.The Appellants averred that through its main contractor, the 1st Appellant obtained a contractor’s all-risks insurance policy with the 2nd Respondent for the project; and that the policy provided that the 2nd Respondent would indemnify the insured by paying for complete loss or destruction of the property arising during the period of insurance from any cause whatsoever. 8.The Appellants further stated that after the 1st Appellant fulfilled the preconditions in the letter of offer, the construction of the apartments began; that on Sunday, 6th September 2015, the building under construction collapsed; that the building was nearly complete; that the Appellants promptly informed the Respondents of the incident, and that the project had come to a halt; that the 1st Respondent advised the 1st Appellant to wait for the assessor’s report from the 2nd Respondent to determine whether the 2nd Respondent would indemnify the 1st Appellant and the 1st Respondent; and that the 2nd Respondent declined to issue the loss assessor’s report. 9.The Appellants stated that because the 2nd Respondent failed to release the loss assessor’s report and to compensate them for the damage to the building under construction, the 1st Respondent issued a statutory notice. This notice, according to the Appellants, purported to recall the entire outstanding loan facility and demanded repayment, warning that failure to do so would lead to the security being realised. 10.The Appellants argued that the statutory notice was unjustified because the apartments, for which the 1st Respondent granted the loan facility, had collapsed. They contended that the 1st Respondent was aware that, apart from the 1st Appellant’s director’s salary, the 1st Appellant had no other source of funds to service the loan. They pointed out that the agreement was that the 1st Appellant would service the loan from the proceeds of presales and sales of the apartments. 11.The Appellants further stated that due to the building's collapse, the financing agreement had been frustrated, a fact which, in their view, was admitted by the 1st Respondent. They argued that this frustration made it impossible for the 1st Appellant to service the loan. They further asserted that the 1st Respondent was responsible for its loss under the Musharaka arrangement and that the statutory notice was aimed at clogging the 1st Appellant’s right of redemption. 12.The Appellants stated that the value of the suit property at the time the 2nd Appellant cleared it for redevelopment was Kshs. 10,000,000, which could not cover the 1st Respondent’s loan of Kshs. 39,600,000. The Appellants also stated that, following the frustration of the agreement between the parties, they were released from any further obligation under it. 13.The Appellants argued that since the loan facility was granted under the Musharaka scheme, the 1st Respondent and the 1st Appellant were partners in the apartment development project; that they were to share profits and losses; that the 1st Respondent’s share of the loss was Kshs. 39,600,000; that the 1st Respondent should not be permitted to invoke the Musharaka scheme regulations selectively; and that since the 1st Respondent was to earn profits proportional to its share in the project, it should also bear the corresponding losses. 14.The Appellants further asserted that they had expressed willingness to settle the outstanding loan facility in instalments, an offer rejected by the 1st Respondent, who insisted on recalling the full loan amount; that the 1st Respondent’s intention to dispose of the suit property to recover the entire loan balance was unlawful and unjustified; and that the 1st Respondent was unlawfully pursuing the Appellants for the loan repayment instead of pursuing the 2nd Respondent for indemnity under the policy which had not expired. 15.The Appellants further averred that the 2nd Respondent was in breach of the contract it entered into with the 1st Appellant for failing to compensate the 1st Appellant upon the collapse of the building under construction, which was a covered risk under the insurance policy issued by the 2nd Respondent. 16.The Appellants sought judgment against the Respondents for:a.A declaration that the financing agreement and subsequent contracts between the Appellants and the 1st Respondent had been frustrated by the collapse of the project, being the block of apartments on L.R No. Ngong/Ngong/10872 and the 1st Appellant discharged from its obligations in the financing agreement and subsequent contracts under the doctrine of frustration;b.An order declaring the statutory notices issued to the Appellants a nullity;c.An order of a permanent injunction restraining the 1st Respondent either by itself, employees, servants or agents from advertising, putting up for sale, either by public option or private treaty, and or otherwise commencing and/or proceeding with any realisation process in respect of all that property known and registered as L.R No. Ngong/Ngong/10872 in an attempt to recover any outstanding amount;d.An order of a permanent injunction restraining the 1st Respondent from listing the Appellants as defaulters with all licensed Credit Reference Bureaus in Kenya, namely, Creditinfo Credit Reference Bureau, Credit Reference Bureau Africa Limited t/a TransUnion and Metropol Credit Reference Bureau Limited;e.As an alternative to prayer (d), an order for the withdrawal and/or lifting the listing of the Appellants as defaulters by the 1st Respondent with all licensed Credit Reference Bureaus in Kenya, namely, Creditinfo Credit Reference Bureau, Credit Reference Bureau Africa Limited t/a TransUnion and Metropol Credit Reference Bureau Limited;f.A declaration that the financing instruments between the Appellants and the 1st Respondent were Musharaka Contracts;g.A declaration that the 1st Respondent is liable for the loss in the project to the extent proportionate to its capital contribution;h.An order compelling the 2nd Respondent to release the assessor's report to the 1st Appellant and the 1st Respondent;i.A declaration that the 2nd Respondent is liable to indemnify the 1st Appellant for the claims made under the contractor’s all risks policy;j.An order compelling and directing the 2nd Respondent to compensate the 1st Appellant in the sum of Kshs. 39,600,000;k.In the alternative to prayer (g), an order converting the facility for the sum of Kshs. 47,764,706.97 into a term loan to facilitate the payment thereof;l.Costs of the suit; andm.Interest at court rates. 17.In its amended statement of defence filed on 16th June 2016, the 1st Respondent denied the Appellants’ claim in its entirety. The 1st Respondent denied that it represented to the Appellants that they would enter into a partnership with them and share profits and losses proportionate to their contributions to the partnership. The 1st Respondent averred that all the terms of the financial facility granted to the Appellants were set out in the agreements entered into by the parties. The 1st Respondent denied that there was an agreement between the parties that the loan advanced to the Appellants would be settled through the pre-sales and sales of the apartments. 18.The 1st Respondent stated that the security for the loan granted to the Appellants was the legal charge over the property known as Title No. Ngong/Ngong/10872 (suit property), and it admitted that the Appellants notified it of the collapse of the building they were constructing on the suit property. The 1st Respondent averred that no further information regarding the incident was provided by the Appellants, and that it was not a party to the insurance policy taken out by the Appellants with the 2nd Respondent. 19.The 1st Respondent admitted that it served the Appellants with a statutory notice of its intention to realise its security over the suit property, asserting that the notice was lawful. 20.The 1st Respondent further stated that the parties' rights were clearly outlined in the agreements they entered into, the method of loan repayment was explicitly specified, and so were the consequences of default. The 1st Respondent denied that completing the housing project was essential to the performance of the contract by either party. The 1st Respondent also denied that the contract between it and the Appellants was frustrated. Additionally, the 1st Respondent denied that there was any ambiguity in the contracts between the parties. 21.The 1st Respondent stated that it had a duty to notify the Credit Reference Bureaus of any loan defaulter. The 1st Defendant averred that it was entitled to realise its security to recover the outstanding loan. The 1st Respondent claimed that the Appellants were not entitled to have the financial facility granted to them by the 1st Respondent converted into a term loan. The 1st Respondent also asserted that it had no obligation to seek compensation from the 2nd Respondent under the insurance policy taken by the Appellants and that, in any event, the evidence presented to the court by the 2nd Respondent indicated that the Appellants lacked valid insurance cover at the time the building on the suit property collapsed. The 1st Respondent urged the court to dismiss the Appellants’ suit. 22.The 2nd Respondent filed a statement of defence dated 19th May 2016. The 2nd Respondent stated that it was not a party to any of the agreements between the Appellants and the 1st Respondent. The 2nd Respondent averred that the Appellants obtained an all-risks insurance policy from the 2nd Respondent, which commenced on 20th August 2014 and ended on 19th August 2015. The 2nd Respondent averred that the insurance policy covered the construction of a five- storey apartment block in Ongata Rongai town on the land parcel Title No. Ngong/Ngong/10872 (the suit property). The 2nd Respondent averred that there was no incident during the period of the insurance cover at the construction site. 23.The 2nd Respondent claimed that the insurance policy was not valid on 6th September 2015 when the building that was being constructed by the Appellants collapsed. The 2nd Respondent stated that, since the insurance policy had expired, it was not obligated to compensate the Appellants for any losses resulting from the incident. 24.The 2nd Respondent stated that it was malicious and in bad faith for the Appellants to seek the loss assessor's report and compensation from it when, to their knowledge, the insurance cover had expired at the time of the collapse of their building. The 2nd Respondent contended that the plaint disclosed no cause of action against it. The 2nd Respondent urged the court to dismiss the claim against it. The 2nd Respondent is said to have amended its statement of defence, but we have not seen a signed copy of its amended defence on record. 25.Before the hearing of the suit commenced before the superior court, the parties filed a list of agreed facts on 1st November 2019. The parties agreed that the Appellants entered into four agreements with the 1st Respondent, namely, the Letter of Offer dated 19th February 2014, the Musharaka agreement, the Letter of Undertaking to purchase the Musharaka Units, and the Charge dated 11th April 2014. The parties also agreed that the 1st Respondent advanced to the Appellants the sum of Kshs. 43,088,591; that the 2nd Respondent issued to Roji Construction Company Limited, a contractors all risks policy dated 20th August 2014 for a period of one year ending on 19th August 2015; and that on 6th September 2015, the apartments which were being constructed on the suit property collapsed. 26.The parties also framed and agreed on issues for determination by the court. The agreed issues were: whether the Appellants and the 1st Respondent were bound by the terms and conditions in the Letter of Offer dated 19th February 2014 and the Musharaka agreement annexed thereto; whether the Appellants and the 1st Respondent complied with the terms of the said Letter of Offer dated 19th February 2014 and the Musharaka agreement; whether the 1st Respondent was entitled to realise the security created over the suit property as per the terms and conditions of the Charge and the Musharaka agreement; whether the agreements between the Appellants and the 1st Respondent were frustrated; and whether there was a valid contractors all risks insurance policy at the time the building collapsed on 6th September 2015, and if so, whether the 2nd Respondent should indemnify the Plaintiffs. 27.At the trial, the 2nd Appellant testified on his own behalf and on behalf of the 1st Appellant. He adopted his witness statements dated 7th April 2016 and 8th April 2016 as part of his evidence in chief. He produced, as a bundle, the documents attached to their list of documents dated 30th October 2019, as exhibits. He testified that, when they were seeking a financial facility, they chose the 1st Respondent because it offered a Musharaka financing option in which no interest would be charged, but the bank would become a partner in the project to the extent of its financial contribution, and profits and losses would be shared accordingly. He stated that the 1st Respondent issued them with a Letter of Offer, which he signed together with the Musharaka agreement; that a charge was thereafter created over the suit property; that they also took insurance cover for the project; that the construction commenced thereafter; and that their obligation was to reduce the 1st Respondent’s shareholding in the project, which was 66% to zero. 28.The 2nd Appellant further stated that on 6th September 2015, the building which was under construction collapsed; that he reported the incident to the Respondents; that the 2nd Respondent conducted investigations over the incident but no report was released; that they had not been indemnified by the 2nd Respondent; that the 1st Respondent thereafter served them with a statutory notice of its intention to realise its security over the suit property; that the 1st Respondent converted them to borrowers and demanded Kshs. 47,000,000; that he expected the 1st Respondent to demand only the money lent as no interest was payable; that the amount advanced to them included Kshs. 3,400,000 which was paid to Kenya Commercial Bank to clear the loan that was owed to it by the Appellants so that it could release the title to the suit property; that they were not required to make monthly payments; that the payments were to be made quarterly based on the apartments sold; that after the collapse of the building, the agreements they had with the 1st Respondent stood rescinded; and that they were discharged of their obligations thereunder. 29.The 1st Respondent called one witness, Mohamed Adan Mohamed (DW1), who adopted his replying affidavit, sworn on 20th April 2016 and witness statement dated 20th September 2019 as his evidence in chief. He added that Musharaka was a financing product which was being offered by the 1st Respondent; that it had aspects of investment by co-owning and security; that by the time the building that was being constructed by the Appellants collapsed, the same was not insured; and that it was the Appellants duty to take out the insurance cover. 30.The 2nd Respondent also called one witness, Ken Kiprop (DW2), who adopted his witness statement dated 31st October 2019 as his evidence in chief and produced the documents attached to the 2nd Respondent’s list of documents as exhibits. He added that the 2nd Respondent did not have any relationship with the Appellants and the 1st Respondent; that the insurance policy was taken by the contractor and paid for by it; that the Appellants were not covered under the insurance policy issued by them; that no claim had been lodged with them under the policy; that the insurance cover had lapsed when the building collapsed; that the certificate of completion of construction had not been forwarded to the 2nd Respondent, and that the 2nd Respondent could not commission a loss adjustment report in the circumstances as there was no cover in force. 31.After the close of evidence, the parties filed written submissions. The Appellants filed submissions dated 11th November 2019, while the 1st Respondent filed submissions dated 18th November 2019. We have not seen on record the submissions filed by the 2nd Respondent in the superior court. 32.In a judgment delivered on 21st January 2020, the superior court dismissed the Appellants' suit with costs to the Respondents. The learned Judge stated that, since there was no dispute that the parties' relationship was governed by written agreements, and that the Appellants had not pleaded any grounds to invalidate them, the parties were bound by the terms of the said agreements. 33.The learned Judge stated that, since, by and large, the dispute between the parties revolved around the interpretation of the various agreements between them, namely, the Letter of Offer, Musharaka agreement, Letter of Undertaking and the Charge, particularly, whether the financial arrangement between the Appellants and the 1st Respondent was in the nature of an investment partnership as was argued by the Appellants or was a lender-borrower agreement as was argued by the 1st Respondent, the testimonies led by their witnesses were not very useful, as much of it offended the rule against parol evidence. 34.On the issue of whether the Letter of Offer, Musharaka agreement, Letter of Undertaking and Charge constituted an investment partnership or a lender-borrower arrangement, the learned Judge noted that the Musharaka agreement was not a standalone document but had to be read together with the Letter of Offer in which; the 1st Respondent financed 66% of the investment while the 1st Appellant financed the remaining 34 %; the 1st Respondent’s investment was to be repaid in quarterly instalments within a period of 9 months after a grace period of 12 months; and the financing rate was agreed at 20.5% per annum. Upon considering the terms of the two documents, the learned Judge found that the relationship between the parties was that of a financing agreement and not a partnership. 35.The learned Judge found that the 1st Respondent advanced money to the 1st Appellant equivalent to or proportionate to its investment in the apartment project; and that the 1st Appellant was required to repay the money advanced through monthly instalments in accordance with clause 2.7 of the Musharaka agreement and/or to make presales and sales of the apartment units to reduce the 1st Respondent’s share in the investment. 36.The learned Judge also concluded that the 1st Respondent did not take ownership or control of the property where the apartments were being built. The learned Judge further observed that the terms of the Musharaka agreement did not release the Appellants from their obligation to service the financial facility. The Judge stated that in the Letter of Undertaking, the 1st Appellant unconditionally committed to purchase all units either on the agreed terms or upon termination of the agreement or upon any event of default. The Court found that this implied that the 1st Appellant was obliged to repay the 1st Respondent’s investment; and that even if the apartments were not sold, the 1st Respondent could not be left holding them as owner, and failure by the Appellants to settle the amount would allow the bank to enforce its security according to Clause 5.1 of the Letter of Undertaking. 37.The learned Judge further found that providing security was one of the conditions on which the 1st Respondent lent money to the 1st Appellant, and that Clauses 16.2 and 9 of the Musharaka agreement specified the requirements for providing security for the 1st Appellant’s obligations and events of default, respectively. The learned Judge observed that the events of default in the Musharaka agreement were incorporated into Clause 7.1 of the Charge, which included the Appellant’s failure to pay any amount due on its due date or default on any loan agreement, facility letter, or related borrowing obligation. The learned Judge therefore rejected the Appellants’ argument that their relationship with the 1st Respondent was not that of a borrower and lender, and thus they were not obliged to repay the money advanced by the 1st Respondent. 38.On the issue of whether the agreements between the parties were frustrated due to the collapse of the building, which was the subject of the parties' investment, the learned Judge held that the essence of the doctrine of frustration was that the event leading to the frustration is not attributed to the fault of any of the parties to the contract. 39.The learned Judge found, from the evidence, that neither party was to blame for the subject building's collapse. However, the Judge was of the view that the collapse was an event the parties had contemplated, and that the insurance was taken out to indemnify the bank against such an event, which could reduce the value of its security. The Judge observed that this was why the insurance requirement was a key condition of the lending. 40.The learned Judge stated that under Clause 3(e) of the Letter of Offer, the Appellants were required to obtain a contractors all risks policy during the construction period; and Clause 3 of the Musharaka agreement imposed on the 1st Appellant the obligation to keep the property insured for the duration of the financing arrangement at its full reinstatement value; and that under Clause 6.5 of the Charge, the 1st Appellant was under an obligation to keep the property insured at its expense. Based on the foregoing, the learned Judge found no merit in the Appellants' argument that they were in a partnership with the 1st Respondent and that the 1st Respondent shared an obligation with them to keep the suit property insured. 41.The learned Judge found that when the building collapsed on 6th September 2015, there was no insurance in place to cover such an event because the insurance cover was valid from 20th August 2014 to 19th August 2015; that there was no evidence that the Appellants, who had an obligation to keep the property insured, had renewed the insurance. The Judge found no merit in the Appellants' argument that the building collapsed during the maintenance period and was still under cover at that time. 42.The learned Judge concluded that the maintenance or defects liability would only have attached after the completion of construction and the issuance of a Certificate of Completion. The Judge found no evidence that, at the time of the building's collapse, it had been completed and a certificate confirming that had been issued. The Judge also held that the insurance policy issued by the 2nd Respondent was not valid at the time of the collapse and that the 2nd Respondent was therefore not obliged to indemnify the Appellants or the 1st Respondent. 43.The learned Judge found that failure by the 1st Appellant to maintain the insurance cover during the period of lending constituted an event of default which entitled the 1st Respondent to realise its security over the suit property. 44.In conclusion, the learned Judge found that the Appellants and the 1st Respondent were bound by the agreements they entered into; that they complied with their terms; that the 2nd Appellant executed a charge in favour of the 1st Respondent to secure the financial facilities advanced to the 1st Appellant; that the Musharaka agreement did not prevent the 1st Respondent from exercising its statutory power of sale under the Charge executed in its favour by the 2nd Appellant; that the Appellants’ defaulted on their obligations under the charge, first by failing to keep the suit property insured during the lending period in accordance with Clause 7 of the Charge, and secondly by their failure to pay the sums due under the agreements, which was a specific covenant by the 1st Appellant under Clause 3 of the Charge; that the Appellants admitted they were in default of their obligations to the 1st Respondent; that since the Appellants were in default, the 1st Respondent could not be prevented from reporting them to the Credit Reference Bureaus, which the 1st Respondent had an obligation to do; and that since the contractors all risks policy was not in force when the subject building collapsed, the Appellants were not entitled to an indemnity from the 2nd Respondent. 45.The Appellants' suit was dismissed in its entirety with costs to the Respondents. 46.The Appellants were dissatisfied with the decision of the High Court and filed the instant appeal. In their Memorandum of Appeal dated 18th March 2020, the Appellants contended that the learned Judge erred in failing to appreciate that the 1st Respondent practised Islamic Banking and that the relationship between the 1st Respondent and the Appellants was a partnership governed by the terms of the Letter of Offer and the Musharaka agreement; that the learned Judge erred in failing to appreciate that the Charge over the suit property was created pursuant to Clause 2.3 of the Musharaka agreement, and the terms of conditions of the Letter of Offer which were the primary contracts; that the learned Judge erred by failing to appreciate Clause 9.14 of the Musharaka agreement and Clause 5.3 of the Letter of Undertaking which provided that in the event of default, the Appellants’ obligation was not to repay the financial facility out of pocket but to purchase the 1st Respondent’s units so as to reduce the 1st Respondent’s shares in the project to zero; that the learned Judge erred by failing to appreciate that the duty to insure the investment was to be borne by the 1st Respondent who was supposed to take out an insurance policy under Clause 3.4 of the Musharaka agreement; and that the learned Judge erred by focusing on literal definitions as opposed to reading the agreements between the parties in a wholesome and purposive manner. 47.The Appellants further contended that the learned Judge erred by failing to appreciate that in the event a contract is ambiguous, the contra proferentem rule should be applied, and construction must be against the 1st Respondent who drew the agreements; that the learned Judge erred by failing to appreciate that the contract between the Appellants and the 1st Respondent was frustrated by the collapse of the building the subject of the investment project and that the obligations of the parties could not be performed as initially contemplated; that the learned Judge erred by failing to grant orders of injunction as sought and in dismissing the Appellants’ suit with costs as against the weight of the evidence and the submission by the parties. 48.The Appellants prayed that:i.The appeal be allowed;ii.The Court be pleased to set aside the order of the superior court made on 21st January 2020 dismissing the Appellants’ suit filed by way of a plaint dated 7th April 2016, amended by way of a Further Amended Plaint dated 9th August 2016 and substitute the same with:a.A declaration that the agreements between the Appellant and 1st Respondent have been frustrated by the collapse of the project, being the block of apartments on Title No. NGONG/NGONG/10872 and the 1st Appellant is discharged from its obligations under the doctrine of frustration.b.An order of injunction restraining the 1st Respondent either by itself, employees, servants or agents from advertising, putting up for sale either by public auction or private treaty and or otherwise commencing and/or proceeding with any realisation process in respect of the suit property.c.A declaration that the parties are bound by the terms of the Musharaka agreement and the 1st Respondent is liable for the loss in the project to the extent proportionate to its capital contribution. 49.When the appeal came up for hearing before us on 24th February 2026, learned counsel Ms. Muraguri appeared for the Appellants, while learned Counsel Mr. Opondo appeared for the 1st Respondent. There was no appearance by the 2nd Respondent, which was represented in the superior court by the firm of Lumumba & Lumumba Advocates. The firm wrote to the Deputy Registrar on 13th February 2026 to the effect that it had no instructions to act for the 2nd Respondent, and was not on record for the 2nd Respondent in the matter. Ms. Muraguri informed the Court that the 2nd Respondent was not going to be affected by the appeal. On that assurance, we heard the appeal despite the absence of the 2nd Respondent. 50.Ms. Muraguri relied wholly on the Appellants’ written submissions dated 23rd February 2026, and urged the court to allow the appeal. Mr. Opondo similarly relied on the 1st Respondent’s written submissions dated 12th February 2026 in opposition to the appeal. 51.In their written submissions, the Appellants argued that this Court can interfere with the findings of the trial court where it is shown that the court misdirected itself on the law, misapprehended facts, took into account irrelevant considerations, failed to take into account relevant considerations, or reached a decision which is plainly wrong. In support of this submission, the Appellants cited Carl Ronning vs. Societe Navale Chargeurs Delmas Vieljeux (The Francois Vieljeux) [1984] KLR 1. 52.The Appellants argued that the main issue for determination in the appeal is not whether they owed obligations to the 1st Respondent, but whether the learned Judge was correct in interpreting the agreements entered into by the parties, namely, the Letter of Offer, the Musharaka agreement, the Letter of Undertaking, and the Charge, as a conventional lender-borrower relationship rather than a Musharaka structure with defined risk allocation and performance mechanisms. The Appellant contended that the learned Judge erred in failing to treat the agreements as a single Islamic financial arrangement. The Appellant asserted that the relationship created by these agreements was not a traditional secured loan, as the judge had concluded. 53.The Appellants cited A Guide to Islamic Banking by Dr. Muhammad Imran Ashraf Usmani in which the author stated that:“The root of the word Musharakah…means being a partner. Under Islamic Jurisprudence, Musharakah means a joint enterprise formed for conducting some business in which all partners share the profit according to a specific ratio while the loss is shared according to the ratio of the contribution.” 54.The Appellants additionally referred to the 1st Respondent’s website, where they advertised Musharaka as one of the Islamic Banking Products they offered, in which Musharaka contract was defined as:“Musharaka means a joint enterprise formed for conducting some business in which the partners share profits realized according to an agreed ratio while losses shall occur on the capital proportionate to the ratio of contribution of the partners.”On the same website, the 1st Respondent stated that:“Islamic banks adopt Musharaka to meet diverse financing needs of their clients. For instance, a client who wishes to acquire a stock of goods for onward sale but does not have full amount required of the purchase price. Upon sale of the stock the bank and the client will distribute the profits realized in accordance to the ratios earlier agreed upon” 55.The Appellants submitted before us, as they did before the superior court, that the 1st Respondent explained to them that under the Musharaka contract they would be partners in the apartments’ project on the suit property (the project); that under the said Islamic Banking Model, the 1st Respondent was not permitted to charge interest; and that the parties would share profits and losses proportionate to their share of capital contributions in the project. 56.The Appellants argued that the parties entered into the agreements based on the said representations made by the 1st Respondent. They also submitted that the Letter of Offer for the facility clearly stated that the 1st Appellant’s contribution to the project was 34%, amounting to Kshs. 20,635,857, while the 1st Respondent’s contribution was 66%, amounting to Kshs. 39,600,000. 57.To support the argument that the relationship between the parties was a partnership and not that of a lender and borrower, the Appellants argued that in all the agreements made between them, the 1st Respondent was referred to as a client and not as a borrower; and the 1st Respondent’s contribution to the project was described as an investment rather than a loan. The Appellants maintained that the words lending or loan were not used in any of the agreements entered into by the parties, and therefore, they could not be inferred or implied into the relationship through oral testimony or inference. 58.On the issue whether the judge erred in law by construing the Letter of Offer, the Musharaka agreement and the Letter of Undertaking and Charge as a borrower and lender relationship, it was submitted by the Appellants that the duty of the Court is to give effect to the intention of the parties. The case of National Bank of Kenya Ltd vs. Pipeplastic Samkolit (K) Ltd & another (2001) eKLR was relied upon in support of this submission. The Appellants argued that in this case, the 1st Respondent’s interest was structured as a defined proprietary share in the project and that the agreed performance mechanism was the progressive reduction of that share through purchase of Musharaka units. It was further argued that, upon default, the outstanding units were to be purchased at the applicable buy-out price; failing which, the 1st Respondent could enforce its security. 59.The Appellants submitted that the Charge was created pursuant to the Letter of offer, and it expressly provided in Clause 33 that the Charge, together with the documents referred to therein, contained the whole agreement between the parties; that the Charge could not be construed in isolation from the Musharaka agreement and the Letter of Offer from which it derived its foundation. The Appellants submitted that instruments forming part of the same transaction must be read together to ascertain the parties' true intention. 60.The Appellants argued that the learned judge arrived at the conclusion that the relationship between the parties was a financing agreement and not a partnership agreement based on Clause 2.7 of the Musharaka agreement, which referred to a monthly instalment payment, non-remittal of which constituted an act of default; that this was an error on the part of the learned Judge in that he interpreted the said clause in isolation without reconciling it to performance mechanism that was agreed on by the parties; that Clause 2.7 of the Musharaka agreement was not self-executing; that the learned Judge treated the mere reference to “Monthly Payments in accordance with the Monthly Payments Agreement” as proof of existence of such an agreement; that no Monthly Payments Agreement or payment schedule was produced in evidence; and that in the absence of the agreement contemplated by Clause 2.7 of the Musharaka agreement, the court could not infer the amounts due, the due dates or the arrears. 61.The Appellants further argued that the learned Judge did not reconcile Clause 2.7 of the Musharaka agreement with the definition of “Monthly Payments” in the same agreement, which described it as amounts paid towards reducing the bank’s share and for the right to use and occupy the property to the extent of the bank’s share. They contended that the definition linked the Monthly Payments to the share reduction and unit purchase mechanism. 62.The Appellants argued that the learned Judge also failed to give effect to the contractual default and remedy architecture in the parties' agreements; that the Musharaka agreement provided for events of default, but the parties also executed a Letter of Undertaking about the purchase of the Musharaka Units; that the undertaking expressly provided that enforcement of security arises upon failure to purchase the remaining units at the applicable buy-out-price; that upon default in the reduction of the 1st Respondent’s shares through purchase of units, the Appellants were required to purchase the remaining units at the buy-out-price so as to reduce the 1st Respondent’s share to zero; that it was upon the failure of the Appellants to effect such purchase that the 1st Respondent could proceed to enforce its security; that the learned Judge skipped those steps and moved directly to enforcement; and that the learned Judge set aside the agreed method of reducing the 1st Respondent’s shares, and treated the transaction as an ordinary loan agreement. 63.The Appellants submitted that the learned Judge failed to anchor his findings of default on the contractual documents rather than on parol evidence. The Appellants submitted that the conclusion reached by the learned Judge that the 1st Respondent’s share was to be reduced through independent instalment payment, detached from the Musharaka units framework, was not supported by the contractual instruments, in the absence of the Monthly Payments agreement; and that the learned Judge misconstrued the contractual architecture of the parties' relationship and reached a conclusion on enforcement inconsistent with the share reduction and enforcement structure agreed by the parties. 64.Regarding whether the judge erred in law by finding that the Appellants were in default when the 1st Respondent failed to prove the amount due, how it was calculated, or when it became payable under the Musharaka framework, it was argued on behalf of the Appellants that the judge could not properly conclude that a legally enforceable event of default had occurred without proof of the exact outstanding amount, the method of its calculation, and the contractual basis for the default. 65.Regarding whether the judge erred in failing to find that the collapse of the building fundamentally frustrated the agreed performance mechanism under the Musharaka agreement, it was argued that the 1st Respondent contributed Kshs. 39,600,000 towards the project, while the value of the suit property was Kshs. 10,000,000. In the Appellants' view, this indicated that the 1st Respondent did not provide the financial facility solely based on the security of the suit property, but also on the value that could be realised from the completed building. The Appellants contended that the entire performance mechanism depended on the existence of completed apartment units that could be sold. 66.The Appellants further argued that when the building collapsed, and the units ceased to exist, the mechanism by which the 1st Respondent’s share was to be reduced was rendered incapable of functioning in its original form. They also contended that the building constituted the commercial and contractual foundation of the transaction and that its collapse fundamentally altered or frustrated the agreed repayment mechanism. The Appellants reiterated that insisting on a repayment method disconnected from the agreed unit-based structure amounted to enforcing the contract in a manner inconsistent with the parties' agreement. They cited the case of Davis Contractors Ltd vs. Fareham UDC [1956] A.C 696, in which the court stated that frustration of a contract occurs whenever the law recognises that, without fault of either party, a contractual obligation has become impossible to perform because circumstances in which performance is required would render it radically different from the manner in which the parties had agreed to perform it. 67.The Appellants also relied on the case of National Carriers Ltd vs. Panalpina (Northern) Ltd [1981] AC 675, in which the court stated that frustration of a contract takes place when there supervenes an event without the default of either party which so significantly changes the nature of the outstanding contractual obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the circumstances; and that in such a case the law declares both parties to be discharged from further performance. 68.The Appellants argued that the question before the learned Judge was not whether the 1st Respondent had provided funds to the Appellants, but whether the contractual mechanism through which the 1st Respondent’s share in the project was to be reduced remained legally viable after the destruction of the subject building. The Appellants contended that the learned Judge failed to address this question, which was an error on his part. 69.On the issue whether the 1st Respondent was entitled to exercise its statutory power of sale, the Appellants submitted that the statutory power of sale could not arise merely because money was advanced by the 1st Respondent to the Appellants; that the power could arise only after the contractual conditions for enforcement had strictly been satisfied as per the agreement between the parties; that the power had not arisen as default on the part of the Appellants had not been established; that the default notice had not been issued; and that the agreed contractual trigger for enforcement had not crystalised. 70.The Appellants argued that the 1st Respondent merely issued a standard statutory notice demanding payment of Kshs. 47,764,706.97, as if the transaction between the parties was a conventional loan repayable in the usual manner. They reiterated that the relationship was not that of a lender and borrower, where non-payment would constitute default, but rather a Musharaka arrangement where performance was measured through share reduction by unit sale. The Appellants further submitted that the 1st Respondent failed to establish the pathway to the enforcement of its statutory power of sale and, therefore, was not entitled to exercise that power. The Court was urged to allow the appeal. 71.As mentioned earlier, the 1st Respondent filed submissions dated 12th February 2026. Regarding whether the relationship between the Appellants and the 1st Respondent, established by the various agreements between them, was that of a lender and a borrower or a partnership, it was argued on behalf of the 1st Respondent that the instrument of Charge created by the 2nd Appellant over the suit property in favour of the 1st Respondent clearly defined the relationship between the parties. The 1st Respondent submitted that the 1st Appellant was described in the instrument as the borrower and the 2nd Appellant as the chargor; and the duties and responsibilities of both were clearly outlined. The 1st Respondent further asserted that Clause 7 of the Charge specified the events of default that would enable the 1st Respondent to recall the debt and initiate the process of realising its security. The 1st Respondent maintained that failure to pay monies advanced on the due dates constituted an event of default. 72.The 1st Respondent submitted that Clause 2.1 of the Musharaka agreement, which the Appellants heavily relied on, stated that the 1st Appellant would repay the principal amount borrowed in monthly instalments. The 1st Respondent further argued that the concept of partnership was negated by Clause 2.7 of the Musharaka agreement, which provided that the 1st Appellant was to pay the 1st Respondent the monthly instalments according to the monthly payments’ agreement. The 1st Respondent contended that the obligation to repay the borrowed principal amount and to adhere to the terms of the Charge were clear, unambiguous, and binding on the Appellants. The 1st Respondent also argued that nowhere in the agreements executed by the parties was the repayment of the money advanced by the 1st Respondent conditional upon the sales or pre-sales of the apartment units. Furthermore, the 1st Respondent stated that if the parties had agreed to link the repayment of the funds advanced to the Appellants with the sales or pre-sales of the apartment units, it would not have been necessary to specify the monthly payments and the security in the form of a legal Charge. 73.The 1st Respondent further argued that the Appellants were attempting to wriggle out of their contractual obligations by misinterpreting the Musharaka Agreement. It was further argued on behalf of the 1st Respondent that the Appellants could not rely on an extrinsic definition of Musharaka contract on the 1st Respondent’s website to vary or interpret clear terms of the written contracts defining the relationship between the parties. In support of this submission, the 1st Respondent cited the case of Kenya Power & Lighting Co Ltd vs. Membly Housing Company [2022] KECA 742 (KLR), where this Court stated that where the intention of the parties has been reduced into writing, under the parol evidence rule, it is generally not permissible to adduce extrinsic evidence, whether oral or written, either to show the intention of the parties, or to contradict, vary or add to the terms of the document, including implied terms. In that case, the Court stated further that courts adopt the objective theory of contract interpretation and profess to have the overriding aim of giving effect to the express intention of the parties when construing a contract, which is sometimes called the principle of four corners of an instrument, which insists that a document's meaning should be derived from the document itself, without reference to anything outside of the document such as the circumstances surrounding the writing or the history of the party or parties signing it. The 1st Respondent submitted that the agreements between the parties clearly defined the relationship of the parties and their obligations, and that the generalised definitions or marketing tools used by the 1st Respondent on their website could not override the express contractual terms agreed on by the parties. 74.The 1st Respondent submitted that its interest was limited only to the recovery of the sums advanced to the Appellants together with the agreed profit component. 75.The 1st Respondent argued that the Appellants violated the financing agreement by failing to keep the insurance policy current, which was their obligation under Clause 16.2 of the Musharaka agreement. This breach, according to the 1st Respondent, led to the event of default when the building collapsed. The 1st Respondent contended that, since the Appellants had breached the financing arrangement by failing to maintain a contractor's all-risks insurance throughout the financing period, it was entitled to take action under the agreements between the parties to protect its interests. 76.The 1st Respondent submitted that it recalled the entire loan and demanded that the 1st Appellant immediately purchase all the 1st Respondent’s outstanding apartment units; however, the 1st Appellant was unable and/or unwilling to do so. The 1st Respondent further submitted that, given these circumstances, it was entitled to realise its security over the suit property; and, therefore, the statutory notice was lawfully issued on 14th January 2016. 77.The 1st Respondent submitted that upon receipt of the statutory notice, the Appellants admitted their indebtedness in a letter dated 8th February 2016, and sought to reschedule the debt repayments by making an initial payment of Kshs. 4,000,000 and the remaining balance in monthly instalments of Kshs. 200,000, which the Appellants failed to honour. The 1st Respondent further submitted that, upon default, the lender’s right to enforce its security arises. In support of this, the 1st Respondent cited the case of Habib Bank A. }G. Zurich vs. Pop-In (Kenya) LTD. & 3 others [1995] KECA 15 (KLR). The 1st Respondent argued that the Appellants explicitly acknowledged the existence of the loan advanced to them by the 1st Respondent, admitted the default, and sought to restructure the debt. The 1st Respondent contended that its right to enforce its security arose, and there was no basis upon which it could be restrained from exercising its statutory power of sale. The Court was urged to dismiss the appeal with costs. 78.We have considered the proceedings of the superior court, the judgment of the court, the grounds of appeal put forward by the Appellants and the submissions made by counsel. This is a first appeal. In Gabriel Kamau Njoroge vs. Republic (1987) KECA 4 (KLR), this Court stated as follows:“As this court has constantly explained, it is the duty of the first appellate court to remember that the parties to the court are entitled, as well on the questions of fact as on questions of law, to demand a decision of the court of first appeal, and that court cannot excuse itself from the task of weighing conflicting evidence and drawing its own inferences and conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and to make due allowance in this respect. (See Pandya v R [1957] EA 336, Ruwalla v R [1957] EA 570).” 79.The same position was reiterated in Kenya Ports Authority vs. Kuston (Kenya) Limited [2009] 2 E. A 212, where the court stated that:“On a first appeal from the High Court, the Court of Appeal should 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 that respect. Secondly that the responsibility of the court is to rule on the evidence on record and not to introduce extraneous matters not dealt with by the parties in the evidence.” 80.The Appellants challenged the superior court’s judgment on eight grounds which we believe can be summarised into four main issues, namely; whether the learned Judge misapprehended the nature of the transaction that the Appellants entered into with the 1st Respondent; whether the learned Judge erred in his finding that the responsibility to take out the insurance cover for the project was on the 1st Respondent; whether the learned Judge erred in failing to find that the contract between the Appellants and the 1st Respondent was frustrated by the collapse of the investment project thereby discharging the parties of their obligations thereunder; and whether the learned Judge erred in not granting the reliefs sought by the Appellants. 81.Regarding the first issue, we are not convinced that the learned Judge misunderstood the nature of the relationship created between the Appellants and the 1st Respondent from the various agreements. The Appellants argued that, in interpreting these agreements, the superior court should have considered not only the terms of the agreements but also the discussions and representations the parties exchanged prior to entering into them. The 1st Respondent, however, maintained that the agreements were unambiguous and that no parol evidence should have been admitted in their interpretation. 82.In Kenya Power & Lighting Co Ltd vs. Membly Housing Company (supra) cited by the 1st Respondent, this Court stated as follows:“ 35.The learned judge’s approach to the interpreting the provisions of the Agreement for sale was guided by Clause 1.4 of the Agreement which provides that: “This agreement constitutes the entire agreement of the parties with regard to its subject matter and supersedes and cancels all previous negotiations and agreements.” 36.This clause constituted an entire agreement clause which the learned judge held that the clause naturally imposed a restriction in interpretation of the agreement for sale to the agreement itself. The previous negotiations, discussions, communications and agreement would have to be ignored by the court where the words of the agreement clearly conveyed the intention of the parties. On the other hand, this Clause would not prevent terms from being implied into a contract if there was a plain and obvious gap in the Agreement that was inconsistent with the objective intentions of the parties. See J N Hipwell & Son v Szurek [2018] EWCA Civ 674. 37.This clause is in line with the parol evidence rule that generally guides the court’s interpretation of a written contract by according primacy to the intention of the parties as set out in the document. This court in Fidelity Commercial Bank Limited v. Kenya Grange Vehicle Industries Limited [2017] eKLR summarised the appropriate approach as follows:“... where the intention of parties has in fact been reduced to writing, under the so called parol evidence rule, it is generally not permissible to adduce extrinsic evidence, whether oral or written, either to show the intention, or to contradict, vary or add to the terms of the document, including implied terms. Courts adopt the objective theory of contract interpretation, and profess to have the overriding aim of giving effect to the expressed intentions of the parties when construing a contract. This is what sometimes is called the principle of four corners of an instrument, which insists that a document's meaning should be derived from the document itself, without reference to anything outside of the document (extrinsic evidence), such as the circumstances surrounding its writing or the history of the party or parties signing it ” 38.The rule of exclusion of negotiations prior to entry of a contract as well as the parol evidence rule are subject to a number of exceptions. For instance, evidence of surrounding circumstances will be admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible to more than one meaning, but not to contradict the language of the contract when it has a plain meaning. Extrinsic evidence of terms additional to those contained in the written document will be admitted if it is shown that the document was not intended to express the entire agreement between the parties. If the parties intend their contract to be partly oral and partly in writing, extrinsic evidence is admissible to prove the oral part of the agreement.” 83.In National Bank of Kenya Ltd vs. Pipeplastic Samkolit (K) Ltd & another (supra), cited by the Appellants, this Court stated that:“A Court of law cannot re-write 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. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the charge.” 84.The following facts are not disputed: The 1st Appellant required finance to construct blocks of residential apartments on the land parcel, Title No. Ngong/Ngong/10872 (the suit property); the suit property was registered in the name of the 2nd Appellant, who was a director of the 1st Appellant; the 1st Respondent is a bank licensed to undertake banking business under the Banking Act, Chapter 488 Laws of Kenya; the 1st Respondent offered various banking products to its customers; among the banking products offered by the 1st Respondent was known as Musharaka; the 1st Appellant approached 1st Respondent and applied for finance to undertake the construction of the said apartments on the suit property(the project); and the 1st Respondent offered to finance the project to the tune of Kshs. 39,600,000. 85.Following the agreement by the 1st Respondent to finance the project, the parties entered into a financing arrangement known as “Musharaka ending with ownership” (the facility). Under this arrangement, the parties signed three (3) agreements (facility agreements), namely: a Letter of Offer dated 19th February 2014; an undated Musharaka ending with ownership financing agreement; an undated Letter of Undertaking to purchase Musharaka units; and a Charge dated 11th April 2014. From our review of the facility agreements, we see no difficulty in agreeing with the learned Judge that the relationship created by these agreements was that of a borrower and a lender, and not a partnership as claimed by the Appellants. 86.We agree with the Appellants that the banking product the 1st Respondent offered to the 1st Appellant was Musharaka. We also agree with the Appellants on the definition and characteristics of Musharaka. What, in our view, the Appellants overlooked is that this was Musharaka ending with ownership. The arrangement was that the 1st Respondent and the 1st Appellant would contribute to the project cost of Kshs. 60,235,857 in the ratio of 34% (Kshs. 20,635,857) and 66% (Kshs. 39,600,000), respectively; that the 1st Respondent would give the 1st Appellant one year to undertake and complete the project; and that the 1st Appellant would then purchase the 1st Respondent's entire contribution (share) in the project within 9 months in quarterly instalments along with a financing cost of 20.5% per annum. The facility agreements clearly stated that the 1st Respondent’s contribution of Kshs. 39,600,000 to the project was a loan to the 1st Appellant, which was to be repaid. The Letter of Offer specified “the repayment period”, the “Grace period,” the “Financing Rate,” and the security for the loan. The Musharaka ending with ownership agreement stipulated that the project property would be occupied and used exclusively by the 1st Appellant; that the 1st Appellant would buy the 1st Respondent’s share in the project; that the 1st Appellant would make monthly payments to the 1st Respondent; that failure to do so would constitute an event of default; and that the 1st Appellant would provide security in the form of a Charge over the suit property for the performance of its obligations. 87.The Letter of Undertaking stated that the 1st Appellant irrevocably undertook to purchase the 1st Respondent’s share in the project; and if the 1st Appellant failed to make the monthly payments or buy the 1st Respondent’s share in the project, it would have the right to enforce its security over the project property. In the Charge, the 1st Appellant is referred to as the borrower, and the 1st and 2nd Appellants agreed to pay the 1st Respondent, upon written demand, the monies owed by the Appellants to the 1st Respondent, with the default in doing so granting the 1st Respondent the right to exercise its power of sale over the suit property. 88.We have noted that when the statutory notice dated 14th January 2016 was served upon the 2nd Appellant, the Appellants, in a letter to the 1st Respondent dated 8th February 2016, admitted that the 1st Respondent’s contribution to the project was a loan that was to be repaid, and that they had defaulted on their repayment obligations and requested the 1st Respondent to reschedule “our indebtedness”. 89.In his judgment, the learned Judge stated as follows on this issue:“ 27.The Musharaka was not an independent agreement but was to be read together with the Letter of Offer in which the Bank financed 66% share of the investment while the 1st plaintiff would finance 34% of the share of the investment. The repayment period would be nine months and the payments made in quarterly instalments with an initial grace period of 12 months. The financing rate was agreed at 20.5% on reducing balance basis. The facility was to be secured by a first legal charge on the suit property, direct assignment of the 2nd plaintiff’s salary from his employer and joint guarantees and indemnities by the 1st plaintiff’s directors. Under the terms and conditions, the plaintiffs were to provide a Contractor’s All Risk Insurance Cover. 28.What emerges from the Musharaka and the Letter of Offer is that both documents show that the relationship between the parties is a financing agreement and not a partnership agreement. The Bank advanced money to the 1st plaintiff equivalent or proportionate to its investment in the property. As the Client in this case the 1st plaintiff, pays monthly instalments in line with Clause 2.7 of the Musharaka and or makes pre- sales and sales of the apartment units, the Bank’s share in the investment is reduced. At all times, the Bank does not assume ownership or control of the property as evidenced by Clauses 2.6, 2.8 and 2.9 of the Musharaka which provides that the Client retains exclusive right to use and occupy the property including the duty to repair and maintain the property. Nor does the Musharaka relieve the 1st plaintiff from repaying the principal sum advanced by the Bank in the form of investment.” 90.Upon analysing the facility agreements and the literature on Islamic Banking presented by the Appellants in the superior court and before us, we find no reason to fault the learned Judge’s findings. Musharaka is an Islamic business model adopted by banks as an alternative to interest-based financing for clients seeking Sharia- compliant financial products. In our view, this banking concept is adapted by banks to meet the individual needs of their customers. 91.In the case before us, the 1st Appellant approached the 1st Respondent for a Musharaka financing facility to develop residential apartments on a parcel of land (the suit property) owned by the 2nd Appellant. It was for the 1st Respondent to structure the facility in a manner that would meet the 1st Appellant’s needs while securing its own funds. The 1st Respondent offered the 1st Appellant what was referred to as Musharaka ending with ownership facility. The facility agreements executed by the parties include the Letter of Offer, the Musharaka ending with an ownership agreement, the Letter of Undertaking, and the Charge. 92.In our view, the superior court was tasked with interpreting the facility agreements between the parties to establish their rights and obligations. It was not asked to assess whether the agreements complied with Islamic law regarding what constitutes Musharaka. An analysis of the agreements clearly shows that the relationship between the 1st Respondent and the 1st Appellant was that of lender and borrower, not a partnership. The agreements lacked several fundamental features of Musharaka and included many elements not characteristic of Musharaka. In our view, the financing facility could only be considered Musharaka to the extent that the loan provided by the 1st Respondent was described as its “share” in the project the 1st Respondent financed, and that no conventional interest was charged. The Appellants did not challenge the legality of the facility agreements on grounds of non-compliance with Islamic law before the superior court. For that reason, we do not wish to comment further. 93.We will interpret the agreements between the parties as they are, an approach adopted by the learned Judge, which, in our view, was correct. The agreements were not ambiguous as claimed by the Appellants. The Appellants mainly sought to read into them what they did not contain, and to enforce obligations and duties that did not exist therein. We agree with the learned Judge’s finding that the relationship created by the said agreements was that of a lender and a borrower. 94.On whether the learned Judge erred in his conclusion that the responsibility to secure and maintain insurance coverage for the project property rested on the 1st Respondent, our answer is negative. Clause 3(e) of the Letter of Offer, Clause 3.1 of the Musharaka agreement, and Clause 6.5 of the Charge all impose an obligation on the Appellants to insure the suit property during the financing period. Contrary to the Appellants' submissions, Clause 3.8 of the Musharaka agreement does not assign the duty to insure the suit property to both the 1st Respondent and the Appellants; rather, it reiterates the 1st Appellant’s obligation to insure, as provided in Clause 3.1 of the agreement. 95.The next issue concerns whether the agreements between the Appellants and the 1st Respondent were frustrated, and consequently, whether the Appellants were discharged from any further performance. Under common law, a contract is deemed to be frustrated when, after its formation, events occur that make performance impossible, illegal, or radically different from what the parties contemplated at the time of entering into the contract (see Ewan McKendrick, Contract Law, Palgrave Law Masters, 11th Edition at 254). 96.In the case of Kwanza Estates Limited vs. Jomo Kenyatta University of Agriculture and Technology (2024) KESC 74 (KLR), the Supreme Court stated as follows on frustration:“(71)In summary, the doctrine of frustration releases parties from their contractual obligations when an unforeseen event fundamentally alters the nature of the contract, rendering further performance impossible or significantly different from the original agreement. Key principles include limitation to narrow circumstances, and reliance on events beyond the control or fault of the invoking party, the effect of bringing the contract to an end forthwith, without more and automatically. The final principle was the effect of fully discharging the parties from further liability under the contract from the moment the frustrating event occurred. Though accepted in civil law jurisdictions, the concept of partial discharge had been rejected in common law jurisdictions….As a matter of logic, the doctrine of frustration operates to discharge a contract, bringing it to an immediate and definitive end. Once the doctrine is applied, the contract cannot be deemed suspended or temporarily inoperative; it is terminated entirely unless the parties expressly agree to revive it through a subsequent agreement….(72)…However, the doctrine of frustration is not absolute. The alleging party must prove that the frustrating event occurred without their fault or contribution. Self-induced frustration, where the event results from the party's own actions or breach, cannot be relied upon to terminate a contract.” 97.In F.A Tamplin Steamship Company Limited v. Anglo-Mexican Petroleum Products Company Limited [1916] 2 A.C 397(House of Lords), cited by the Appellants in their case digest, the Court stated as follows:“When parties enter into a contract which is dependent for the possibility of its performance on the continued availability of a specific thing, and that availability comes to an end by reason of circumstances beyond the control of the parties, the contract is prima facie regarded as dissolved….In that case the question arises whether the event which has actually made the specific thing no longer available for performance is such that it can be regarded as being of a nature sufficiently limited to fall within the suspensory stipulation, and to admit of the contract being deemed to have provided for it and to have been intended to continue for other purposes….that the occurrence itself may yet be of a character and extent so sweeping that the foundation of what the parties are deemed to have had in contemplation has disappeared, and the contract itself has vanished with the foundation. If the course of events can be regarded as consistent with the continuance of the contract, it will follow that when the event possesses the more limited character, there will under the terms of the special stipulation, be mere suspension of the particular rights and duties which would otherwise arise under the general terms agreed on…And where the interruption is simply one of an interim character and likely to cease as soon as to leave the rest of the period stipulated free for the revival of the rights and duties of the parties after what amounts to no more than a temporary cessation of the power of performance, then, not only when there is an express stipulation covering the case that has occurred but, but possibly even where there is no such stipulation, the contract may be regarded as not becoming destroyed but only suspended. The question must always turn mainly on the facts. But if the facts be such that it appears that the power of performance has been wholly swept away to such an extent that there is no longer in view a definite prospect of this power being restored, then the contract must be looked upon as being wholly dissolved, and the courts cannot take any course which would which would in reality impose new and different terms on the parties.” 98.The Appellants argued that the facility agreements were frustrated because the collapsed buildings formed the basis of the agreements. As we have established earlier, the relationship between the Appellants and the 1st Respondent was that of a borrower and a lender. It is undisputed that the loan provided by the 1st Respondent was for the construction of apartments on the suit property. Like the learned Judge of the superior court, we find no clause in the facility agreements linking the repayment of the loan to the completion of construction of the apartments. We are not convinced that the Appellants’ obligation to repay the loan was frustrated by the collapse of the apartments. 99.We also add that the doctrine of frustration cannot be invoked by a party at fault. The Appellants argued that the collapse of the project apartments was not caused by any party's fault or negligence. The 1st Respondent lent the 1st Appellant Kshs. 39,600,000 to build apartments on the suit property; this loan was to be repaid within a set period. The Appellants were fully responsible for the construction works, had control and possession of the suit property, and were required to insure the property throughout the financing period to prevent loss to the 1st Respondent during and after construction. The 1st Appellant took out contractors all risks insurance for Kshs. 39,600,000; however, the insurance expired during construction and was not renewed as stipulated in the facility agreements. Subsequently, the apartments under construction collapsed. It is evident that the Appellants breached the facility agreements. Had the insurance cover been maintained, the parties could have recovered the principal sum of Kshs. 39,600,000 from the 2nd Respondent, representing the construction cost according to the insurance policy. With this amount, the construction could have continued without interruption. It is clear that the collapse was anticipated, and the parties had prepared for it by obtaining insurance. The Appellants’ failure to renew the insurance, which constituted an event of default, did not frustrate the facility agreements or absolve them from their obligations. We therefore find no merit in the Appellants' claim that the agreements were terminated due to frustration. 100.The final issue is whether the learned Judge erred in failing to grant the reliefs the Appellants sought in their plaint. After re-evaluating the evidence and the law applied by the learned Judge, we find no error in the judgment and decree of the superior court. The Appellants had taken a loan from the 1st Respondent, which they defaulted on after demand. The debt and default were admitted. The proposal for repayment was not honoured. The 1st Respondent was within its rights to exercise its power of sale under the Charge executed in its favour by the 2nd Appellant. The reliefs sought by the Appellants before the superior court had no basis. The Applicants’ suit was, therefore, properly dismissed. 101.The upshot is that we find no basis for interfering with the superior court's judgment. The appeal is dismissed with costs to the 1st Respondent. DATED AND DELIVERED AT NAIROBI THIS 31ST DAY OF JULY, 2026.W. KARANJA...........................JUDGE OF APPEALL. ACHODE...........................JUDGE OF APPEALS. O. OKONG’O...........................JUDGE OF APPEALI certify that this is the true copy of the originalsignedDEPUTY REGISTRAR