SOCOGEDI SA v. BRALIRWA

SOCOGEDI SA v. BRALIRWA

- Source: Amategeko - Section: Decisions (Judgements) - Date: 2012-12-07 - Case/document no.: R.COM.A 0156/11/CS - Collection: Supreme Court

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SOCOGEDI SA v. BRALIRWA [Rwanda SUPREME COURT – R.COM.A 0156/11/CS (Mukanyundo, P.J., Havugiyaremye and Mukamulisa, J.) 7 December, 2012] Law governing commercial contract – Commercial partnership agreements – Commercial agreement may be proven by relationships that characterized both parties even when it unwritten especially that commercial law does not provide for it. Commercial contract – Termination of the contract – Damages – There was no unlawful termination of the contract because it is sufficient for the party who opts to terminate contracts such as this one to demonstrate the grounds which pushed him/her to do it and it is not a requirement to pay damages at any cost. Tort law – Right to appeal – Damages – He cannot be awarded damages based on appeal of the other party stating that the latter dragged into litigations since filing appeal for whoever who is not satisfied of the ruling is his right and no proof of that unjustified litigations. Facts: SOCOGEDI SA (now SOCOGEDI Ltd) concluded partnership contract with BRALIRWA. That agreement was about the commerce of beverage. After the written agreement had ended, the relationship between them did not stop. Later on, BRALIRWA terminated the contract on the ground that SOCOGEDI had failed to respond to its letter requesting explanations about breach of the terms of the contract that they had concluded. After that

termination, SOCOGEDI wrote to BRALIRWA requesting amicable settlement of the matter. After parties failed to reach the compromise, SOCOGEDI sued BRALIRWA before the Commercial High Court stating that BRALIRWA had terminated the contract unlawfully and requested various damages. BRALIRWA replied that the written contract that they had concluded had ended. The Court held that the claim had no merit as the contract had been terminated. SOCOGEDI appealed to the Supreme Court stating that it was dissatisfied of the ruling of the appealed judgment because it contains contradiction figured out by the fact that the Court had admitted that that the written contract between SOCOGEDI and BRALIRWA was supposed to take the end on April 30, 2010, even after that date parties kept their relations intact as emphasized by different acts that that existed between both parties while on the other hand it held that again that the agreement had taken the end. They added in addition that, in commercial contract, the written agreement is not compulsory. In replication to these grounds of appeal, BRALIRWA stated that the partnership agreement had ended and, in addition, there was no clause therein specifying that the contract would possibly be extended without the conclusion of the new one. BRALIRWA insisted that, thought there might be the relationship that later existed, it would not therefore be considered as being based on the contract; rather the relationship that can exist between any buyer and seller. Held: 1. He cannot pretend not to recognize the document stating that it is for the first time revealed before the court while it has been debated on during the hearing before the court which issued the verdict of the appealed judgment and that such a document had been issued by the

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party which denies it., It is rather the re-introduction of an issue which had been ruled on and by the previous court and had never been appealed against.

2. Though there was written agreement after the termination of the initial contract, the contents of the correspondences between both parties prove with no doubt that the relationships between them which was even based on the initial written contract continued being in existence especially that the commercial law does not provide that the commercial agreements must only be written. Instead, the essential is evidence proving the commitments of each party and which the latter can prove by whatever means.

3. BRALIRWA did not unlawfully terminate the contract since it demonstrated the grounds of the termination in additions to different disagreements that they had including bad relationship and that in termination of agreement such that concluded between them, it is sufficient to give explanations thereon. The party which terminates the contract is not bound to pay damages.

4. No damages must be paid by the party who is not satisfied of the ruling as long as it is visible that he did not drag the other party in unjustified proceedings; it is rather his rights. Appeal has merit in part; Cross appeal has no merit’ Both parties must jointly pay court fees. No law was based referred to. No case was referred to

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DIMITRI HOUTCIEFF, DROIT DU COMMERCE ET DES AFFAIRES, 2È ÉD., SIREY, 2008, Nº 779. Judgment I. BRIEF BACKGROUND OF THE CASE [1] SOCOGEDI SA (now SOCOGEDI Ltd) entered into a partnership contract with BRALIRWA Ltd. The agreement concerned the trade of beverage either alcoholic or non- alcoholilic. From that agreement SOCOGEDI announced that though the latest written contract they had entered into was supposed to terminate by April 30, 2010, even after that date their partnership continued till BRALIRWA terminated the contract on December 23, 2010 on the ground that SOCOGEDI had not responded to its letter requesting information about the non- respect of the terms of the contract. After the termination of the contract SOCOGEDI wrote to BRALIRWA requesting amicable settlement of the matter. After this failed, it made recourse to

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courts. BRALIRWA presented its defence that it has no obligation for SOCOGEDI as the agreement partnership that they had concluded ended April 30, 2010. [2] SOCOGIDI sued BRALIRWA in Commercial High Court lamenting that it had illegally terminated the contract. He requested 860.410.433 Frw for the loss incurred, 15.000.000 Frw for damages and 10.000.000 Frw for advocate fee. The Court ruled that the claim of SOCOGEDI has no merit on the ground that there was no partnership agreement between it and BRALIRWA as it had been terminated. [3] SOCOGEDI appealed to the Supreme Court and the latter found that the claim has merit after it was subjected screening. [4] The case hearing waqs conducted on November 1, 2012 SOCOGEDIE assisted by Mugabo Christoph alongside Kayianga Cyrille while BRALIRWA was assisted by Mpayimana Iasaie alongside Basomingera Alberto, councels. II. ANALYSIS OF LEGAL ISSUES a. Whether the document that SOCOGEDI presents as defence must not be considered [5] The defence for BRALIRWA raised an objection that the documents that SOCOGEDI bases its appeal to this instance include the ones concerining the bonus that BRALIRWA used to allocate to it and must not be considered because their opponent had denied to submit them and that after the written request of those document was addrssed to them, they had denied to respond. [6] Counsels for SOCOGEDI responded that the

documents that BRALIRWAinvoked had been debeted on since the Commercial High Court as that very Court had adjourned the hearing so that aparties could exchange their submissions and documents that serve them in the proceeding. It added that all of that have been done and the hearing was re-opened and then plead the case on merit whereby BRALIRWA presented its defence against the claim of SOCOGEDI. It concluded that the objection raised by BRALIRWA has no merit. [7] The Court finds that as indicated by the case file, during the preliminary hearing of the case dated March 31, 2011 the counsel for BRALIRWA apologized for not having submitted to his opponent the defence submission adding that the delay was due lack of the document that he was supposed to used and that was supposed to be issued by the whitemen of BRALIRWA but unfortunately they were not available and the Court adjourned the hearing to April 14, 2011 so as to have time to assess the submissions of BRALIRWA that were submitted before it on the day of the haering. [8] The hearing was re-opened on April 4, 2011. On that day BRALIRWA raised an objections including SOCOGEDI failure to hand evidence that constitue the base of its claim and this also led to another adjournment to June 16, 2011. On July 29, 2011 the Court issued a verdict on the plelimonary hearing about the objection that had been raised by BRALIRWA and on the issue about the exchange of the documents, it orders that SOCOGEDI must hand to

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BRALIRWA all set of evidence and another hearing was fixed on October 3, 2011. On that day, the hearing continued and all parties submitted to the Court the grounds of their claims. [9] Inparticular, with regard to the objection that BRALIRWA had raised requesting the Court not to consider the documents that SOCOGEDI prsents as as a proof of good partnership between it and BRALIRWA as the latter used to allocate the bonus as well as other evidence, though BRALIRWA pleads that those document must not be considered because they are for the first time presented on this instance, these statements differ from the minute of the hearing dated June 16, 2011 in the Commercial High Court since it indicates that the disputes related to those document have been debated on before that Court. In addition, the documents that BRALIRWA denies the acknowledgement, though it was debated on before, it is would be not comprehensible to states that it does not recognizes them. [10] Based on the above explanations, the Court finds that the fact that at this instance, BRALIRWA brings back the objection that it had raised before the Commercial High Court and even give its ruling on that and present the full dedence on all grounds of the claim of SOCOGEDI and that it did not appeal against the order; this implies the objection raised as stated above has no merit. b) Whether the partnership agreement

between BRALIRWA and SOCOGEDI was still in force even after April 30, 2010. [11] Counsels for SOCOGEDI argue that their grounds of appeal are among others the contradiction in the appealed judgement whereby in paragraph 13 page 3 the judge conceded that even though the written contract between SOCOGEDI and BRALIRWA was supposed to cease existing on April 30, 2010, even after that date parties’ relationship continued as stressed by different activities while on paragraph 18 page 6 of the judgment he conceded that the contract had ceased existing. [12] They state further that based on article 1 CCB III which provides for what the contract is, the law does not set that the contract must at any cost proved in a written form. Thay added that the defence of BRALIRWA that the contract had already taken the end on April 30, 2010 is refuted by their relationships which continued whereby it continued supplying its products to SOCOGEDI as it used to be. They added further that evidence that their relationships continue dis the latter dated May 14, 2010 that BRALIRWA wrote to SOCOGEDI admitting, ''in the meantime the terms of the former contact will still be binding as well as the clauses in our letter Div nº 037/com.27/2010 dated March 25, 2010'' According to them, the content of that letter proves that the contract did not take the end on April 30, as held by the judge. [13] They

insisted further that another evidence that the contact was still into force is that BRALIRWA conceded that their relationship was good to the extent that it allocated to it a bonus equivalent to 10.360.738 Frw and that that payment had been already made and that on Septemeber 30, 2010 it allowed another bonus for the third term even though it is not yet paid. [14] Counsels for BRALIRWA disputed that as held by the previous Court, the agrrement between it and SOCOGEDI ended on April 30, 2010 and there is not further agreement that the latter may be extended without the conclusion of the new contract. They further stated that though there might be another commercial relationship that had sebsequently existed, it is not

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related to the contract that they had concluded before. Rather, the articulated, it is simple commercial relationship that may exist between any client and the trader which is different from the commercial pertinership which was provided for in contract that took the end as held by the previous judge. [15] They argue that since BRALIRWa’s relationships with SOCOGEDI, new agreement used to be renewed every year and thise was the practice for other traders but since SOCOGEDI relationship that did not satisfy BRALIRWA, the contract was not renewed as it was the practice for the others in partnership and it led to non regular contracts while it was in trial period to seek how to sort out the problem. [16] They stressed further that in their different correspondances, BRALIRWA has repeatedly showed the bad relationship to SOCOGEDI and that another evidence of SOCOGEDI’s struggles is that it is on its way to being declared bankrupt. With regard to the bonus that SOCOGEDI is alleging to have been given, counsels for BRALIRWA replied that it was done before April 30, 2010. [17] The Court notes that both parties accept that the latest written contract was supposed to take the end on April 30, 2010. They disagree on the fact that the partnership agreement was still in effect even if there was no written agreement till December 23, 2010. [18] [Though BRALIRWA argue that the relationship

between it and COCOGEDI after April 30, 2010 was based on temporary activities and not on the written contract that used to be between them, there is a serie of evidence proving that their commercial relationship had never stopped on April 30, 2010 as above highlighted, which differs from the holdings of the previous court. Some of that serie of evidence includes : -In its correspondence dated May 14, 2010 BRALIRWA wrote to SOCOGEDI demonstating that its intention was '' the renewal of the partnership agreement''; -In very correspondance further, BRALIRWA comes back to the discussions that they had on February 25, 2010 whereby it cleared that the new agreement would be containing the terms as agreed on and that would be signed in June 2010. That correspondance further demonstrates that in the meantime, the terms of the previous contract shall apply as well as the terms in the correspondance dated March 25, 2010; -In the letter as referred to above dated March 25, 2010, that is one month prior to April 30, 2010, which concerns the '' re-accentuation of the agreement between you BRALIRWA'' talking about relationship with BRALIRWA clients including SOCOGEDI that was set to shape good relation; -Furthermore, in its letter to SOCOGEDI dated June 23, 2010, BRALIRWA talk about its senior officials’ trip in the area that SOCOGEDI distributes BRALIRWA products ( those areas include Kamonyi, Gitarama and Ruhango) the points which they were not satisfied on, and the strategy that SOCOGEDI must adopt to put things right.; -In its letter dated Novembaer 9, 2010 among the notices of BRALIRWA to SOCOGEDI, there was its worry concerning the distribution area of SOCOGEDI whereby clients have been lamenting of lack of BRALIRWA products. BRALIRWA

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requested it in addition that it would comply with the THE request of BK about the payment cheques. [19] Even though there was no written agreement after April 30, 2010, the Court finds that the content of the correspondences lised above demonstrate without any doubt that the partnership between BRALIRWA and SOCOGEDI had continued and it was based on the terms in the previous contract. In addition, the law does not provide that the commercial agreement must be only proven by written agreement. This matches with the opinion of the legal scholars who view that the principle in commercial law is that the written agreement is not a condition in case there is avidence that parties committed themselves to perform obligations and which may be proven by evidence whatever.1 c) With regard to whether BRALIRWA had unlawfully terminated the contract so that it may pay damages. [20] Counsels for SOCOGEDI argued that after a long time of good relationship between it and BRALIRWA, the latter had unlawfully terminated the contract and that the they do not agree on the ground that BRALIRWA pretends that SOCOGEDI had stopped to order the supply of its bebarage since it had regulary making ''supply order'' of the bevarage but BRALIRWA denied upon the prertext that their cheques were not iniatially acknowledged by BK while the latter in its letter to BRALIRWA dated December 21, 2010 was admitting

that it would keep its relation with SOCOGEDI (confirmation of financial support for SOCOGEDI). They add that evidence that the defence of BRALIRWA about the concerns over those cheques is ptetext is that on December 21, it received its cheques equivalent to 60.000. 000 Frw while they had not been initailly recognized by BK. [21] Counsels for BRALIRWA responded that the termination of the contract was a result of bad relationship with SOCOGEDI and that evidence of that bad relationship is a letter that BRALIRWA wrote to it on June 23, 2010 after it had tripped in the area it distributed whereby it showed the mistake that disfavered BRALIRWA. [22] They add further that SOCOGEDI must not pretend the bonus that gained since that was allocated before it had changed the its working style since it had finally stopped making the command of BRALIRWA products and that its defence about the cheques must not be considered because the fact that BRALIRWA asked it to have its cheques be recognized by BK was the result of that bank requests as it is in its letter dated December 21, 2010. According to them, this indicates that the bank had no long trust in SOCOGEDI and that it is actually on the way to being declared bankrupt. [23] The Court finds that even though both BRALIRWA an SOCOGEDI had been for so long in commercial partnership, their relationship got damaged as indicated by

different 1 See, Pierre FERNANDEZ, Contrats commerciaux, disponible sur http://www.avocat.fernandez.com/contrats commerciaux.php : In commercial law, the principle is that the drafting of a written contract is not required, the contractual relationship from the exchange of consent and can be demonstrated by any means ... .All evidence can be admitted in court : written, witnesses, confessions, indices, assumptions, etc ... " see also Dimitri HOUTCIEFF, Trade and Business Law, 2nd ed, Sirey, 2008, No. 779, p.318. "Commercial contracts are generally consensual; they are formed by the simple meeting of the offer and acceptance".

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correspondences that they had been exchanging. For example in the latter dated June 23, 2010 as highlighted above, after visiting the area of the activities of SOCOGEDI, BRALIRWA submitted to the latter the worries about about the non-respect of the contract. Furthermore, in its letter of November 9, 2010 BRWALIRWA notified SOCOGEDI about the lamentations of its clients about the lack of the products of BRALIRWA in the area of activities of SOCOGEDI. That letter requests also SOCOGEDI to come closer to BRALIRWA to avoid another lack of its products. [24] Moreover, in that correnspondance as said above, BRALIRWA notified SOCOGEDO of BK request of not accept their payment cheques prior to its (BK) acknowledgemen and herewith advised it to comply with the requets of BK. This matches with the content of t the letter of BK dated December 21, 2010 as above mentioned whereby the bank, though admitting that it would continue fanancially support SOCODEGI, it had stated that that support was supposed to last on three months while waiting for the renewal of the contract with BRALIRWA. It stated this however also stating that it was going to set the new system of monitoring the activities of SOCOGEDI with regard to its cheques which ha first to be acknowledged an connection with its stock. Based on the above holdings, though there might be cheques of SOCOGED which might have been received

by BRALIRWA while they have not been acknoledged by BK does not invalidate those instructions about those cheques as highlighted above. [25] The Court finds that in accordance with explanations above, SOCOGEDI does not exclude that it was not surprised of termination of of the contract by BRALIRWA nor he diny that the contract termination was unlawful so that it can seek reparation while in its letter BRALIRWA notifie dit of the grounds for the termination of the contract in addition to some other existing problems as underlined. Furthermore, this is in accordance with the opinions of the legal scholars that in case of the termination of agreement like that which was between BRALIRWA and SOCOGEDI (distribution agreement) the essential is that the party which opts to terminate it gives explanations thereon but is not bound to give damages to the other party at any cost.2 c. With regard to cross-appeal filed by BRALIRWA [26] BRALIRWA filed a cross appeal against that of SOCOGEDI. It requests that 500 000Frw would be added to that which was granted by the previous instance for dragging it into it litigations. [27] SOCOGEDI responded that this has no merit because it is the one which had unlawfully terminated the contract. [28] The Court finds that in case SOCOGEDI was not satisfied of the ruling of the firt instance, nothing would hinder it from filing an appeal as it is its right

and there is no evidence that it dragged BRALIRWA into litigations. Hence, damages requested by BRALIRWA on this instance have no merit. 2 See François COLLARD DUTILLEUL na Philippe DELEBECQUE, Contats civils et commerciaux, 8è éd., Dalloz, 2007, nº 929, pp 908-909: “….Le contractant qui prendrait l’initiative de rompre le contrat devrait avoir à se justifier sans être tenu, bien entendu, d’indemniser automatiquement la victime de la résiliation. Il lui appartiendrait simplement de faire état des raisons fondant la cessation des relations contractuelles.”

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III. THE DECISION OF THE COURT [29] Holds that appeal of SOCOGEDI has merit in part. [30] Cross appeal filed by BRALIRWA has no merit. [31] Orders SOCOGEDI to pay ½ of the court fees equivalent 35.750 Frw, that is 17.875 Frw which would be followed by governmant coercion in case of default within 8 days.