BACO AND AYUB TRADING CO

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION)

AT PAR ES SALAAM COMMERCIAL CASE NO. 40 OF 2015

BACO AND AYUB TRADING COMPANY LIMITED..................................................... PLAINTIFF

VERSUS PERMANENT SECRETARY,

MINISTRY OF DEFENCE AND NATIONAL SERVICE...................................... 1st DEFENDANT

CHIEF OF DEFENCE FORCES TANZANIA PEOPLE’S DEFENCE FORCES HEADQUARTERS............................ 2ND DEFENDANT THE ATTORNEY GENERAL............................. 3*D DEFENDANT

JUDGEMENT Mansoor, J: Date of JUDGEMENT- 18™ MARCH 2016 The plaintiff is carrying on the business of supply of varieties of foods and other materials. The plaintiff has been in the said business for many years. The plaintiff is on the 1st and 2nd defendant’s approved list of suppliers for the varieties of products for a number of periods and its supplies and work were always appreciated and accepted by the defendants for all these periods. The Is*1 and the 2nd defendants issued a tender for supply of Tinned and Dry Food (Meals Ready to Eat) by inviting tenders. The Tenders were advertised on Daily Newspapers and Habari Leo of 7th and 11th September Newspapers, respectively. On 3rd March 2013, the plaintiff was awarded Tender to supply Tinned and Dry Food- Meals Ready to Eat (Tender No. ME- 020/2012/13/HG/G/01. Accordingly, the Plaintiff was awarded a tender to supply Meals Ready to Eat for Breakfast and Lunch in 18,573 Cartons for a consideration of THz 4,913,131,500. The plaintiff alleges in its plaint that, immediately after receiving the award, the plaintiff placed an order to the producer of dry foods and paid USD 769,419 (THz 1,700,000,000) as advance payments. He continues to allege in paragraph 11 of the plaint that on 9th May 2013, 1st defendant wrote a letter to the plaintiff to cancel the tender on the ground that such tender is scheduled for the financial

year starting July 2013, which ends on 30th June 2014. The plaintiff alleged to have written a letter to the first defendant dated 15th May 2013, informing the 1st defendant that it had already ordered the products and they are expected to arrive to Dar es Salaam Port on 20th July 2013, and that such kind of Ready to Eat Meals cannot be sold in the ordinary market as they are special foods made for the Army. The 1st defendant did not respond. The plaintiff alleged at paragraph 15 of its plaint that the products arrived and were delivered to the 1st defendant on 28th September 2013. The plaintiff avers that the products were delivered to the 2nd defendant’s CO 511 KJ Base Stores Department, Gongo la Mboto Area, Dar es Salaam, as instructed by the 1st defendant. The plaintiff said he supplied 18,573 Cartons of Ready to Eat Meals for Breakfast and 3| agc Lunch. The plaintiff avers that the 1st defendant refused to pay for the supplies despite several demands. At paragraph 17 of the plaint, the plaintiff avers that it has taken a loan from the CRDB Bank amounting to THz 4,755,501, 483, and the plaintiff is suffering payments of interests and penalties because of failure to repay the loan on time. The plaintiff thus alleges that it had to suffer a huge loss on account of the abrupt stoppage of the, or cancellation of the tender, and refusal to make payments for the supplies. The

plaintiff therefore demands for the following reliefs: a) A declaration that the Defendants have breached the Contract to Supply Meals Ready to Eat (Tender Number ME-020/2012/ 13/HG/G/01); b) Payments of THz 4,913,131,500 being the principal amount agreed in the Tender; c) Payments of THz 3,000,000,000 being compensation for the loss suffered due to failure to pay on time and failure to honor the contract; d) Payment of THz 1,000,000,000 being interests, penalties, annoyance and disturbance suffered by the plaintiff due to failure to pay on time; e) Payments of THz 500,000,000 as compensation for loss suffered in the whole course, time wasted in the investments, exemplary damages and punitive damages for unlawful acts of the defendant’s; f) Payments of interest at the commercial rate on the amounts on (b), (c), (d), and (e) at the rate of 22% per month from the date when each claim accrued until the date of final payments; g) Payments of interest s of 7% on amounts in b), (c), (d), and (e) per month from the date when each claim accrued until the date of final payments; h) Payments of general damages; i) Costs of the suit; j) Any other reliefs his Court deems fit and fair to grant. Along with the plaint and the statements of the witnesses , the plaintiff produced in court as exhibits , a 90 days statutory 5| Notice to sue the defendants (Exh Pl), Special Resolutions authorizing

the plaintiff to institute the suit (Exh P2), Copies of Newspapers for invitation of the Tender (Exh P3), Addendum to Tender dated 9th October 2012 (Exh P4), Tender Award Letter dated 2/03/2013 (Exh P5),letter dated 9th May 2013, Cancellation of Lot No. 18 (Supply of Meals Ready to Eat - MRE) (Exh P6), letter dated 15th May 2013 from the plaintiff to the 1st defendant(Exh P7), Delivery Note No. 0358 dated 28th September 2013 (Exh P8), Request for payments letter dated 3/10/2013 (Exh P9), Demand Letter by CRDB Bank dated 11/12/2013 (Exh P10), Demand Letter dated 11/12/2013 (Exh Pll), Demand Notice from CRDB Bank dated 7th March 2014, (Exh. Pl2), Reminder Letter requesting for payments dated 8th November 2013 (Exh Pl3), and a letter dated 17th September 2013 from the plaintiff to the defendants requesting the assistance to remove the products from the Port. The following documents were admitted as Exhibits No. Pl5, collectively: 1. Letter dated 29/12/2011 (Award Letter from TPDF); 2. Award Letter dated 21 / 12/2010; 3. LPO dated 2/6/2011; 4. Letter dated 10th / 12/2011 from TPDF; 5. Payment voucher dated 28/06/2015. The plaintiff also produced as exhibit P16 a letter from CRDB dated 17th June 2015 to the Plaintiff as a legal notice for recovery of THz 5,947,516,551.22 overdue outstanding loan. The plaintiff case presented one witness, Mr. Ayoub Amani, who is the Director of the

Plaintiffs Company, whose evidence was basically a repetition of what was pleaded in the plaint. During cross examination Mr. Ayoub Amani admitted that there was no contract between his company and the defendants for supply of Ready to Eat Meals, but he said, the Award Letter was the Contract. He also admitted that the Delivery Note (Exh P8) was for temporary receipt of the products at the 2nd defendant warehouse, and that he was asked by the Army Officer to write the word “Temporary”, but since the goods were imported in the name of the Army, and 71 since the plaintiff was waiting for the LPO from the defendants, he had to write the words Temporary on the delivery note, awaiting the instructions and the LPO from the Army. He said, he never received the instructions and the LPO from the Army to date, and the goods are still in the warehouse of the 2nd defendant. The defense denied each and every allegation contained in the plaint, and demanded for strict proof. During trial, the defense presented Major Verus Chrysostom Mbuzi, senior Officer of the Regular Force of Tanzania People’s Defense Forces, currently working as a Staff Officer Logistic at the Naval Command Headquarters, and Major General Patrick Peter Mlowezi (rtd), also Staff Sergeant Chacha Makoba working as a Quartermaster of Kipili Detachment of the Naval Command Headquarters, Nkasi District, Rukwa Region. These

witnesses presented in Court as exhibits Bid Submission for Tender Form from the Plaintiff for Tender No. ME-020/2012/ 13/HQ/G/01 dated 19/10/2012 (Exh DI), Invitation for Bid Document dated October 2012 for Tender 8| gc No. ME-020/2012-13/HQ/G/01 (Exh D2), Addendum for Tender No. ME-020/2012-13/HQ/G/01 dated 9th October 2012 (Exh D3). In his testimony Major Verus Chrysostom Mbuzi had said that he gave out the letter of Award to the plaintiff, but he had asked the plaintiff to contact the Chief of Logistics and engineering for other formalities, including the signing of the contract. He also said that he was the one who wrote the cancellation letter and the reasons for cancelling the tender was that the army experienced unpredicted financial limitations, and had advised the plaintiff to wait for the budget for the financial year procurement plan of July 2013 to July 2014. Major General Patrick Peter Mlowezi said in his testimony that since the plaintiff did not sign the contract, the defendants’ could not issue him with the LPO, and that the plaintiff was to comply with certain conditions before the contract was signed, including the fact that the plaintiff did not contact the Chief of Logistics and engineering as directed by Major Verus Chrysostom Mbuzi. Staff Sergeant Chacha Makoba, acknowledged to have received the goods from the plaintiff and kept them in the go downs of

the Army in 511 Warehouse, Gongo la Mboto, temporarily awaiting for other formalities to be completed. He said he received 19,423 cartons. The issues which needs determination in this suit, is whether there is a binding contract between the plaintiff and the Defendants. * It has been admitted by Mr Ayub (PW1) that there is no contract signed between the plaintiff and the defendants. Mr Ayubu said, the Award Letter is the contract, and that as soon as he got the Award Letter he ordered the Ready to Eat Foods. An award letter is the decision notice sent out to all successful supplier(s) once the evaluation decision has been made. The despatch of a valid award letter, together with letters to unsuccessful suppliers, represents the start of the important standstill stage in the procurement process. It is now well settled that a letter of intent or award letter merely indicates a party's intention to enter into a contract with the other party in future. A letter of intent is not intended to bind either party ultimately to enter into any contract. The letter of award merely expressed an intention to enter into a contract. There was no binding legal relationship between the plaintiff and 1st defendant at this stage. However, it is no doubt true that a letter of award may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts

involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the offer and asking the contractor to start the work with a .stipulation that the detailed contract would be drawn up later. If such a letter is issued to the contractor, though it may be termed as a letter of intent/award, it may amount to acceptance of the offer resulting in a concluded contract between the parties. But the question whether the letter of intent is merely an expression of an intention to place an order in future or whether it is a final acceptance of the offer thereby leading to a contract, is a matter that has to be decided with reference to the terms of the letter. In the present case, Exhibit P5, which is the Tender Award Letter from the Defendants to the Plaintiff was not detailed. It simply stated that, the Ministry of Defense and National Service at its meeting held on 2nd March 2013, the Ngome Tender Board authorized the plaintiff to supply Meals Ready to Eat Breakfast & Lunch (1X12 Pack C/W Accessories)TPDF Standard, Cartons 18,573 for THz 4,913,131,500. At the end of this letter, the following words appears: “Please liaise with the Chief of Logistics & Engineering at TPDF HQs for contract signing and other modalities on how to execute the contract.” It is clear that the letter of award was not the contract, and the tender was not to be

executed until the contract is signed and the modalities on how to execute the contract was discussed with the Chief of Logistics and Engineering. The plaintiff did 12 | no produce any material evidence showing that he had liaised with the Chief of Logistics & engineering, and that the Chief of Logistics and engineering had either neglected or refused to give the contract. The records and the pleadings shows that on 2nd March 2013, the letter of Award was issued to the plaintiff, and 16 days later, the plaintiff placed an order to the manufacturer to produce and ship the Ready to Eat Food, and on 28th September 2013, the products were delivered to the 2nd defendants’ warehouse at 511 KJ Base Stores Department, Gongo la Mboto Dar es salaam. The records shows also that the contract was not signed, and instead the tender award letter was cancelled on 09th May 2013, before the goods were delivered. Chitty on Contracts (para 2.115 in Vol. 1, 28th Edn.) observes that where parties to a transaction exchanged letters of intent, the terms of such letters may, of course, negative contractual intention; but, on the other hand, where the language does not negative contractual intention, it is open to the courts to hold that the parties are bound by the document; and the courts 13 | will, in particular, be inclined to do so where the parties have acted on the document for a long period of

time or have expended considerable sums of money in reliance on it. Be that as it may." A careful reading of the above letter of award alone shows that the letter of award issued by the 1st defendant were never intended to be treated as a binding contract between the parties. There was no indication in the letters of award about acceptance of the offer made by the defendants. Therefore, this Court holds that no agreement was executed between the parties for purchase of the goods. The plaintiff ought to have waited for the signed contract in which the modalities of the execution of the tender would have been discussed and incorporated in the contract. The plaintiff took the risks of going ahead and make the order without first signing the contract. In fact Exh DI and D2 which were instructions to Bidders (IBT) Clause 40.2 clearly instructed the plaintiff the notification of the award will not constitute the formation of the contract, subject to the bidder furnishing the performance Security in accordance with ITB Clause 42 and signing of the contract in accordance with Clause 41.2. It appears the plaintiffs Director read this clause but he ignored it since in the previous tenders, he used to supply and get paid without entering into a contract as evidenced in Exhibit Pl5, he tendered in court. This case will not be decided based on documents of previous tenders, of which they

are not the subject of this case. Even if I have to read the award letter along with other documents presented in court by the plaintiff in the light of the conduct of the parties, it becomes clear that an agreement was to be executed first between the parties before execution of the tender could have started. . In any case, the plaintiff did not give any evidence showing that he made follow up with the Chief of Logistics and Engineering as instructed in the letter of award before the expiry of 28 days. In fact the plaintiff did not even await the expiry of 28 days, he went ahead and ordered for the goods within 16 days from the date he received the award letter. The 151 \ A records shows that, the award was canceled on May 9th 2013 via a letter with Ref No. MMJ/5577-1 (NTB) (Exhibit P6), since as stated by the defendants that the tender could not be implemented without a valid binding contract, among other reasons stated in that letter. I agree with the submissions of the Defendants that Section 55 of the Public Procurement Act, 2004, which was in force at the time when the letter of award was issued to the plaintiff, it provides that a formal contract is required between the parties before the supply of the goods. 55.- (1) Subject to the provisions of section 54, the tender or proposal that has been ascertain to be the successful tender or proposal pursuant to section 68(a)

and 71(1) of this Act shall be accepted. Of tender and entry into force of a procurement contract; (2) The procuring entity on whose behalf the tenders, offers or proposals were invited shall be notified by the tender board of the tender board's acceptance of the tender, offer or proposal and the notice of acceptance of the tender shall be given by the procuring entity promptly to the supplier, contractor or consultant who submitted the tender, offer or proposal. 16 | P ,i y c IB ' V (3) The notifications referred to in subsection (2) of this section shall be in writing and signed bg authorised officers. (4) Where a tender, offer or proposal has been accepted by the tender board, the procuring entity on whose behalf the invitation for tender, offer or proposal was issued and the person whose tender, offer or proposal has been accepted shall enter into a formal contract for the supply of goods, services of the undertaking of works, as the case may be. Therefore, since the award letter in this case did not constitute a valid contract between the parties, issue no 1 is answered that there was no valid agreement between the parties. Now, having held that there was no agreement or valid legally binding contract between the parties there could be no defaulting party. Let me for the interest of justice discuss the issue of delivery note. It is evident that the goods were received by

the defendants as acknowledged by Sergeant Chacha Makoba on 28th September 2013. In fact all the 18,573 Cartons of Ready to Eat Food were received at the warehouse of the 2nd Defendants located at 511 KJ Base Stores Department Gongo la Mboto Dar es Salaam. The plaintiff also let in some evidence to show that these 18,573 Cartons of Ready to Eat foods were received and accepted by the defendants without the existence of a valid contract-. Even assuming that it is open to the plaintiff to put forward such a new case at this stage based on Sales of Goods Act, that the goods were delivered and accepted by the defendants, cannot be the case here, as firstly, there was no contract of sale between the plaintiff and the defendants. Secondly, the buyer cannot be said to have accepted the goods and he never intimated to the seller that he has accepted them. It has been said in evidence that the goods were delivered to the go down of the defendants for temporary storage, even the delivery note was endorsed the word temporary by the plaintiff himself, stating that he was awaiting for the LPO to be issued. , again, it has not been shown in 18 | evidence that the defendants have either used the goods or have acted in anyway inconsistent with the ownership of the goods of the plaintiff kept for temporary storage at the defendants’ warehouse. It is on evidence that having become aware of there

was no valid contract for the supply of the goods, and that since there was no LPO, the person receiving the goods at the go down immediately on their arrival made it clear to the plaintiff, that they were not going to accept the delivery,of these goods as a performance or even an improper performance of the contract of sale, but they will receive the goods for temporary storage until the formalities with regards to LPO are complied with.. There was no obligation on the defendants to return the goods to the plaintiff whose property they have become by reason of only storage Therefore the right of the plaintiff to sue for damages for a breach of warranty or on the basis that the defendants have accepted the goods delivered to them, has no basis as there is no proof that the goods were received by the defendants as 1,1 -F- buyers, rather there is evidence that the goods were accepted on the basis of temporary storage awaiting the conclusion of a contract, and an execution of an LPO. , the goods are still the property of the plaintiff, and there was no delivery. To conclude on issue Number 2, is that there was no breach of contract as there was no contract existing, and also there was no acceptance of the goods by the defendants under the Sales of Goods Act. As to what reliefs are the parties entitled, I agree with the submissions of the defendants that since there was no proof

of the existence of the legally binding contract between the plaintiff and the defendants, and that there was no Local Purchase Order for delivery of the goods to the defendants by the plaintiffs to support the delivery, and since the goods were stored at the defendants’ warehouse temporarily as written in the delivery note (Exhibit P8). The essence of the Local Purchase Order was to ensure that the goods were actually ordered by the Tanzania People’s Defense Forces. The plaintiff’s claims for declaration that the Defendants breached 20 I P a c the contract cannot succeed since there was no valid contract. The plaintiff prayer for payment of THz 4,913,131,500 cannot be granted since there was no goods properly supplied by the plaintiff and properly received by defendants, since there is no valid contract, and no valid Local Purchase Order, and since the goods were received at the defendants’ go down for temporary storage only. It follows therefore that the other reliefs of damages, exemplary or punitive, and the claims of loss of business and for loss suffered cannot be granted as the plaintiff has failed to prove its case to the standard required in civil cases to justify its claims for compensation, interest, and general damages. Therefore the case against the defendants fails, and it is hereby dismissed with costs. DATED at DAR ES SALAAM this 18™ day of MARCH, 2016

MANSOOR

JUDGE 18th MARCH 2016 21 | Pa g c