[2025] UGHCCD 36

**THE REPUBLIC OF UGANDA**

**IN THE HIGH COURT OF UGANDA HOLDEN AT KAMPALA**

**CIVIL DIVISION**

**CIVIL SUIT NO 428 OF 2020**

**KAUSHIK ROY DAMANI::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: PLAINTIFF**

**VERSUS**

**DAMANICO PROPERTIES LIMITED::::::::::::::::::::::::::::::::::::::::::::::: DEFENDANT**

***BEFORE: HON. JUSTICE SSEKAANA MUSA***

**JUDGMENT**

The plaintiff brought this suit against the defendant for, breach of contract, specific performance, special damages-30,000,000,000/=, general damages Interest thereof and costs for the suit.

In **2015,** the defendant was assigned approximately **195 Acres** of land comprised in FRV 356, Folio 12, Plot 1073 in Lubowa, FRV 432, Folio 23, Plot 102 Busiro Block 537, Wakiso, FRV 429 Folio 5, Plot 103, Busiro Block 537, Wakiso and FRV 380, Folio 6, Plot 697 at Lubowa Estate, through a Consent Judgment in HCCS No. 279 of 2015 involving Lakeside City Limited.

On **15th August, 2015,** the plaintiff and defendant entered into a **Memorandum of Understanding (MOU)** which stipulated that the plaintiff was entitled to **50%** of the assigned land. The defendant was to register the land in its name, then transfer it to a new company by **December 2015**. This new company would be jointly owned by both the plaintiff and the defendant.

The defendant did later register the **195 acres** of land in its name. However, it failed to form the new company or transfer the land as agreed. The MOU had a clause that if the defendant failed to transfer the land to the new company, the Plaintiff would be entitled to half the **monetary value** of the land, payable by **December 2016**. The Defendant failed to do so.

The defendant's former Managing Director, the late Harshad Damani, signed the MOU and the land acquisition documents. He passed away on 7th **October, 2016**, before the land was registered in the defendant's name. The land was eventually registered to the Defendant in **2018**. This meant that the payment to the Plaintiff, based on the MOU, was due by **December 2019**.

The defendant did not pay the Plaintiff half of the land value. However, the land was valued by the Chief Government Valuer at Ug. Shs. **450,000,000/=** per acre in **2019**, during a compensation process for a portion of the land taken for the Entebbe-Express Highway.

The defendant asserted that there was no formal resolution by the defendant company authorizing the **Memorandum of Understanding (MOU)** between the plaintiff and the defendant. They claim that this lack of authorization renders the MOU null and void.

The defendant states the Plaintiff's suit is premature because they have not fully and finally acquired the land that is the subject of the MOU. They suggest the land ownership is still in flux.

The defendant also argued that the MOU has been **frustrated by numerous lawsuits and disputes** regarding the land. They claim these legal challenges, which the Defendant says were known to the Plaintiff, have made the MOU unenforceable.

That the **50% of the land** claimed by the plaintiff is subject to ongoing litigation. This implies that the Plaintiff's claim is potentially problematic.

The Defendant further noted that part of the land is heavily encumbered by **squatters/trespassers**, a fact they say is well known to the plaintiff.

The parties filed a joint scheduling memorandum where following issues were agreed upon.

**The Issues raised for determination**

1. *Whether Memorandum of Understanding dated 15th August, 2015 between the Plaintiff and the Defendant forms a valid and enforceable contract.* 2. *Whether the Defendant is in Breach of the Memorandum of Understanding (Contract).* 3. *What remedies are available to the parties?*

The plaintiff was represented by *Counsel Kasumba Patrick* while the defendant was represented by *Counsel Mugogo Edward*

***DETERMINATION***

***Whether the Memorandum of Understanding dated 15th August, 2015 between the Plaintiff and the Defendant forms a valid and enforceable contract.***

The plaintiffs’ Counsel submitted that Section 9(1) of the Contracts Act 2010 defines a contract as "an agreement made with the free consent of parties with capacity to contract, for a lawful consideration and with a lawful object, with the intention to be legally bound. “That Section 9(2) of the Act further provides that "A contract may be oral or written or partly oral and partly written or may be implied from the conduct of the parties.”

The plaintiff averred that the evidence indicates that a written Memorandum of Understanding (PEX-2) was signed on the 15th of August, 2015 between the Plaintiff and the Defendant Company. That the parties had the capacity to enter a contract, as Section 10(1) of the Contracts Act requires that one have legal capacity to contract, and they must be 18 years or older and of sound mind. The Plaintiff was an adult male Ugandan, 64 years old at the time, and did not suffer from any mental illness. Both parties were also capable of understanding the contract and forming rational judgments as to its effect.

The plaintiff stated that both parties agreed that the Plaintiff owns 50% stake in the land in question, and the acknowledgement of the equal stake in the land is their respective lawful consideration.

The plaintiff and defendant legally owned equal shares/interests in the assigned land and the Memorandum of Understanding was entered to agree and set straight the record on the ownership of interests in the land and how the same were to be registered or shared by the parties.

The plaintiff Counsel argued that the parties entered into the Memorandum of Understanding freely without any coercion, undue influence, fraud, misrepresentation or mistake.

The front page of PEX-2 clearly states "This Memorandum of Understanding which is intended to be legally a binding Agreement between the Parties is made this 15th day of August, 2015". This indicated the parties’ intention for the Memorandum of Understanding to be legally binding.

The Memorandum of Understanding fulfills all the elements of a valid contract.

Therefore, the Memorandum of Understanding dated 15th August, 2015 forms a valid and enforceable contract between the Plaintiff and the Defendant.

The defendants’ counsel argued that the MOU is a *nudum pactum* means that the agreement is a bare promise without any consideration and is therefore not valid. He cited the Black’s Law Dictionary and the Contracts Act 2010 to define consideration. This highlights that a contract requires a benefit or detriment to each party, and that a bare promise is insufficient. The Plaintiff's suit does not disclose a cause of action against the Defendant, is misconceived and bad in law under the principle of *nudum pactum*.

The defendant argued that the Plaintiff did not provide consideration for the purported agreement. Section 19(1) of the Contracts Act indicates that consideration for an object of an agreement cannot be unlawful. That the agreement was devoid of lawful consideration and therefore cannot be enforced.

***Analysis.***

**Sec. 9 (1) of the Contracts Act 2010** defines a contract

*“ an agreement made with the free consent of the parties with capacity to contract, for a lawful consideration and with lawful object, with intention to be legally bound.”*

Agreement is not a mental state but an act, and as an act, it is a matter of inference from conduct. The parties are to be judged, not by what is in their minds, but by what they have said or written or done. ***See Makubuya Enock v Songdoh Films (U) Ltd & Another HCCS No. 349 of 2017***

The parties to any contract and the court are bound by the terms or conditions in a contract, whether parole or written, between contracting parties. The courts lack the power to add or subtract from the terms of contract of parties and parties thereto are not allowed to unilaterally alter them. This has acquired the sobriquet and mantra of sanctity of contract which is expressed in the maxim, *pacta sunt servanda*, which means the non-fraudulent agreement of parties must be observed. ***See Golden Const. Co Ltd v Stateco (Nig) Ltd (2014) 8 NWLR (pt 1408) p. 171.***

It is not in dispute that the plaintiff and defendant own 50% stake in the land in question which formed the basis of memorandum of understanding. The plaintiff and defendant owned equal shares/interests in the assigned land and the memorandum of understanding was entered to agree and set the straight record on ownership of interests in the land and how the same was to be registered or shared by both parties.

The court must treat as sacrosanct the terms of an agreement freely entered into by the parties. This is because parties to a contract enjoy their freedom to contract on their own terms as long as is lawful. The terms of a contract between parties are clothed with some degree of sanctity and if any question should arise with regard to the contract, the terms in any document which constitute the contract are invariably the guide to its interpretation. When parties enter into a contract, they are bound by the terms of the contract as set out by them.

The court’s duty in interpreting contracts made by the parties and not rewriting them for the parties “*A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of the contract unless coercion, fraud or undue influence are pleaded and proved*” S*ee;* ***National Bank of Kenya v Pipe Plastic Sankolit (K) Ltd & Anor [2001] EA****.*

The defendant denies the validity of any contract on the premise that there was no consideration for the said contract. The evidence on record points to the fact that the plaintiff was and or is a brother to the managing director of defendant. They owned land which they agreed to transfer into a new company in which each party would hold 50% shares. The memorandum of understanding clearly states that it is intended to be a binding agreement between the parties. The parties where equally involved in different court matters which resulted in consents over land. It is erroneous to argue that there was no consideration between the plaintiff and defendant and especially after the demise of the managing director. The defendant duly acknowledged that the plaintiff had a 50% in and resides and or is in possession that has been assigned to the defendant. See Memorandum of Understanding.

The cardinal principle of construction of a document, the agreement between the parties, is for the court to give an interpretation which is consistent with the object of the entire document. The proper interpretation of the agreement shows that there is a binding agreement. This court has a primary duty as an impartial arbiter to interpret the memorandum of understanding between the parties in light of their clear intentions as conveyed in the memorandum and the factual background which formed the basis of the memorandum of understanding.

There is a valid and enforceable contract as specified in the memorandum of understanding.

***Whether the Defendant is in Breach of the Memorandum of Understanding (Contract).***

The plaintiff’s counsel stated that Section 32(1) of the Contracts Act provides that, "The parties to a contract shall perform or offer to perform, their respective promises, unless the performance is dispensed with or excused under this Act or any other law. “ Section 35 of the Contracts Act further provides that "Where it appears from the nature of a case that it was the intention of the parties to a contract that a promise contained in it is to be performed by the promisor, the promise shall be performed by the promisor".

The plaintiff noted that the evidence indicates that the defendant was under obligation to do a number of things, including incorporating a company with equal shareholding between the plaintiff and the Defendant and transferring the land into its name. The plaintiff was supposed to have the land valued by an independent valuer agreed upon by both parties and either pay the defendant monetary value of half the land or transfer half the land into the names of the plaintiff.

The defendant was clearly under obligation to have the land registered in its names and simultaneously under obligation to transfer the same land to a new company with equal shares between the parties.

The plaintiff submitted that the document indicates that the defendant has failed to transfer the land into the new company, and the defendant has refused to transfer the value of the land or half of the land to the Plaintiff.

Counsel for the plaintiff averred that a breach occurs when a party neglects, refuses or fails to perform any part of its bargain or any term of the contract, written or oral, without a legitimate legal excuse. Therefore, the Defendant is in breach of the Memorandum of Understanding.

The defendants’ counsel argued that there was no breach of contract because the MOU was invalid. That there was no agreement on the valuation of the land by an independent valuer, that both parties needed to incorporate a company as part of the agreement, and both parties failed to agree on incorporating a company. These failures are cited as reasons the defendant cannot be held liable. The defendant submitted that the performance of the agreement depended on both parties taking action and did not take place.

Counsel further argued that the doctrine of frustration applies, which means that the contract's principal purpose was substantially frustrated by unforeseen circumstances.

***Analysis.***

**Sec. 33 (1) of the Contracts Act** states that

“ ***the parties to the contract shall perform or offer to perform, their respective promises, unless the performance is dispensed with or excused under this Act or any other law”*** which provision gives the parties room to dispense from the mode of performance of a contract as long as it is allowed under the Act.

**Section 35 of the Contracts Act** states that

“***Where it appears from the nature of the case that it was the intention of the parties to a contract that a promise contained in it is to be performed by the promisor, the promise shall be performed by the promisor”.***

The law takes an objective rather than a subjective view of the existence of agreement and so its starting point is the manifestation of mutual assent by the parties to one another. The parties agreed in their memorandum of understanding that they form or incorporate a company with equal shareholding between the plaintiff and defendant and transfer the land into its names. In as much as the agreement never specified who was responsible to do this, the defendant had an upper hand in ensuring that the memorandum is executed to the letter since they had taken benefit of some land.

The parties agree that this was never done and the company was not incorporated as envisaged and the Memorandum of understanding provided for an alternative in case the company is not incorporated.

***FAILURE TO TRANSFER THE LAND***

*“Subject to the terms in the paragraph 2 above, in the event that the First Party for any reason fails to transfer the land into the names of the company mentioned in paragraph 2 above, the whole land shall be valued by an independent Valuer who shall be agreed upon by both parties and the second party shall thereby be entitled to half the value of the land (in monetary terms) which shall be transferred to the second party or his successor and/or nominee/assignee by June, 2017”*

The court observes that the time has passed without enforcing the terms of the contract but it does not defeat the terms which were clearly entered into by the parties. The defendant pleads frustration as the main reason for the failure to fulfil the contract terms because there are several cases or claims which have since come up on the same land.

The third party claims cannot be the reason to claim that the memorandum of understanding was frustrated since the claims or cases may be frivolous or orchestrated to defeat the plaintiff’s claim. The defendant is bound to enforce the terms of the memorandum of understanding notwithstanding the third party claims on the said land.

The defendant is bound by the terms of the Memorandum of Understanding atleast to effect what is practically possible, i.e the valuation of the land notwithstanding the alleged third party claims or being encumbered by squatters/trespassers on the said land. The defendant is in breach of this term of the memorandum of understanding. Even encumbered land with squatters has value and it should mean that it has become valueless in order to avoid enforcement of the terms of the memorandum of understanding.

***What remedies are available to the Parties?***

The plaintiff seeks a declaration that the defendant breached the Memorandum of Understanding.

The plaintiff claims special damages of Ug. Shs.30,000,000,000/= (Uganda Shillings Thirty Billion only), general damages, interest of 30% per annum on special damages from the date of breach and 20% per annum on general damages from the date of judgment till payment in full and costs for the Suit.

***Analysis***

Special damages are defined as damages that are alleged to have been sustained in the circumstances of a particular wrong. To be awardable, special damages must be specifically claimed and proved. Special damages relate to past loss.

The Plaintiff is entitled to the value of a half of the 195 acres of land as special damages.

There is no basis for claiming 30,000,000,000/= which has not been agreed upon by through an independent valuer.

The doctrine of sanctity of contract directs that a court cannot intervene and substitute any other interpretation of the contractual intentions of the parties, but must clinically give effect to only what the parties have themselves contracted to do in their contract.

The plaintiff and defendant should agree on an independent valuer who shall give an exact value or probable estimate of the value of the said land.

The plaintiff can only claim from the defendant after all practical efforts have been made to secure his half value of the land (monetary terms) through a sale of that part of land.

The valuation of the land shall be completed within 6 months from the date of this judgment. In case the parties fail to agree on an independent valuer, the Registrar of this court shall appoint a valuer for the parties at their cost.

The plaintiff is not entitled to any of the other remedies sought due to the peculiar circumstances of the case.

This matter is determined in the above terms and I make no order as to costs

I so Order

***Ssekaana Musa***

***Judge***

***This Judgement has been delivered by the Registrar this…..day of February 2025***