Even Where a Contract Ought to Be in Writing Under Section 10(5) of the Contracts Act, Equity Will Render It Enforceable Where One Party Has Partly Performed Its Obligations. High Court Rules.

Background and Facts

Trust Ventures (U) Limited, a supplier of industrial chemicals used in the manufacture of foam mattresses, entered into a commercial arrangement with Power Foam (U) Limited for the supply of chemicals, including Polyether Polyols (CARADOL) and Toluene Diisocyanate (TDI).

The parties initially operated under an oral arrangement whereby the defendant would pay for supplied chemicals within seven days of delivery. Subsequently, the credit period was extended to one month.

On 4 June 2016, the plaintiff supplied chemicals worth USD 30,060, which together with a pre-existing outstanding balance of USD 11,202 brought the total debt to USD 41,262. The defendant made partial payments totalling USD 21,187, leaving an unpaid balance of USD 20,075. The plaintiff's suppliers, M/s Solvochem East Africa Limited, imposed a penalty of USD 1,300 on the plaintiff for delayed payment, and the plaintiff also incurred interest on borrowings it undertook to meet its obligations to Solvochem.

Trust Ventures subsequently sued for Recovery of the outstanding balance of USD 20,075; General damages for breach of contract; Special damages arising from supplier penalties and loan interest; Interest; and Costs of the suit.

Power Foam denied liability, contending that; The arrangement was originally cash-on-delivery and later payment depended on proceeds from sales; All supplies had been paid for; The disputed invoice dated 4 June 2016 did not relate to goods received by the defendant; The contract was unenforceable because it was not in writing; and The contract had been frustrated by a fire that destroyed its factory.

Issues for Determination

The Court considered the following issues:

1. Whether there was a contract for the supply of chemicals between the parties.

2. Whether the defendant breached that contract.

3. What remedies, if any, were available to the plaintiff.

Legal Representation

For the Plaintiff

M/s Bashasha & Co. Advocates

For the Defendant

M/s Odokel Opolot & Co. Advocates

Parties' Submissions

Plaintiff's Submissions

The plaintiff argued that the parties had an oral contract for the supply of chemicals.

Orders were placed orally and supported by invoices and delivery notes.

Every delivery was accompanied by documentation signed by the defendant's representatives.

The defendant acknowledged the debt in correspondence dated 12 February 2016 and 23 January 2017.

Partial payments made by the defendant constituted acknowledgment of indebtedness.

The defendant's failure to pay caused the plaintiff to incur penalties from its supplier, Solvochem East Africa Limited, and financing costs on loans obtained to meet contractual obligations.

The plaintiff therefore sought recovery of the outstanding amount together with damages, interest and costs.

Defendant's Submissions

The defendant maintained that payment was only due after sale of the manufactured products. All goods supplied had been fully paid for. It did not receive the goods reflected in the disputed invoice dated 4 June 2016. The invoice was not signed by an authorised representative. The alleged contract was unenforceable because it was not reduced into writing. The destruction of its factory by fire frustrated the arrangement.

Accordingly, the defendant sought dismissal of the suit.

Court's Findings

On the Existence of a Contract

The Court examined Section 10(2) and (5) of the Contracts Act. It held that a legally binding contract can be inferred from a collection of related commercial documents (purchase orders, invoices, delivery notes, and emails) even if a single formal instrument does not exist.

"It is a doctrine of equity that a contract required to be evidenced in writing will still be enforceable even if it is not so evidenced, provided that one of the parties does certain acts by which the contract is partly performed."

The Court found that the consistent course of dealing, where the Defendant placed oral orders, received goods, and signed delivery notes, constituted a valid and enforceable contract through part performance.

Importantly, the requirement may be satisfied by piecing together related commercial documents, purchase orders, invoices, delivery notes, email chains and reconciliation sheets, provided they disclose offer, acceptance, consideration and an intention to create legal relations.

A legally binding contract can be inferred or pieced together from a collection of related commercial documents, provided that the necessary elements of a contract … are present.

Additionally, the court invoked the equitable doctrine of part-performance: even where a contract is not reduced to writing as required, equity treats it as enforceable if one party has performed its obligations under it, since performance itself constitutes powerful evidence that an agreement was concluded.

The court rejected the defendant's denial of receipt of the 4 June 2016 delivery. The defendant's own witness (D.W.1 Mr. Mulongo Francis) acknowledged in his witness statement that he had signed that invoice. Furthermore, the defendant made partial payments totalling USD 21,187 against the invoice without querying it.

Applying the estoppel principle under s. 114 of the Evidence Act, the court held that the defendant was precluded from later denying either the existence of the contract or the delivery of goods, having voluntarily made those payments. The finding was reinforced by a joint reconciliation meeting and a signed Excel reconciliation sheet confirming an outstanding balance of USD 23,262 as at 5 November 2016.

Issue 2 on the Breach of Contract

The court found that the contract's terms were objectively ascertainable from the parties' oral agreement as evinced by their conduct;

(i) orders would be placed orally;

(ii) quantities and prices would be specified in corresponding delivery notes and invoices; and

(iii) invoices were payable within one month of delivery.

The defendant failed to discharge the evidential burden of proving that all invoiced sums had been paid. The court noted that where the existence of a debt is established, the burden shifts to the debtor to prove payment; the defendant adduced no credible evidence of full settlement. Contemporaneous emails from July 2016 to July 2017 showed the defendant making multiple unconditional undertakings to pay the outstanding balance, which it acknowledged to be overdue. The defendant accordingly breached the contract.

Issue 3 on the Remedies

(a)  Declaration

The plaintiff sought a declaration that the defendant was in breach of the supply agreement. The court refused the declaration, holding that declaratory relief is appropriate only where parties require definitive judicial clarity on contested legal rights, status or obligations to prevent a future dispute, not where, as here, the matter calls for factual adjudication and enforcement. The finding of breach was made in the course of the court's reasoning and formed the basis for the substantive remedies granted.

(b)  Outstanding Principal

The court awarded the plaintiff the liquidated sum of USD 20,075, being the outstanding balance on the defendant's account. As the defendant adduced no evidence to refute the plaintiff's documentary proof, the liquidated claim was fully established.

(c)  Interest

The court awarded interest at 10% per annum from the date of filing the suit (25 August 2017) until payment in full, as reasonable compensation for the deprivation of the use of money during the litigation period. The court noted that interest in commercial disputes serves the same compensatory function as an award of general damages.

(d)  Special Damages

The court declined to award either of the two heads of special damages claimed;

Loan interest

The plaintiff failed to prove that the defendant was aware at the time of contracting that the plaintiff would need to secure specific borrowings to fund its purchases from Solvochem. The causal link between the defendant's non-payment and the loan was not established, and the cost was in any event too remote.

Supplier penalties

No evidence was led that the defendant had been informed of the plaintiff's contractual arrangements with Solvochem or the penalties that could flow from late payment thereunder. Third-party penalties are not a natural consequence of late payment to a supplier; they are indirect and too remote unless their prospect was expressly communicated to and accepted by the defendant at the time of contract formation.

(e)  General Damages

The court refused to award general damages in addition to interest, holding that doing so would amount to overcompensation. The award of interest at a commercial rate already performs the function of restoring the plaintiff to the position it would have occupied had the breach not occurred.

The Court observed that;

"Generally, late or non-payment only naturally triggers costs of that specific invoice, not a cascade of penalties in entirely separate contracts with other suppliers, except where special circumstances were communicated to and accepted by the customer at the time of contract formation."

The Court held that for a plaintiff to recover third-party loan interest as special damages, they must prove the defendant foresaw that non-payment would force the plaintiff to incur such specific costs.

(f)  Costs

Costs followed the event in favour of the plaintiff pursuant to s. 27(2) of the Civil Procedure Act. No special reason existed to depart from the general rule.

Holding

Judgment was entered in favour of the plaintiff on all substantive claims. The court awarded USD 20,075 the unpaid outstanding principal amount. Interest at 10% per annum from 25 August 2017 (date of filing) until payment in full. The costs of the suit.

The claims for a declaration, special damages (loan interest and supplier penalties), and general damages were refused.

Read the full case

Trust Venturs (U) Limited v Power Foam (U) Limited 2026 UGCommC 317 (26 June 2026).pdf

Download PDF • 288KB

Key takeaways

Contracts need not be formal documents

Under ss. 10(2) and 10(5) of the Contracts Act, an oral or partly-written commercial arrangement is enforceable. Invoices, delivery notes, email correspondence and reconciliation sheets, read together, can constitute sufficient 'writing' for statutory purposes.

Part-payment estops denial of debt or delivery

A debtor who voluntarily makes a partial payment on an invoice is estopped by s. 114 of the Evidence Act from later denying that the underlying goods were delivered or that the contract exists. Payment without explicit protest amounts to ratification.

Doctrine of part-performance supplements writing requirements

Even where a contract ought to be in writing under s. 10(5), equity renders it enforceable if one party has partly performed. Actual performance is powerful confirmation that a contract was made.

Implied terms cure ambiguity in oral contracts

Where an oral contract's terms are incomplete or uncertain, a court may imply a term that is either objectively necessary or so obvious as to go without saying, provided a concluded contract already exists.

Special damages require communicated, foreseeable loss

Third-party penalties and loan interest are recoverable as special damages only if the defendant was aware, at the time of contracting, of the specific dependency giving rise to those losses. Undisclosed supplier arrangements and unilateral borrowing decisions are too remote.