Sellers Have a Duty to Deliver Land Free of Encumbrances (or Expressly State so), Defaulting Parties Cannot Retain Benefits from Breach or Non-Performance, High Court at Mukono Rules.

Waboga David
5 days ago
5 min read

Facts

The dispute arose from a land exchange agreement dated November 30, 2016, between the Plaintiff (Kasirivu Paul), the registered proprietor of Kyaggwe Block 193 Plot 1058 at Kikooza (a developed property with eight rental units valued at UGX 150,000,000), and the Defendant (Kaye Richard). Under the agreement, the Plaintiff transferred his titled land to the Defendant in exchange for two kibanja (customary tenure) interests at Kubiri and Takajjunge (collectively valued at UGX 90,000,000) plus a cash balance of UGX 57,000,000.

The Plaintiff fully performed by delivering possession of the land, the certificate of title, and signed transfer instruments.

The Defendant paid only UGX 3,000,000 initially (later admitting a total of UGX 12,000,000) and failed to pay the balance.

The Kubiri kibanja was encumbered by a bank mortgage and subsequently sold by the bank, rendering it undeliverable.

The Takajjunge kibanja was handed over but without any supporting documentation to confirm ownership or title.

The Defendant took possession of the Plaintiff's land and retained it without completing his obligations, leading to the Plaintiff's deprivation since 2016.

The Defendant alleged a subsequent agreement dated June 19, 2017, substituting the original terms with an offer of three acres on Kyaggwe Block 15 Plot 58. The Plaintiff denied this, claiming the document was forged. The suit was filed on November 7, 2022, seeking recovery of the land (or its monetary equivalent), general damages, mesne profits, interest, and costs. The matter proceeded ex parte after the Defendant failed to file a defense or attend hearings, despite proper service.

Issues

Whether the Defendant’s acts and omissions constituted a fundamental breach of the Exchange Agreement dated November 30, 2016.
Whether the purported subsequent agreement dated June 19, 2017, was duly executed, legally valid, and capable of novating or discharging the 2016 Exchange Agreement.
What reliefs or remedies the Plaintiff is entitled to in law and equity.

Submissions

Plaintiff's Submissions (via Testimony of PW1 - Kasirivu Paul):

The Plaintiff testified on September 18, 2024, adopting his witness statement and tendering exhibits including the 2016 Exchange Agreement (PEX1), Certificate of Title and transfer instruments (PEX2), valuation report (PEX3), the disputed 2017 document (PEX4), and correspondence on non-payment (PEX5). He asserted full performance on his part and detailed the Defendant's failures: partial cash payment, delivery of encumbered/undocumented kibanja interests, and retention of the land without settlement. He vehemently denied executing the 2017 agreement, labeling it a "fabrication" and forgery, unsupported by any mutual intent or delivery of alternative property. The Plaintiff sought declaration of breach, invalidation of the 2017 document, substitutionary damages equivalent to the land's value (UGX 150,000,000), mesne profits for lost use, general damages for distress, interest, and costs.

Defendant's Submissions:

The Defendant entered appearance but failed to file a written statement of defense. In his pre-trial statement (admitted via unchallenged evidence), he acknowledged executing the 2016 agreement, receiving possession and benefits from the Plaintiff's land, and partial payment of UGX 12,000,000. He admitted Kubiri's encumbrance and sale but claimed Takajjunge was delivered (albeit undocumented). As a defense, he alleged the 2017 agreement novated the original terms by substituting three acres on Kyaggwe Block 15 Plot 58. However, he produced no evidence at trial, no attesting witnesses, handwriting experts, or proof of conveyance, despite bearing the burden.

The Defendant absented himself from the hearing, rendering his claims unsubstantiated.

Court's Findings

Issue 1: Fundamental Breach

The Court found the Defendant's partial performance of UGX 12,000,000 paid, encumbered Kubiri lost, and undocumented Takajjunge, constituted a "fundamental breach, a breach going to the root of the contract." It emphasized the Plaintiff's complete performance versus the Defendant's "woefully deficient" obligations, holding:

"In contract law, such conduct constitutes a fundamental breach—a breach going to the root of the contract. Section 9 of the Contracts Act, 284 binds parties to the obligations they voluntarily undertake, and Section 32(1) reinforces the duty to perform promises in accordance with their terms. A party who undertakes to convey property is presumed to warrant its availability and freedom from encumbrances unless expressly stated otherwise."

Citing Kabaco (U) Ltd v. Turyahikayo Bonny (HCCS No. 14 of 2021), the Court ruled the breach deliberate and material, entitling the Plaintiff to relief:

"The Defendant’s reliance on the fact that Kubiri was sold off by the bank cannot absolve him, for he voluntarily contracted to provide that land and assumed the risk of encumbrances... When these principles are applied to the Defendant’s admitted conduct, there is no doubt that his breach was deliberate, material, and fundamental, warranting the Court’s intervention in damages."

Issue 2: Validity of the 2017 Agreement

The Court rejected the novation claim, finding the document unproven, inauthentic, and evidentially worthless. The burden shifted to the Defendant under s. 101 of the Evidence Act, but he adduced no proof:

"Once authenticity of a document is challenged, the evidential burden shifts to the party asserting its validity (Section 101, Evidence Act). The Defendant, having raised novation, bore this burden but did not discharge it. The document was never properly tendered or admitted as an exhibit. It therefore carries no probative value (Des Raj Sharma v Reginam [1953] 19 EACA 310; Kibalama v Sajjabi [1988–90] HCB 84)."

Even hypothetically valid, novation failed for lack of mutual intent, consensus, and consideration (Haji Asuman Mutekanga v. Equator Growers (U) Ltd, SCCA No. 7 of 1995):

"On the totality of the evidence, the Court finds that the 2017 document is not proved, and legally ineffective. It cannot discharge the Defendant from his binding obligations under the 2016 Exchange Agreement."

Issue 3: Remedies

Specific performance was deemed impracticable due to lost properties. The Court awarded substitutionary damages to restore the Plaintiff "as far as money can do" (Mujuni Muhangi v. M. Turyagyenda, C.A. Civil Appeal No. 24 of 2004):

"The law on damages for breach of contract is settled: the innocent party should, as far as money can do, be placed in the same financial position as if the contract had been performed... The agreed value of the Plaintiff’s land was UGX 150,000,000. Considering the prolonged deprivation since 2016, the Court awards UGX 200,000,000, comprising UGX 150,000,000 for the land value and UGX 50,000,000 for loss of use."

General damages addressed distress and unjust enrichment (Kibimba Rice Ltd v. Umar Salim, SCCA No. 17 of 1992):

"The depreciation in value of the Plaintiff’s property cannot be visited upon him. To allow the Defendant to rely on reduced valuation would reward his own breach... The Court therefore awards UGX 5,000,000 as general damages."

Interest and costs followed statutory norms (Civil Procedure Act, ss. 26–27; Kampala City Council v. Nakaye [1972] EA 446).

Holding

Judgment was entered for the Plaintiff with the following declarations and orders:

The Court entered judgment for the Plaintiff and ordered:

Declaration that the Defendant breached the 2016 Exchange Agreement.
Declaration that the alleged 2017 Agreement was inauthentic and of no legal effect.
Award of UGX 205,000,000 (exclusive of interest and costs).
Interest at 8% per annum on all sums until payment in full.
Costs to the Plaintiff.

The Court concluded:

"Equity and law alike abhor unjust enrichment. As the Supreme Court held in Patel v Spear Motors (supra), courts will not allow a party to retain benefits arising from a breach."

Key Takeaways

Fundamental breach:
Failure to deliver agreed property or payment constitutes a material breach justifying full restitution.
Forgery and novation:
An alleged subsequent agreement must be proved by credible evidence; absence of attestation or documentary proof renders it legally void.
Equitable compensation:
Where specific performance is impossible, courts may order substitutionary damages to place the innocent party in the same financial position as if the contract were performed.
Equity against unjust enrichment:
A breaching party cannot retain benefits gained through deceit or non-performance.