The
plaintiff in this matter, in terms of the summons as amended by
consent at the trial, claims as against the defendant the specific
performance of a contract to deliver 319,240 plastic bottles and
369,320 tearstrip closures.
The
defendant admits that it has failed to deliver the remaining quantity
of bottles and closures originally contracted for but denies that its
failure constitutes a breach of contract because of the withdrawal,
by the Reserve Bank, of its Basic Commodities Supply Side
Intervention Facility (BACOSSI).
Evidence
for the Plaintiff
Lishon
Chipango is the plaintiff's Chief Executive Officer. His evidence
was as follows.
In
August 2007, the plaintiff launched a new product through its
subsidiary, Mazoe Citrus Estates, requiring 2 litre plastic bottles
with caps. Subsequently, on the 1st
of October 2007, Lishon Chipango met the Managing Director of the
defendant (Martin Makomva) at the Reserve Bank's presentation of
its Monetary Policy Statement. Martin Makomva indicated that the
defendant had already received BACOSSI funding for making bottles and
referred him to the defendant's Marketing Director (Albert
Chitapi). After several meetings and phone calls, he sent an e-mail
to Albert Chitapi on the 12th
of October 2007 [Exhibit 3] asking him to finalise a quotation for
700,000 bottles and caps.
On
the 15th
of October he met with Albert Chitapi who confirmed that the
defendant could supply the required bottles and caps over a period of
five (5) weeks. On the 18th
of October he received an e-mail from the defendant [Exhibit 4]
attaching a quotation for 700,000 bottles and caps. The total cost,
inclusive of bottles, closures, cartons and freight charges, was
quoted as a sum slightly over $53 billion.
The
plaintiff then made arrangements to borrow this sum from Barclays
Bank. Thereafter, Lishon Chipango called Albert Chitapi to reconfirm
the price. After the price was re-confirmed, he effected payment of
the contract price on the 9th
of November. On the 12th
of November he e-mailed Albert Chitapi asking him to confirm receipt
of the payment [Exhibit 5A] and Albert Chitapi responded on the 13th
of November to confirm payment [Exhibit 5B].
Thereafter,
the defendant's staff met with the plaintiff's staff to agree on
delivery of the products. On the 20th
of November the parties emailed each other to confirm a delivery plan
and the defendant then commenced delivery of the bottles and caps.
Each delivery was accompanied by a delivery note and cumulative
invoice showing the deliveries to date, as summarised in a schedule
prepared by the plaintiff [Exhibit 7].
The
invoices furnished by the defendant expressed the unit prices for the
bottles and caps in the same amounts as were quoted in Exhibit 4.
When the deliveries became erratic, Lishon Chipango e-mailed Albert
Chitapi on the 3rd
of December [Exhibit 8A] and the latter responded explaining that the
defendant had problems with its mould [Exhibit 8B]. At a subsequent
meeting, in mid-December, the defendant's staff indicated that they
were encountering machine breakdowns. On the 17th
of December, the plaintiff again queried the erratic deliveries
[Exhibit 9A] and Albert Chitapi responded, on the same date [Exhibit
9B], raising pricing difficulties for the first time. On the 24th
of January 2008, Lishon Chipango met with Martin Makomva who
indicated that the BACOSSI funding had ended and that the price for
the remaining bottles and caps should be re-negotiated.
The
proposed price adjustment was rejected and Martin Makomva wrote, on
the 20th
of February [Exhibit 10], restating his position at the meeting. The
plaintiff's lawyers then forwarded a letter of demand to the
defendant on the 27th
of February [Exhibit 11].
Gabriel
Chinembiri is the Managing Director of Mazoe Citrus Estates. He
testified that the summary of deliveries [Exhibit 7] was prepared by
Mazoe Citrus Estates. The deliveries listed from the 20th
of November 2007 to the 4th
of January 2008 amounted to 380,760 bottles and 330,680 caps. The
prices listed in the delivery notes and invoices were exactly the
same as those stated in the original quotation [Exhibit 4] with
respect to the bottles, closures and cartons. However, the cost of
freight charges was higher than was originally quoted.
Gabriel
Chinembiri
corroborated the testimony of Lishon
Chipango as
regards the confirmation of transport arrangements for the delivery
of 700,000 bottles and caps. He also corroborated the evidence
relating to the plaintiff's complaints concerning erratic
deliveries and the defendant's explanations relating to plant
problems and pricing issues.
On
the 24th
of December 2007, he received an e-mail from the defendant [Exhibit
12A] stating that the old price would only apply to 300,000 bottles
and caps as agreed at a meeting held on the 17th
of December. He refuted any such agreement between the parties,
having regard to his email of the same date to the defendant [Exhibit
9A] as well as the e-mail from the plaintiff to the defendant on the
28th
of December [Exhibit 12B].
Evidence
for the Defendant
Martin
Makomva has been the Managing Director of the defendant for the past
9 years. He confirmed his meeting and discussion with Lishon Chipango
on the 1st
of October 2007. He told Lishon Chipango that the defendant had
already benefited from the BACOSSI scheme and would therefore be able
to supply products at lower competitive prices. He then referred
Lishon Chipango to Albert Chitapi.
His
evidence was that the plaintiff's order required about 6 to 8 weeks
to fulfil. In the event, the order could not be met in full because
the Reserve Bank only availed BACOSSI assistance to the defendant for
one month. The funding was stopped at the end of September 2007 and
covered customers' orders for the month of October only.
Consequently, the defendant wrote to the Reserve Bank, on the 29th
of November [Exhibit 13], pointing out that the BACOSSI material had
run out and that this had impacted significantly on the defendant's
pricing structure entailing a ten-fold increase in costs and prices.
Martin
Makomva himself had previously written to the National Incomes and
Pricing Commission (NIPC), on the 22nd
of November [Exhibit 14], requesting its approval of price
adjustments in light of the defendant's cost build-up. This was
followed by further applications to the NIPC on the 28th
of November [Exhibit 15], 30th
of November [Exhibit 16], and 10th
of December 2008 [Exhibit 17]. In early December, the defendant
received NIPC approval to adjust prices in response to one of the
applications.
On
the 17th
of December he met with staff from Mazoe Citrus Estates to discuss
pricing and supplies relating to the plaintiff's order. New prices
were agreed at that meeting subject to clearance from Lishon
Chipango. The latter refused to accede to the revised prices at a
meeting in January 2008 and Martin Makomva then wrote to him, on the
20th
of February [Exhibit 10], pointing out that the BACOSSI facility had
terminated and suggesting that supplies be continued at revised
prices. This offer was rejected by the plaintiff.
According
to Martin Makomva, the current cost of a bottle and cap is US23
cents. The money paid by the plaintiff, in November 2007, only
covered the cost of what was actually supplied, and, therefore, the
balance of the plaintiff's order cannot be met at current prices.
The
entire contract was premised on the continuation of the BACOSSI
facility.
Under
cross-examination, Martin Makomva conceded that in terms of the
conditions stipulated in the quotation [Exhibit 4] the goods were to
be despatched once payment had been made into the defendant's
account and that payment of the full contract price was confirmed on
the 13th
of November 2007. He also accepted that the first change in unit
prices was only reflected in an invoice generated on the 24th
of December, over two (2) months after the original quotation. The
prices were increased after National
Incomes and Pricing Commission (NIPC)
approval was granted. However, this was not communicated to the
plaintiff in any written form nor was there any clear agreement
between the parties for the prices to be increased.
Albert
Chitapi
is the Marketing Director of the defendant. He confirmed that the
defendant had forwarded the quotation [Exhibit 4] to the plaintiff on
the 18th
of October 2007 and that he had agreed with Lishon Chipango, over the
telephone, that the defendant would be able to deliver 700,000
bottles and caps as and when they became available.
He
also confirmed receipt by the defendant of the plaintiff's payment
of $53 billion on the 9th
of November. Deliveries of the goods then began on the 20th
of November and continued until it became necessary to review the
prices because of the stoppage of BACOSSI assistance. He then met
Gabriel
Chinembiri
and other Mazoe Citrus Estates staff on the 17th
of December and agreed on a new pricing structure. However, he
conceded that the e-mails between the parties, on the 17th
and 18th
of December [Exhibits 9A, 9B & 9C], do not reflect any agreement
on new prices and that subsequent emails, on the 24th
and 28th
of December [Exhibits 12A & 12B], make it clear that there was no
such agreement. He further conceded that the agreement with Mazoe
Citrus Estates was subject to confirmation by the plaintiff and that
no one representing the plaintiff was present at the meeting.
Under
cross-examination, Albert Chitapi explained the sequence of the
conditions set out in the defendant's standard form quotation
[Exhibit 4] as follows:
(a)
The
quotation is sent to and received by the customer;
(b)
The latter must confirm availability of the product before making
payment;
(c)
After confirmation, the customer effects payment;
(d)
Delivery of the product then commences.
The
price change stipulation only comes into play before confirmation of
product availability and before payment of the purchase price is
effected. Once product availability is confirmed and the purchase
price is paid, any price change cannot be imposed.
In
the instant case, the plaintiff did not confirm the availability of
the goods between the date of the quotation and the date of payment.
Nevertheless, despite that failure to confirm, the defendant accepted
the plaintiff's payment of $53 billion as the full purchase price.
Moreover, the defendant only increased the unit prices on the 24th
of December 2007 after National
Incomes and Pricing Commission (NIPC)
approval of the new pricing structure.
Contractual
Conditions
The
principal issue for determination in
casu
is whether the defendant is absolved of its liability to deliver the
balance of the plaintiff's order by virtue of the conditions
pleaded in paragraph 2 of its plea as amended. In essence, the
defendant's plea is that delivery of the remaining goods was
subject to;
(a)
The continued availability of the BACOSSI facility; and
(b)
The express term stipulated in the quotation that prices were subject
to change at any time without notice.
As
regards the BACOSSI facility, there is little doubt that the
defendant's pre-existing access to the facility was the principal
factor that enabled it to charge a considerably lower price for the
products required by the plaintiff and that this in fact influenced
the plaintiff to enter into the contract with the defendant. However,
there is nothing in the testimony or documentation before this Court
to indicate that the continued availability of the facility after
the plaintiff's order had been placed and confirmed was a condition
upon which the contract was premised. Moreover, the fact that the
defendant's access to the facility would cease after one month was
never communicated to the plaintiff at any stage before the
conclusion of the contract.
The
plaintiff's order was to be fully delivered within 5 weeks
(according to Lishon Chipango) or 6 to 8 weeks (according to Martin
Makomva). The first indication of the BACOSSI facility having
terminated was only given at a meeting between Lishon Chipango and
Martin Makomva on the 24th
of January 2008 - almost 11 weeks after payment of the full contract
price had been effected. On these facts, it is abundantly clear that
the continued availability of the BACOSSI facility was not a
condition for the due performance of the contract between the
parties.
As
for the conditions set out in the plaintiff's quotation, it is
clear that the price change stipulation could only have come into
play before
confirmation of product availability and before
payment of the purchase price was effected. In
this respect, Albert Chitapi had no option but to concede that once
product availability was confirmed and the purchase price was paid,
any subsequent price change could not have been contractually
imposed.
In
the instant case, Lishon Chipango met with Albert Chitapi on the 15th
of October 2007 to confirm the defendant's capacity to deliver
700,000 bottles and caps over a period of 5 weeks. On the 18th
of October, the defendant forwarded its quotation for the 700,000
bottles and caps. Thereafter, Lishon Chipango called Albert Chitapi
to re-confirm the price and, having reconfirmed the price, he
proceeded to effect payment of the full contract price of $53 billion
on the 9th
of November. On the 13th
of November, Albert Chitapi confirmed receipt of the payment by the
defendant. Subsequently, on the 20th
of November, the parties confirmed a delivery plan and the defendant
then commenced delivery of the bottles and caps.
Given
this sequence of events, it is very clear that the defendant accepted
the plaintiff's payment of $53 billion as the full purchase price
before commencing delivery of the contracted goods. Thereafter, the
defendant was contractually precluded from changing the purchase
price as it purported to do on the 24th
of December 2007. Indeed, it would be absurd in any commercial
transaction to allow the seller to alter the contract price after he
has accepted the agreed amount in full payment and begun delivery of
the contracted goods in accordance with an agreed delivery plan.
Specific
Performance
It
is settled that a plaintiff who elects to enforce a contract is
entitled to specific performance where the defendant is in a position
to perform the contract – because justice demands that those who
enter into contracts should fulfil their obligations. See Farmers
Co-op Society v Berry
1912 AD 343…,; Smith
& Ors v Zimbabwe Electricity Supply Authority
2003 (1) ZLR 158…,.
However,
the Court has a discretion to refuse to grant an order for specific
performance on several grounds. In particular, a decree of specific
performance might be declined, inter
alia,
where it would operate unreasonably hardly on the defendant or where
it would produce injustice or be inequitable in all the
circumstances. Moreover, the Court is not confined to the
circumstances prevailing at the time that the contract was entered
into and is at large to consider the circumstances at the time that
specific performance is claimed. See Haynes
v Kingwilliamstown Municipality
1951 (2) SA 371 (A)…,; Benson
v SA Mutual Life Assurance Society
1986 (1) SA 776 (A)…,.; CHRISTIE: The
Law of Contract in South Africa
(3rd
ed.)…,.
In
the instant case, it is submitted that an order for specific
performance would cause undue hardship to the defendant. More
specifically, it is argued that the BACOSSI facility was only availed
to the defendant for one month and that the defendant would now have
to incur its expenses in foreign currency. It is further argued that
it would be unduly inequitable to require the defendant to deliver
the outstanding balance at twice the original cost (in local
currency) and that the plaintiff has not suffered any loss as a
result of the defendant's failure to deliver.
Having
regard to all the relevant circumstances, both past and present, I am
unable to see any merit in these submissions.
Looking,
firstly, at the plaintiff's position, it is not disputed that it
obtained a Bank loan in order to pay the contract price and that it
would be required to repay that loan with interest. Moreover, as a
result of the defendant's failure to deliver the contracted goods
timeously, the plaintiff was unable to fulfil the projected sales of
its own product. On these facts, it is difficult to sustain the
argument that the plaintiff has emerged materially unscathed from the
transaction in
casu.
Turning
to the defendant's situation, it is common cause that the defendant
had already availed itself of the BACOSSI facility on very favourable
terms before entering into the present contract. Armed with that
commercial advantage, it then promised to deliver to the plaintiff a
quantified amount of goods at an agreed price and within a specific
period. Before making that promise, the defendant was presumably
equipped with all the information and material resources that it
required in order to make an economically sound decision on the
matter. In these circumstances, the only inference that one can
reasonably draw is that the defendant's failure to deliver, as
promised, was attributable to its failure to exercise due commercial
diligence. It has obviously mis-managed and squandered the financial
advantage afforded by the BACOSSI facility and cannot now entreat the
Court to condone its commercial incompetence.
Disposition
It
follows from all of the foregoing that the defendant is liable to
deliver the outstanding balance as contractually agreed and that the
plaintiff is entitled to an order for specific performance of the
contract. However, having regard to the evidence before me, I do not
think that it would be either feasible or equitable, at this
juncture, to expect the defendant to comply with its contractual
obligations within the period of 7 days as per the relief sought by
the plaintiff. In my view, a longer period for due compliance would
more aptly meet the justice of the case.
In
the result, judgement is entered in favour of the plaintiff as
against the defendant as follows:
(i)
The defendant be and is hereby ordered to deliver 319,240 (2 litre)
plastic bottles and 369,320 tear-strip closures to the plaintiff
within 30 days of the date of service of this order upon the
defendant.
(ii)
The defendant shall pay the costs of suit.
