MERALI HIRJI AND SONS v GENERAL TYRE (E.A.) LTD 1983 TLR 175 (HC)
Court Court of Appeal of Tanzania - Dar Es Salaam
Judge Nyalali CJ, Makame JJA and Kisanga JJA
April 27, 1984
CIVIL APPEAL 24 OF 1983
Flynote
Contract - Formation - Agreement made verbally - Arrangement lasted for five years
- D Whether valid contract.
Contract - Agency - Agent incurs expenses to run the business - Nature of agency.
Contract - Agreement carries no terms - Duty of the Court.
Contract - Agency - Contract carries no terms - Termination - Whether court to
imply E reasonable notice of termination.
-Headnote
The appellant company was appointed the sole dealer in selling and distributing the
respondent company's tyres and tubes in Rugwe and Kyela districts. The appellant
used F to buy the goods from the respondent at a 15% discount and transport them
to his premises. The appellant dealt in the respondent's goods only. Five years later
the respondent unilaterally terminated the five-year-old commercial relationship
without notice and without assigning any reason for doing so. G
The whole arrangement was made verbally. The High Court held that the
arrangement was one of agency, that the respondent was not obliged to give any
notice for terminating the agency and therefore that there had been no breach. On
appeal it was argued in favour of the appellant that given the nature of the
relationship between the H parties and the appellant's commercial dealings the court
should have imported reasonable terms into the contract and held that a reasonable
notice was necessary to terminate the relationship.
Held: (i) There was a valid contract between the parties proved by their conduct over
I the years:
1983 TLR p176
MAKAME J
(ii) the contract was one of agency; A
(iii) given the nature of the relationship in this case the appellant was not a
commission agent, as such was entitled to a reasonable notice of termination of the
contract;
(iv) since the contract did not provide for terms the court had a duty to imply
reasonable terms; B
(v) the respondent was legally obliged to give notice;
(vi) given the circumstances of the case six months' notice is reasonable and
justified.
Case Information
Appeal allowed. C
Cases referred to:
1. Martin-Baker Aircraft Co.Ltd. and Another v Canadian Flight
Equipment, Ltd. [1955] 2 All E.R. 722.
2. Motion v Michaud (7) (1892) S.T.L.R. 253 D
M.A. Lakha, for the appellant.
R.J. Rweyemamu, for the respondent.
[zJDz]Judgment
Makame, J.A. read the following considered judgment of the court: Sometime in 1975
E the appellant company was appointed the sole dealer in selling and distributing the
respondent company's tyres and tubes in the Rungwe and Kyela Districts after one
C.V. Patel had ceased to function as such. The appellant would purchase the said
goods on F cash at a 15% discount, and collect them himself from the respondent
company's premises in Mbeya Township. His assertion that he was to sell the tyres
and tubes of only the respondent company, and that he was the only one permitted to
do so in the two district, was not controverted in evidence. G
By a letter dated 15th August, 1980, the respondent company unilaterally terminated
the five-year old commercial relationship, without any prior notice and, apparently,
without providing any reason for doing so. The appellant felt that the respondent
company's H action was high-handed and unreasonable, that the said action had
caused him loss of profit, and that gave him a right to damages. The appellant
accordingly sued in the High Court for Shs. 150,000/= damages, contending that could
cover a reasonable notice, for six months, at the rate of shs. 25,000/= per month. Mr.
Lakha, learned advocate, appeared for the appellant in this appeal before us, as he did
also in the court below. At I the original hearing the respondent company
1983 TLR p177
MAKAME J
was represented by Mr. Rweyemamu, learned counsel from the Tanzania Legal A
corporation, who appeared also before us.
It was common ground that the communication giving rise to the alleged relationship
between the parties was merely verbal. It was the appellant's case that, that
notwithstanding, what was thereby formed was a valid contract proved by the
conduct B of the parties over the year. Admittedly no specific provision was made
for circumstances which would entitle either party to terminate the contract or for
the necessary length of notice in the event. In such a case, Mr. Lakha maintained, the
court had to import reasonable terms: in the instant case he reckoned that six months'
notice C would have been reasonable.
Mr. Rweyemamu for the respondent company argued that the arrangement was ad
hoc, that no contract was in fact entered into, and so there was no obligation to issue
the alleged or any notice.
Mr. Msaky, the only witness for the respondent company, told the trial court that his
D company did not normally give notice to their dealers when the company wanted
to terminate a dealership; there were simply no rules.
The learned Jaji Kiongozi who tried the suit was satisfied that "there was some
understanding between the parties regarding selling of tyres of the defendant in
Mbeya E (sic) and Kyela Districts" and went on, further, to hold that there was an
irresistible inference that the appellant was the respondent company's agent in
Tukuyu (sic). We respectfully agree that the appellant was the respondent company's
agent as alleged, and we did not permit Mr. Rweyemamu to endeavour to persuade us
otherwise, because F there was no cross-appeal on the issue.
Having found that the appellant was the respondent company's agent the learned Jaji
Kiongozi was nonetheless of the view that the respondent company was not obliged
to G give any notice terminating the agency, and therefore there had been no
breach. The learned Jaji Kiongozi referred to some authorities, chiefly the case of
Martin-Baker Aircraft Co. Ltd And Another v Canadian Flight Equipment Ltd [1955]
2 all E.R. 722. He was of the view that because there was allegedly no Master and
Servant H relationship in the present case, and, as unlike in Martin Baker's case,
there was herein not "the highest degree of mutual trust and confidence between the
parties", there was no need for a notice. The learned Jaji Kiongozi referred to two
other authorities, Birtley's and Bellshill's cases, and said that the decision in Bellshill's
case overruled those in I Birtley and Martin-Baker. With great respect, we have
grave doubt as to the
1983 TLR p178
MAKAME J
relevance of Bellshill's case, and it is clearly incorrect to assert that Bellshill had A
over-ruled Martin-Baker. Martin-Baker is not mentioned even in passing in Bellshill's
case.
We have had to look at Martin-Baker's case closely to get the kernel from the husks.
We do not read the case the way the learned Jaji Kiongozi appears to have done. The
B rival contentions in Martin-Baker were different from those in the present case. In
Martin-Baker a great deal of discussion was spent on whether the relationship was
permanent. i.e. terminable only by mutual consent, or whether it could be terminated
by party on reasonable notice to the other. That is where reference was made to high
C degree of mutual trust or a relationship akin to Master and Servant, the argument
emerging therefrom being that, if there was some such relationship, involving a high
degree of mutual trust etc, it would be unreasonable to hold that the relationship is
permanent; continuing to be binding despite the breach of trust etc. Such a
relationship D would be terminable by either party. Our present problem is
different: It is not whether it would be permanent or terminable by one of the parties
but rather, whether is determinable at will and without notice at all, or whether it
can only be terminated with E reasonable notice and, if it is the latter, what is
reasonable notice. The slant is thus different and it is when one appreciates that, that
one really understands Mr. Lakha's complaint that the case law used was misapplied.
The facts in the present case are also different from Motion v Michaud (7) 1892
S.T.L.R. 253, which concerned an independent merchant who undertook to sell the F
defendant's brandies, like he had been selling other people's wines and champagne,
on a commission basis. He got the consignments of brandy without paying for them
and was getting his cut after the sales. He was only involved the office expenses.
In the present case the appellant was expending his own cash to buy the goods, he G
collected them himself from Mbeya, transported them to his shop, and the evidence
was that he had an outfit for selling the respondent's goods. He was not a commission
agent who had virtually no risk and who did not have to tie up his capital. What he
got was a H discount on the cash payment, not a commission for only whatever he
sold. One has to look at the particular facts and circumstances of each case. In the
present case the appellant had geared himself to selling only the respondent
company's tyres and tubes and to selling them alone, without competitors. All of a
sudden he would get no more I supplies, was no more a dealer for the respondent
company and, obviously, if he was inclined to secure
1983 TLR p179
another tyre and tube agency, it would take him time and effort, and possibly some A
resources, to cultivate one. It is quite true that, as McNair, J. said in Martin - Baker, it
is not the function of the court to make a reasonable contract between the parties but,
as the learned judge also observed, and with him we respectfully agree, it is the duty
of the court to imply reasonable terms. It is our considered view that in the present
case the B respondent was legally obliged to give notice and that, on the evidence,
the learned Jaji Kiongozi should have so held. Mr. Rweyemamu for the respondent,
eventually conceded as much, but he urged that one-month notice would have been
reasonable and enough. In our view the six months' notice the appellant asked for is
reasonable and C justified in the circumstances. We accordingly allow the appeal to
that extent, with costs, here and in the court below.
Regarding the quantum of damages, we are at a disadvantage. We would naturally
need D data for this, and what Mr. lakha furnished us with cannot take us far
enough. He has included in the record before us the respondent's sales documents for
only August 1980, the last month the parties transacted business with each other
immediately before the termination. We are aware that at the High Court a lot more
documents were produced E and we trust that the present omission by Mr. Lakha
was merely fortuitous and not by design. The trend of sales between the parties over
the whole tract of time the parties did business together would tell the story better
when it comes to assessing the damages. For that reason we remit that aspect of the
suit back to the learned Jaji Kiongozi for F assessing the quantum of damages and
awarding the same accordingly.
G Appeal allowed
1983 TLR p179
H
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