Caltex Oil (Kenya) Limited v Evanson Njiiri Wanjihia [2017] eKLR

Key Facts

Transaction Type

Issues

• 2. Whether the respondent breached the contract terms. The appellant alleged failure to meet sales targets, poor cleanliness, and customer service. The court found no evidence of such breaches during the contract period, noting the termination occurred after the probationary period expired without prior communication of defaults.
• 6. Whether the respondent is entitled to the damages awarded or any amount. The court partially allowed the appeal, reducing the damages from 161 months (Ksh 15,055,423) to 15 months (Ksh 1,402,680), citing unreasonable inflation in the original award. The revised amount aimed to restore the respondent's position post-termination.
• 3. Whether the termination of the dealership licence was fair. The court held the termination was unjust and in bad faith, as the respondent was asked to temporarily vacate for refurbishment but was later abruptly terminated without notice or justification, constituting trickery.
• 4. Whether the one-month notice provided in October 1993 was adequate. The court ruled the notice was superfluous, as the earlier September 1993 letter had already terminated the licence without notice. The 15-month reasonable notice period was determined based on the respondent's need to mitigate losses.
• 5. Whether the damages awarded (Ksh 15,055,423) were properly pleaded and proved as special damages. The court found the claim was for general damages (anticipated profits) rather than special damages, which did not require specific pleading. However, the 161-month calculation was deemed excessive and revised to 15 months.
• 1. Whether there was a valid contract between the parties; if so, what were the terms and whether a termination clause existed. The dealership agreement dated 29th October 1991 (letter of offer) and 16th December 1992 (probationary period of six months) formed the basis of the contractual relationship. The court determined the contract expired by effluxion of time on 23rd July 1993, with no renewal or termination clause in place.

Holdings

• The court held that the dealership contract between Caltex Oil (Kenya) Limited and Evanson Njiri Wanjihia expired by effluxion of time on 23rd July 1993, as stipulated in the agreement. Post-expiration, there was no binding contract in place, rendering any claim for breach of contract invalid. The court emphasized that the contract's six-month probationary period was admitted by the appellant, and no termination clause existed after expiration. The relationship post-expiration was deemed nebulous, requiring reasonable notice for termination, which was not provided.
• The court found the termination of the respondent's dealership license to be unjust and deceptive. The respondent was asked to 'temporarily' vacate the premises for reconstruction but was later abruptly terminated without notice. The court highlighted the absence of prior communication about breaches and the respondent's investments (loan, bank guarantee, staff retention) to argue that the termination was in bad faith. The one-month notice period in the 25th October 1993 letter was deemed superfluous after the immediate termination in September 1993.
• The original damages of Ksh 15,055,423 awarded by the High Court were set aside due to miscalculation based on a 161-month period. The Court of Appeal substituted this with Ksh 1,402,680, reflecting 15 months of reasonable notice. This adjustment considered the respondent's need to clear financial liabilities (loan, bank guarantee) and transition to alternative employment. The court acknowledged the audit report's figures were unchallenged but ruled the extended period unjustified under the circumstances.

Remedies

• The appellant was awarded half the costs of the appeal and the costs incurred before the High Court. This reflects partial success in the appeal.
• The court substituted the original damages of Kshs. 15,055,423 with Ksh 1,402,680, representing 15 months of monthly profits (Ksh 93,512/month). The amount attracts interest at court rates from the High Court judgment date until full payment.

Monetary Damages

Legal Principles

Precedent Name

• Visai Sawmills Ltd vs The Attorney General
• V.R. CHANDE AND OTHERS VS E.A AIRWAYS CORPORATION
• Kimakia Co-operative Society vs Green Hotel
• ADAIS VS GRAMOPHONE CO. LTD
• Oharamshi vs Karsam
• Provincial Insurance Co. East Africa Limited vs Nandwa
• Kenya Power & Lighting Co. Ltd vs Abel M. Momanyi Birundu
• Total (Kenya) Limited formally Caltex Oil (Kenya) vs Jane Wams Limited
• Savannah Development Company Limited vs Post Telecommunication Employees Housing Co-operative Society Limited
• Nyamogo & Nyamogo Advocates vs Barclays Bank of Kenya
• Kenya Ports Authority vs Kuston (Kenya) Limited

Key Disputed Contract Clauses

• The appellant alleged the respondent breached conditions such as failing to meet sales targets, poor cleanliness, and subpar customer service. The court found no evidence of such breaches during the contract period, as the termination occurred after the probationary period expired without prior communication of defaults.
• The contract stipulated a 6-month probationary period for the dealership, which expired by effluxion of time on 23rd July 1993. The agreement did not include a renewal clause, and the court determined that no binding contract existed post-expiration.
• The dealership agreement lacked a termination clause after the probationary period ended. The court found that the post-expiration relationship was nebulous, requiring reasonable notice for termination, which the appellant failed to provide.

Judge Name

• S. Ole Kantai
• G. B. M. Kariuki
• W. Karanja

Passage Text

• He continued operating the petrol station long after the six month probation period... There was evidence which was not refuted that after getting the dealership, he left a well-paying job in order to devote himself to running the petrol station on permanent basis.
• This in our view would therefore mean that the contract expired by effluxion of time and from 23rd July, 1993, there was no binding contract between the parties which was capable of being breached.
• we substitute therewith an order that the sum of Ksh 15,055,423 is hereby set aside and substituted with an amount of Ksh 1,402,680/= which is made up of the monthly income of Ksh 93,512 for a period of 15 months...

Damages / Relief Type

• Compensatory Damages of Ksh 1,402,680 substituted for original award
• Half costs of appeal and High Court awarded to the appellant