Topic: Agreement, Parole Evidence Rule
Date of Judgment: 18 June 2024
Court: Supreme Court of Uganda
Case Number/Citation: Civil Appeal 31 of 2021; 2024 UGSC 13
Judges: Justices; Owiny-Dollo, CJ, Faith Mwondha, Justice Percy Night Tuhaise, Elizabeth Musoke and Christopher Madrama.
Summary Facts of the Case
The parties in this case entered a transaction on 17th January 2007, which the appellants claimed was a land sale transaction, while the respondent claimed it was a loan transaction with the land as security.
The respondent argued that he signed two separate documents between him and the first appellant with his company, the second appellant.
He alleged one document was a blank land sale agreement to be effected upon default of the loan and the other document was a loan agreement for the loan sum of UGX 272M.
And therefore the land sale agreement was intended to secure the monies as a loan but not an outright sale.
The High Court found that the transaction was a sale and that there was no evidence of the loan agreement alleged by the respondent and therefore ruled in favour of the appellants.
Dissatisfied the respondent appealed to the Court of Appeal which reversed the decision of the High Court upon finding that the transaction was a loan and not a sale because there had been no intention between the parties to create a sale transaction.
Dissatisfied with the decision of the Court of Appeal, the Appellants appealed to the Supreme Court on the ground that the Court of Appeal erred in reaching its decision by considering the oral testimony of the respondent as to the existence of a loan agreement and ignoring the written land sale agreement on record.
Legal Issues Before the Court
- Whether the transaction between the parties was a sale agreement or a loan agreement.
- Whether the oral evidence provided was admissible to contradict the written agreement.
The Decision of the Court
The Supreme Court allowed the appeal, set aside the decision of the Court of Appeal, and restored the High Court’s judgment, which had found the transaction to be a sale and not a loan.
The Supreme Court found that the written agreement explicitly stated it was a sale agreement, and the respondent’s acknowledgment of the same barred any oral evidence to the contrary under Sections 91 and 92 of the Evidence Act.
The Court of Appeal therefore erred in admitting oral testimony of a loan agreement that contradicted the written agreement of a land sale between the parties.
The Supreme Court held that where the parties have reduced their intentions into a contract document, then that document is taken to be conclusive evidence of their intention to create legal relations except vitiating circumstances such as fraud are proven to the contrary which the respondent did not do in this case.
Key Quote: “The contract has terms and the words in them speak for themselves. By the act of the Ptaintiff, he endorsed a land sale agreement and executed a transfer deed. Being an adult of sound mind and signing a document whose terms expressly indicate the intention of the parties, he cannot be allowed to depart from the terms except on grounds that would invalidate a contract.” – Justice Christopher Madrama, Lead Judgement.
Law Applied by the Court
- Sections 91 and 92 of the Evidence Act (Parole Evidence Rule); Exclude extraneous oral evidence to contradict, vary the terms of a written agreement.
Counsel on Record
- For the Appellants: Mr. Joseph Kyazze, Mr. Edgar Ayebazibwe, Mr. George Arinaitwe.
- For the Respondent: Mr. Innocent Okeng, Mr. Tonny Okweny.
Conclusion
This case reinforces the principle that written agreements are presumed to fully encapsulate the contractual intention and terms agreed upon by the parties and that extraneous oral evidence cannot be used to contradict such written agreements unless exceptional grounds as provided under the Evidence Act are proven.