What constitutes a binding contract: The case of Uba Kenya Bank Limited v. Top Image Africa Limited (Civil Appeal E162 of 2022) [2025] KEHC 254 (KLR)

Case Summary: UBA Kenya Bank Limited v. Top Image Africa Limited (Civil Appeal E162 of 2022) [2025] KEHC 254 (KLR)

Court: High Court of Kenya at Nairobi (Milimani Commercial Courts)
Judge: Hon. Justice H. Namisi
Date: January 23, 2025
Citation: [2025] KEHC 254 (KLR)

Background:
Top Image Africa Limited (the respondent) sued UBA Kenya Bank Limited (the appellant) for breach of contract, alleging that the bank misled it into converting Nigerian Naira (NGN) to Kenyan Shillings (KES) at an erroneous exchange rate of 0.18% instead of the prevailing rate of 1.18%, resulting in a loss of KES 12,300,000. The trial court found in favor of the respondent, declaring the transaction unconscionable and awarding damages.

Issues on Appeal:

1. Whether the email correspondence between the parties constituted a binding contract.

2. Whether the indicative exchange rate set by the Central Bank of Kenya (CBK) was binding.

3. Whether the respondent proved that the appellant applied a fraudulent exchange rate.

4. Who bore the burden of proof in commercial disputes.

High Court's Findings:

1. Binding Contract via Email: The court held that the email correspondence between the parties, confirming the exchange rate of 0.18%, constituted a legally binding contract.

2. Indicative Exchange Rate: The court clarified that the CBK's indicative exchange rates are not fixed rates but serve as reasonable estimates, and parties are free to negotiate and agree on different rates.

3. Burden of Proof: The respondent failed to prove that the appellant applied a fraudulent exchange rate. The evidence presented was insufficient, as it lacked official CBK rates and relied on unverified online sources.

4. No Breach of Contract: The court found no breach of contract by the appellant, as the agreed-upon exchange rate was honored, and the respondent did not demonstrate any vitiating factors such as fraud or misrepresentation.

Outcome:
The High Court allowed the appeal, set aside the trial court's judgment, and dismissed the respondent's suit with costs to the appellant. Additionally, the appellant was awarded KES 50,000 in costs for the appeal.

Legal Principles:

• Contract Formation: Email correspondence can constitute a binding contract if there is clear agreement on essential terms.

• Indicative Rates: Indicative exchange rates provided by the CBK are not mandatory but serve as guidelines; parties may negotiate different rates.

• Burden of Proof: In commercial disputes, the party making an allegation bears the burden of proving it.

• Contract Enforcement: Courts will not rewrite contracts but will enforce them as agreed, barring evidence of vitiating factors.

Citation:
Uba Kenya Bank Limited v. Top Image Africa Limited (Civil Appeal E162 of 2022) [2025] KEHC 254 (KLR)