Barzem Enterprises (Pvt) Ltd v Tarcon (Pvt) Ltd

On 27 August 2014, the plaintiff and defendant entered into a written agreement for hire of Articulated Dump Trucks (ADTs) to run from 1 September 2014 to 31 December 2014. The plaintiff was to provide four ADTs with each truck working a minimum of 500 hours per month at a rate of US$75.00 per hour. The trucks were for use at Murowa Diamond mine. Payment was due by the 15th of every month, with interest on late payments at Barclays Bank overdraft rate. The plaintiff delivered only 3 ADTs instead of 4, and these trucks had constant breakdowns and failed to meet the minimum 500 hours per month target. The defendant made some payments but not the full invoiced amounts. The plaintiff issued three invoices totaling US$203,160.65 and sued for this amount. The defendant contended it had made payments totaling US$119,516.63 and was entitled to set-off US$110,292.19 for breakdown hours and US$64,538.65 for hiring a third party (JRG Contracting) to complete the work, leaving the plaintiff owing the defendant US$2,132.47.

• What were the terms and conditions of the contract between the parties?
• Did the plaintiff breach those terms by failing to deliver 4 ADTs and/or by delivering ADTs that constantly broke down and failed to meet performance targets?
• Whether the defendant was entitled to set-off and the quantum thereof
• Whether the defendant was entitled to contra-charge for breakdown hours under clause 19 of the contract
• Whether the defendant was entitled to charge for costs of hiring third party equipment under clauses 16 and 18 of the contract
• Whether written notice was required before the defendant could exercise its rights under clauses 16, 18, and 19
• What rate of interest, if any, should apply to the outstanding amount

Judgment entered for the plaintiff in the sum of US$92,868.46 (being US$203,160.65 less set-off of US$110,292.19) with interest at the prescribed rate from the date of the order. Each party to bear their own costs of suit.

1. Set-off operates ipso jure under common law when mutual debts are liquidated and due, extinguishing debts pro tanto as effectually as if payment had been made. 2. Where a hire contract stipulates minimum performance standards (e.g., 500 hours per month per machine) and these are not met due to constant breakdowns and malfunction, the hirer is in breach of contract. 3. A party seeking to exercise contractual rights to contra-charge for breakdown hours under a commercial contract must establish that the breakdown occurred and that notice of the breakdown was given, but need not give separate written notice of intention to contra-charge where the contract does not expressly require such notice. 4. Where a contract permits hiring of substitute equipment from third parties upon breach, the party claiming reimbursement must prove: (a) that substitute equipment was actually hired; (b) the specific periods of such hiring; and (c) that the hiring corresponded to periods when the contracting party failed to perform. 5. A party claiming a specific interest rate bears the onus of proving that rate, including proving the benchmark rate (such as a bank's overdraft rate) where the contract references such benchmark. 6. Where both parties achieve partial success in litigation, the court may exercise its discretion to order each party to bear their own costs.

The court observed that the relationship between the defendant and JRG Contracting (the alleged third party substitute provider) made it particularly difficult to distinguish between plant hired as substitute and plant used as part of the parties' ordinary contractual working relationship. This suggested that greater evidential clarity and documentation would be required in such circumstances. The court also noted that whilst clause 16.2 of the contract did not require notification to the plaintiff of the actual hiring of a third party (only notification of breach and demand for remedy), clause 16.3 required the plaintiff's written consent for the defendant to retain sums and apply them toward costs of work referred to in clause 16.2. In the absence of such consent, the burden was on the defendant to prove its entitlement to retain such sums. The court commented that the plaintiff's claim for collection commission appeared to have been abandoned when no insistence was placed on it during trial after the defendant's opposition.

This case is significant for clarifying the application of common law set-off principles in Zimbabwean contract law, particularly in commercial hire agreements. It establishes that set-off can operate where parties have exchanged sufficient written and oral communications regarding breaches, even without formal written notice in specific contemplated form. The judgment provides guidance on the interpretation of contractual clauses dealing with breakdown charges and third party hiring in equipment rental contracts. It also emphasizes the importance of establishing clear evidential links between claimed contra-charges and actual periods of non-performance, particularly where the contracting parties have pre-existing business relationships with third parties. The case demonstrates the court's application of equity in costs awards where both parties achieve partial success.