Delta Beverages (Private) Limited v Blakey Investments (Private) Limited

Delta Beverages (Private) Limited (appellant), a Zimbabwean company, and Blakey Investments (Private) Limited (respondent), a South African company, had been in a business relationship for several years, with the respondent supplying the appellant with plastic products. On 16 March 2018, Cynthia Malaba, the appellant's Supply Chain Director, signed a written supply agreement with the respondent to run until 31 December 2019. The appellant alleged it discovered the agreement during an internal audit in July 2019 and claimed Cynthia had no authority to sign it. The appellant filed an application in the High Court on 11 June 2020 seeking a declaratur that the agreement was void, invalid and of no legal effect, alleging: (i) Cynthia lacked authority; (ii) the agreement contravened the Competition Act (exclusivity clause); (iii) it violated Exchange Control Regulations (requiring payment outside Zimbabwe without approval); (iv) it breached import licensing requirements; and (v) it was procedurally irregular. The respondent opposed, contending that Cynthia had ostensible authority, a similar prior agreement had been signed in October 2017, the appellant's senior officials knew of the agreement, the parties had performed under it, and the agreement provided for amendments of any offensive clauses.

• Whether Cynthia Malaba had ostensible authority to bind the appellant to the supply agreement
• Whether the appellant was estopped from denying the validity of the contract based on the Turquand Rule
• Whether the supply agreement contravened section 43 of the Competition Act (exclusivity clause)
• Whether the agreement violated section 11 of the Exchange Control Regulations, 1996
• Whether the agreement breached import licensing requirements under SI 122/2017
• Which law governed the contract - South African law (as chosen by the parties) or Zimbabwean law
• Whether the court a quo erred in failing to declare the contract void for breach of Zimbabwean laws
• Whether severability of offensive clauses could save the contract
• Whether costs on a legal practitioner and client scale were warranted

The appeal was dismissed with costs on the ordinary scale. The High Court's judgment dismissing the appellant's application for a declaratur was upheld, confirming that the supply agreement dated 16 March 2018 was valid and binding on the appellant.

The binding legal principles established are: (1) Ostensible authority binds a principal where an agent's position and conduct would lead a reasonable third party to believe the agent has authority to act, and the principal is estopped from denying liability for the agent's actions; (2) The Turquand Rule protects third parties dealing with company representatives where internal procedures may not have been followed, provided the representative's actions appear consonant with the company's powers; (3) Parties to international contracts have freedom to choose the governing law, and such choice will generally be respected by courts in the spirit of sanctity and freedom of contract; (4) Directly applicable mandatory statutes of the forum (such as exchange control regulations) stand outside the choice of law process and may override the parties' chosen law; (5) A party cannot rely on its own non-compliance with mandatory laws to avoid contractual obligations, particularly where it has warranted compliance with all necessary laws and regulations; (6) Where a contract contains a severability clause, offensive provisions may be excised or amended without nullifying the entire agreement; (7) Courts will not assist a party seeking to rely on its own illegality or default to escape contractual obligations, as this would be contrary to public policy and the principle of sanctity of contracts; and (8) Where parties have performed under a contract by receiving and consuming goods on credit, the purchasing party cannot subsequently claim the contract is void to avoid payment.

The Court made several non-binding observations: (1) It noted with concern the procedural irregularity of the appellant's legal practitioners writing to the Registrar in October 2021 seeking audience with the court after the appeal had been heard and was awaiting judgment, stating that it was incumbent upon the legal practitioners to clarify the appropriateness of such a request, and that this should not hold back delivery of judgment; (2) The Court observed that the appellant's position on challenging the parties' choice of law would render the entire concept of choice of law and freedom of contract nugatory and would severely hinder international trade between private corporations; (3) The Court commented on the importance of ostensible authority in achieving justice where a principal has created an impression that its agent has authority, citing with approval the South African case of Makate v Vodacom Ltd and the English case of Hely-Hutchinson v Brayhead Ltd; (4) The Court noted that if the appellant believed it had not bargained well, its proper recourse was to seek amendments in terms of the contract's amendment clause rather than seeking to have the entire contract declared void; and (5) The Court observed that the ground of appeal regarding costs on a punitive scale was not pursued in the heads of argument or in oral submissions, indicating it had been abandoned, and therefore would not be interfered with.

This case is significant in Zimbabwean jurisprudence for several reasons: (1) It affirms the doctrine of ostensible authority and the Turquand Rule in the context of company contracts, protecting third parties who deal with company representatives in good faith; (2) It recognizes the sanctity and freedom of contract in international commercial transactions, including the parties' right to choose the governing law; (3) It establishes that while directly applicable mandatory statutes of the forum may override choice of law clauses, a party cannot rely on its own non-compliance with such statutes to avoid contractual obligations, particularly where it has warranted compliance; (4) It demonstrates the importance of severability clauses in commercial contracts, allowing offensive provisions to be excised without nullifying the entire agreement; (5) It reinforces the public policy principle that courts will not assist parties seeking to benefit from their own wrongdoing or illegality; (6) It provides guidance on the interplay between domestic regulatory statutes (competition law, exchange control, import licensing) and international commercial contracts; and (7) It emphasizes that parties who have received and consumed goods under a contract cannot subsequently seek to avoid payment by claiming the contract is void, particularly where they have previously honored similar agreements.