Firex Services (Pvt) Ltd v Mai Kai Estate Development Trust and Bernard Mutanga

The parties entered into a verbal contract in 2007-2008 for the installation of security equipment (including electrical works, fence, access control, grille gates and alarm system) at the defendants' premises. The plaintiff issued a statement in March 2008 claiming work performed totaling US$18,830. The defendants promised payment but this did not materialize, including an alternative offer of Old Mutual shares. Negotiations were in local currency initially but complications arose when Zimbabwe converted to a multi-currency system. The defendants disputed the amount claimed, believing work done was valued at US$4,600. On 29 December 2009, the parties entered into a deed of settlement which reduced their oral agreement to writing and provided that the first defendant would pay US$4,681 upon signing, with the rest to be implemented in three phases. The deed included an arbitration clause. The plaintiff subsequently sought cancellation of the contract, return of electrical gadgets, and costs. The defendants admitted owing US$4,681 but disputed the balance.

• Whether the deed of settlement between the parties is legally binding
• Whether the dispute between the parties should be referred to arbitration
• What were the exact terms of the agreement between the parties
• Whether the plaintiff supplied and fixed electrical equipment worth US$18,808.00
• Whether the contract was illegal for want of exchange control authority
• Whether the plaintiff proved performance of the entire contract

Judgment entered for the plaintiff in the sum of US$4,681. Absolution from the instance granted in respect of the rest of the claim. Defendants ordered to bear plaintiff's costs in respect of the admitted claim.

1. A deed of settlement that varies an oral agreement and is signed by the parties is legally binding and constitutes the terms of the contract between them. 2. Where a contract contains an arbitration clause, a party seeking referral to arbitration must request it before submitting their first statement on the substance of the dispute in accordance with Article 8(1) of the UNCITRAL Model Law on International Commercial Arbitration; failure to do so before trial commences precludes subsequent referral. 3. A party claiming performance of contractual obligations bears the burden of proving such performance on a balance of probabilities; in the absence of documentary proof or testimony from employees who performed the work, the claim will not be proven. 4. Where a defendant admits partial liability, judgment will be entered for the admitted amount, and absolution from the instance will be granted for the unproven balance of the claim.

The court made observations regarding the in pari delicto melior est conditio possidentis rule in the context of exchange control violations, noting that the issue of illegality was "neither here nor there" given that the parties had renegotiated their contract in December 2009 when the multi-currency regime was already in operation, and that prior to the multi-currency regime the defendants had sought exchange control authority for payments. The court also observed that work of the nature claimed would not ordinarily be done without some form of documentary proof, suggesting that commercial parties should maintain proper records of work performed in phases. The court noted that plaintiff's counsel cited cases on relaxing the in pari delicto rule (J v Cassim 1939 AD 437, Hatley And Others v Van Click 1987 (2) ZLR 240 (S), Dube v Khumalo 1986 (2) ZLR 103 (S) and Patterson v Hajbhay 1940 TPD 182), though this did not ultimately affect the decision.

This case is significant for Zimbabwean contract law and arbitration practice as it: (1) demonstrates the binding nature of settlement agreements that vary oral contracts; (2) clarifies that illegality defenses based on exchange control violations require proper foundation and context; (3) emphasizes the importance of documentary evidence and witness testimony in proving performance of contractual obligations, particularly in commercial contracts for services; (4) applies the UNCITRAL Model Law on International Commercial Arbitration as incorporated into the Arbitration Act 6 of 1996, confirming that requests for referral to arbitration must be made before submitting first statement on the substance of the dispute; and (5) illustrates the principle that where a plaintiff fails to prove the full extent of a claim, absolution from the instance is appropriate for the unproven portion while judgment can be entered for admitted amounts.