The plaintiff, a South African company, and the defendant, a Zimbabwean company, entered into a contract in May 2012 for the purchase of 116 concrete rectangular portal culverts for ZAR 1,332,738.01. The plaintiff paid the full purchase price on 1 June 2012. The plaintiff was allowed to collect only 72 culverts from the defendant's manufacturer, Infraset, in Brakpan, South Africa. The remaining 44 culverts could not be collected because the defendant had failed to pay Infraset for their manufacture. Initially, in November 2011, the parties had agreed on a contract that included delivery costs. However, when transport costs doubled from US$104,400 to US$210,540, the plaintiff refused to accept the increased costs. On 31 May 2012, the plaintiff issued a new purchase order for 116 culverts without delivery, deleting the word "delivery" and leaving only "collection" on the purchase order. The defendant accepted this new order by providing banking details and subsequently providing collection details including the physical address of Infraset and contact person. The plaintiff sought to cancel the contract and claimed a refund of ZAR 505,521.51 representing the value of the 44 undelivered culverts.
Judgment for the plaintiff. The defendant was ordered to pay: (1) ZAR 505,521.51 with interest at 5% per annum from date of summons to date of full payment; (2) Costs of suit on the attorney and client scale.
A contract of sale is created when the offeror (purchaser) issues a purchase order and the offeree (seller) accepts. The offeror is entitled to stipulate the terms of the offer, including whether goods are to be delivered or collected. When parties replace an old contract with a new one containing different terms, this constitutes novation, which extinguishes rights and duties under the old contract and replaces them with fresh contractual obligations as per the new contract. The issue of how payment is to be effected is distinct from the contract itself; payment to a third party authorized by the seller does not affect the validity of the contract. Where a party breaches a contract by failing to perform its obligations, the innocent party is entitled to cancel the contract and claim damages. Institution of legal proceedings constitutes adequate notification of cancellation where prior notice has not been communicated. An attorney and client scale of costs is justified where a defence is groundless, frivolous, vexatious and constitutes an abuse of court process.
The court made observations about the nature and purpose of purchase orders, invoices, and proforma invoices in commercial transactions. The court noted that a proforma invoice is not a true invoice but a document declaring the seller's commitment to provide goods at certain prices, essentially a quotation or estimate. The court observed that in Zimbabwe's multi-currency system adopted in 2009, both the United States Dollar and South African Rand are legal tenders, and there is nothing illegal about electing to pay in either currency. The court commented that a third party is entitled to receive payment on behalf of a seller as long as properly authorized, with the third party's right restricted to receipt of payment without incurring obligations or rights under the contract.
This case establishes important principles in Zimbabwean contract law regarding: (1) novation of contracts and the replacement of old contractual obligations with new ones; (2) the legal effect of purchase orders and proforma invoices in commercial transactions; (3) the distinction between the contract itself and payment arrangements for purposes of determining illegality; (4) the entitlement of an innocent party to cancel a contract for breach and the adequacy of service of summons as notice of cancellation; (5) the circumstances justifying costs on an attorney and client scale where a defence is frivolous and vexatious. The case also demonstrates the application of multi-currency considerations in Zimbabwean commercial law following the adoption of the multi-currency system in 2009.