Mazhar Rawoof Petkar N.O and Milly Mirriam Gaibie N.O v Alexandre Paulo Castanheira and Rachel Salu Castanheira

On 25 January 2005, the plaintiffs (sellers) and defendants (purchasers) entered into a written agreement of sale for a building known as Sunkist Flats in Bulawayo for Z$11.5 billion. The defendants, who ran educational institutions, needed the building for a school. After negotiations in which defendants disclosed their income patterns, the purchase price was agreed at Z$11.5 billion. Payment terms required: Z$5 billion by the date of signature (paid 23 January 2006), Z$5 billion by 27 January 2006, and Z$1.5 billion upon occupation. The defendants paid Z$5 billion before the agreement was signed on 26 January 2006. The defendants failed to pay the second installment by 27 January 2006. On 16 February 2006, the parties signed an addendum extending the deadline to 28 February 2006 with penalties for late payment at 80% interest per annum. By 30 March 2006, defendants had paid Z$9.2 billion to the plaintiffs' account. A dispute arose over payment of Capital Gains Tax of Z$2.3 billion. The plaintiffs issued a notice in terms of the Contractual Penalties Act on 15 March 2006 and subsequently sought cancellation of the agreement. The defendants took occupation, made extensive renovations, and continued operating their school from the premises.

• Whether the defendants were in breach of the agreement of sale
• Whether the plaintiffs' cancellation of the agreement was in accordance with the Contractual Penalties Act (Chapter 8:04)
• Whether the plaintiffs attempted to restitute amounts paid by defendants
• Whether plaintiffs were entitled to cancel the agreement based on alleged breach of contract
• The proper interpretation of the payment terms in the agreement of sale and addendum, particularly regarding Capital Gains Tax

1. The plaintiffs' claims are dismissed. 2. The plaintiffs are ordered to pay the costs of suit.

Once parties to a contract execute an addendum that novates the payment terms and provides specific remedies for breach (such as penalty interest), the original rights under the initial contract (including the right to cancel for breach) are extinguished unless the addendum specifically or by clear implication provides that the original claim shall revive in the event of non-performance. A party cannot elect to enforce penalty provisions under a compromise agreement while simultaneously seeking to exercise cancellation rights under the original agreement. Where ambiguity exists in a contract regarding payment mechanisms, the ambiguity must be construed against the proferens (the party who drafted the contract). In agreements for the sale of immovable property, amounts designated for specific purposes (such as Capital Gains Tax payable to conveyancers) cannot be demanded by sellers as part of the purchase price payable to them.

The court observed that it accords with salutary practice in sales of properties that the purchase price is released to the seller only upon the passing of transfer, with parties exchanging value simultaneously - the seller receiving money and the purchaser obtaining title and rights in the property. The court noted with apparent disapproval that after almost 17 years, the defendants remained in occupation of the property without title deeds, having paid the full purchase price and made substantial improvements to the property. The court commented on the lack of probative value of the first plaintiff's evidence, noting that corroboration can only be supplied by independent evidence of a witness giving independent recollections, not wholesale adoption of another witness's testimony. The court observed deep contradictions in the agreement of sale itself, particularly regarding payment terms and Capital Gains Tax, noting that this lack of clarity was one of the reasons that led to the litigation.

This case is significant in Zimbabwean contract law for its application of the principles of contractual interpretation, particularly the golden rule requiring ordinary grammatical meaning of contractual terms. It establishes important principles regarding novation of contracts through addenda, holding that once parties enter into a compromise agreement (addendum) that creates new rights and obligations, they cannot revert to rights under the original agreement unless the compromise specifically provides for revival of original claims. The case also reinforces the contra proferentem rule that ambiguities in contracts must be construed against the party who drafted them. It demonstrates the consequences of attempting to cancel a contract while simultaneously retaining benefits (purchase price) under that contract, and the importance of clear drafting regarding payment terms and mechanisms in property sale agreements.