The applicant (Victoria Foods) supplied products to the respondents. On 21 June 2010, the first respondent signed an acknowledgment of debt for US$418,400.00. Further debt of US$267,260.00 was incurred between 6 June and 1 September 2010, totaling US$685,659.98. After payments of US$195,494.00, a balance of US$490,165.00 remained. A surety mortgage bond was created with the second respondent as mortgagor. On 21 July 2010, the parties entered into a compromise agreement whereby the applicant would supply flour to the first respondent (which ran a bakery business), and the first respondent would make weekly repayments of US$30,000.00 to service both old and new debts. The applicant stopped supplying flour on 1 September 2010, and the respondents' payments stopped on 14 September 2010. The applicant then sought to enforce the original debt and declare the mortgaged property executable.
The application was dismissed with costs against the applicant.
A compromise agreement, once validly concluded (whether expressly or by conduct), precludes an action on the original debt unless the compromise specifically and by clear implication provides that the original claim shall revive in the event of non-performance of the compromise terms. A party to a compromise agreement can only sue in terms of that compromise agreement and not in terms of any previous arrangement or original debt. Acceptance of a compromise agreement can be implied by conduct, such as resuming performance in accordance with the proposed terms.
The court noted that if the applicant had intended the compromise merely to assist the respondent out of sympathy while preserving rights under the original agreement, it should have responded to the offer of compromise accordingly and made this clear. The court also observed that the applicant ought to have foreseen the emergence of the factual dispute regarding breach, suggesting criticism of the decision to proceed by way of motion proceedings rather than action proceedings where evidence could be properly tested.
This case is significant in Zimbabwean contract law (which shares principles with South African law) for affirming the binding nature of compromise agreements and their effect on original debts. It establishes that once parties enter into a compromise agreement, the original cause of action is extinguished unless the compromise expressly provides for revival upon breach. The case also demonstrates the principle that motion proceedings are inappropriate where material factual disputes exist that require viva voce evidence to resolve, particularly regarding allegations of breach of contract.