Zimbabwe Development Corporation and Trust Merchant Bank Limited v Mako Properties and Construction (Private) Limited t/a Msuna Safaris

The first appellant (ZDC) owned all shares in Last Hope Estate Dete Holdings (Pvt) Ltd and advertised their sale in February 1999. The respondent (Msuna Safaris) bid Z$30,000,000 with financial assistance from the second appellant (the bank). The bank issued irrevocable bank guarantees on 26 April and 26 May 1999, each valid for 30 days. On 27 April 1999, ZDC accepted the offer subject to payment within seven days. An Agreement of Sale was drafted by ZDC's lawyers and signed by ZDC and Msuna Safaris on 21 June 1999, stipulating payment by 30 June 1999. After signing, the bank's lawyers advised the agreement was defective and required amendments. When the purchase price was not paid by 30 June 1999, ZDC's lawyers gave 14 days' notice to remedy the breach on 5 July 1999. When the breach was not remedied, ZDC cancelled the Agreement on 26 July 1999. Msuna Safaris applied to the High Court seeking a declaration that the Agreement remained valid and compelling the bank to pay. The High Court granted the order, prompting ZDC's appeal.

• Whether ZDC was entitled to cancel the Agreement of Sale when the purchase price was not paid by the due date
• Whether ZDC was obliged to agree to amendments to the Agreement proposed by the bank's lawyers after the Agreement had been signed
• Whether the bank guarantees remained valid and enforceable
• Whether Msuna Safaris could compel the bank to pay the purchase price after the Agreement had been lawfully cancelled

The appeal was allowed with costs. The High Court order was set aside. The application in case no. HC 3327/99 was dismissed with no order as to costs. The provisional order granted in case no. HC 4075/99 on 2 September 1999 was discharged with costs.

Where parties have concluded a valid agreement, neither party can be compelled to vary that agreement without consent, regardless of whether the proposed variation would be prejudicial. Where a contract stipulates a specific cancellation procedure in the event of breach (notice to remedy followed by cancellation if not remedied), strict compliance with that procedure entitles the aggrieved party to lawfully cancel the contract. Once a contract has been lawfully cancelled in accordance with its terms, orders compelling performance of obligations under that contract are incompetent. The essence of contract law is that parties are bound by the terms they have agreed to, and variations require mutual consent.

The Court made observations regarding the bank's conduct in consulting its lawyers only after the Agreement had been signed, rather than before. The Court noted that had the bank consulted its lawyers before the Agreement was signed, the problems which arose would most probably not have arisen, and the sale would have been completed in 1999. To show disapproval of this conduct, the Court made no order as to costs in case HC 3327/99, even though this was unusual given that the bank was essentially the successful party in defending that application. This demonstrates the Court's willingness to use costs orders to express disapproval of conduct that, while not unlawful, contributes unnecessarily to litigation.

This case establishes important principles in Zimbabwean (and by extension South African) contract law regarding the sanctity of contracts and the right to cancel for breach. It affirms that parties who have concluded a valid agreement cannot be compelled to vary that agreement without their consent, even where the proposed variations might not be prejudicial. The case reinforces the principle that where a contract provides for cancellation upon breach following notice, strict compliance with the contractual cancellation procedure entitles the aggrieved party to cancel. It also demonstrates that courts will not compel parties to accept variations to contracts already concluded, emphasizing freedom of contract and the binding nature of agreements freely entered into.