JUDGMENT
Ostensible authority
1.This is an appeal from the Judgment and Decree of the Chief Magistrate's Court at Milimani Commercial Courts (Hon. Muthoni Mwangi) delivered on 29.10.2024 in MCCOMMSU No. E853 of 2023.
2.In the impugned judgment, the trial court found the appellant and the 2nd respondent jointly and severally liable to pay the 1st respondent Kshs. 2,643,000/-.
3.Dissatisfied with the decision, the appellant instituted this appeal.
4.The memorandum of appeal dated 26.11.2024, lists the following grounds: -
1)That the learned trial magistrate erred in law and fact by failing to appreciate that the cause of action as against the Appellant was unfounded and misconceived in law.
2)That the learned trial magistrate erred in law and in fact by failing to acknowledge the non-existence of a contractual relationship between the Appellant and the 1st Respondent herein with regard to the cause of action and the buy-back agreement.
3)That the learned trial magistrate erred in fact and law by holding that the 2nd Respondent was an authorised agent of the Appellant.
4)That the learned trial Magistrate erred in law and fact by failing to appreciate the fact that one Peter Mutuli was a natural person and the 2nd Respondent herein was a juristic person, making the two totally separate and not monolithic.
5)That the learned trial magistrate erred in law and fact by failing to appreciate that the Appellant was herein alien to any pre-existing relationship, between the 1st and 2nd Respondents.
6)That the learned trial magistrate erred in law and fact by awarding the sum of Kshs. 2,643,000/= despite the fact that the 1st Respondent had not specifically pleaded and proved the said sum as required by the law.
7)That the learned trial magistrate, in arriving at her decision, erred in law and fact in by failing to acknowledge and take into account the fact that the 1st Respondent had conceded to having adduced false documents as part of his evidence during trial.
8)That the learned trial magistrate erred in law and fact by holding the Appellant jointly and severally liable with the 2nd Respondent, despite the fact that it is only the 2nd Respondent who breached the buyback agreement with the 1st Respondent.
9)The learned trial Magistrate erred in law by misdirecting herself on the issues for determination by acting on issues she ought not to have acted on and failing to act on issues she ought to have acted on.
10)That the learned trial magistrate erred in law and fact in predisposing her mind to a position favourable to the 1st Respondent against the Appellant and thereby arrived at a wrong decision.
11)That the learned trial Magistrate erred in law and fact in failing to consider the pleadings, testimony, evidence, submissions and binding authorities submitted by the Appellant and thus arriving at a wrong decision.
Brief Background
5.The 1st respondent’s case before the trial court stemmed from a dispute which ensued after alleged breach of an agreement dated 7.11.2022 for purchase of a Foton Sauvana VX3 SUV. The agreement was between it and the appellant and the 2nd respondent. He paid the deposit as instructed by the 2nd respondent. Thereafter, his financier, KCB Bank Kenya Limited transferred Kshs. 1,935,000/- directly to the appellant.
6.The 1st respondent claimed that he had agreed to purchase a brand-new vehicle but the appellant and the 2nd respondent delivered a second-hand one. That upon inquiry, he was assured that he would be given a new vehicle once the next shipment arrived.
7.The 1st respondent stated that while he was using the second-hand vehicle, it developed a mechanical issue and the appellant refused to repair it unless he paid for the repairs, which he did.
8.Subsequently, the 1st and 2nd respondents entered a buy-back agreement following which the 1st respondent handed over the vehicle to the 2nd respondent. However, the 2nd respondent did not refund the 1st respondent as agreed.
Directions of the Court
9.The appeal was admitted to hearing and directions issued to the parties to put in their written submissions.
10.The appellant and the respondent filed written submissions dated 20.5.2025 and 23.6.2025, respectively.
Appellant’s submissions
11.The appellant submitted that from the onset, it maintained that the motor vehicle for sale was in used condition as per the sale agreement. That nowhere in the agreement reflects that the vehicle was new or of zero mileage.
12.The appellant relied on the parole evidence rule affirmed in Safari Eight Two Thousand and Two Co. Limited v Evanson Nyasani t/a Nyasani E. N. & Company Advocates (Civil Appeal 16 of 2019) [2020] KEHC 5420 (KLR). It argued that extrinsic evidence cannot be introduced to vary the express terms of the written agreement.
13.The appellant asserted that it was a stranger to the buy-back agreement, which was exclusively between the 1st and 2nd respondents. It submitted that the 2nd respondent acted as an intermediary and acknowledged responsibility in the buy-back agreement distancing it from any alleged misrepresentation. It urged the court to find that there was no misrepresentation on its part as there was no demonstration of the elements thereof. It relied on Kobilo Farm Limited & another v Elfam Limited; Commodities Fund (Interested Party) (Environment and Land Case 24 of 2020) [2024] KEELC 1567 (KLR) (14 March 2024) (Judgment).
14.The appellant contended that the trial court failed to distinguish between Peter Mutuli and the 2nd respondent, Tunica Auto Ltd.
15.The appellant relied on the caveat emptor doctrine to argue that the burden was upon the 1st respondent to investigate and satisfy himself as to the quality and conditions of the goods before finalizing purchase. It relied on Thrift Homes Limited v Kays Investment Limited [2015] KEHC 5591. It argued that in the absence of a warranty or express assurance by the seller as to the condition of the vehicle, and where the purchaser had the full opportunity to inspect or make inquiries regarding the same, the seller cannot be held liable for unexpressed assumptions or expectations on the part of the buyer.
16.The appellant faulted the trial court for failing to appreciate that the sale agreement was signed by 3 parties but the 1st and 2nd respondents completely disregarded it in the buy-back agreement. It referred to a letter dated 24.10.2022 addressed to the 1st respondent from the 2nd respondent to assert that at no point did they engage it. It cited Gimalu Estates Ltd & 4 Others v International Finance Corporation & another [2006] eKLR for the proposition that parties effect a variation of contract by modifying its terms by mutual agreement. It also relied on the contra-proferentem rule to argue that the buy-back agreement ought to have been executed by all parties to the original sale agreement.
17.The appellant submitted that the 2nd respondent’s express undertaking to assume responsibility amounts to an admission of liability. It relied on Trust Bank Ltd v Paramount Universal Bank Ltd & 2 Others [2009] eKLR. It urged the court to treat the statement as an admission and to apportion fault accordingly and hold the 2nd respondent severally liable. It cited City Council of Nairobi v Wilfred Kamau Githua t/a Githua Associates & another [2016] eKLR to the effect that contract cannot be enforced against a person who is not a party.
18.The appellant submitted that the failure to return the motor vehicle back to it negates any claim for default or liability on its part.
19.The appellant argued that the award of Kshs. 2,643,000/= was made without strict proof. It relied on Hahn v Singh [1985] KLR 716, to assert that special damages must not only be specifically pleaded but also strictly proved.
20.The appellant urged the court to allow its appeal with costs, to set aside the judgment and decree and all consequential orders and to dismiss the suit against it in MCCOMMSU No. E853 of 2023 with costs.
1st Respondent’s submissions
21.The 1st respondent emphasized that, in para. 2 of the agreement of 7.11.2022, the appellant acknowledged that he had negotiated for a brand-new vehicle. He also submitted that the agreement was ambiguous and relied on United Millers Limited v Nairobi Java House Limited [2019] eKLR to assert that if there is an ambiguity in a contract, it ought to be construed against the party that drew it.
22.According to the 1st respondent, there was material misrepresentation by the appellant and the 2nd respondent in offering a brand-new vehicle and delivering a second-hand one. Thus, the buy-back agreement was to remedy the material misrepresentation.
23.He submitted that by conduct, the appellant held out the 2nd respondent and its director, Peter Mutuli as its agent. He highlighted the appellant’s admission that Peter Mutuli was its former employee. He relied on Kariuki v Nakuru & 3 others (Environment and Land Case 308 of 2017 [2022] KEELC 3413 (KLR) where the court considered the definition of term agency.
24.The 1st respondent argued that the appellant is estopped from claiming caveat emptor when it benefited from the actions of its employee. He highlighted that the appellant admitted that it received Kshs. 2,835,000/- for the purchase of the motor vehicle, also confirming that Peter Mutuli was acting on its behalf.
25.The 1st respondent asserted that the buy-back agreement was negotiated, reviewed and agreed upon with the appellant’s full knowledge and that the 2nd respondent signed it as the appellant’s agent. He highlighted that the appellant received all the funds that the buy-back was based on. For this reason, he argued that the liability should be apportioned jointly and severally between the appellant and the 2nd respondent. He asserted that both parties breached the contract, that the 2nd respondent was the one that brought the business to the appellant.
26.The 1st respondent disputed the appellant’s claim that he did not carry out due diligence. He highlighted that he visited the appellant’s premises and was assisted by Peter Mutuli in selecting the vehicle.
27.The 1st respondent asserted that he proved his cause of action and special damages. He argued that the appellant does not deny receiving money from him and his financier. He explained that the damage suffered came about when the appellant’s employee and agent offered him a buy-back agreement in exchange for collection of the motor vehicle which he had not ordered. This led to him no longer having a motor vehicle and losing money already paid to the appellant and still having to pay the bank loan. He referred to the plaint where the damages incurred from the transaction were specifically broken down.
28.The 1st respondent therefore urged the court to find that there was a valid agency that existed based on conduct and that the award of damages was proper due to the appellant’s failure to honour the buy-back agreement. He urged the court to uphold the judgment with costs.
Analysis and Determination
Duty of court
29.The court’s duty in a first appeal is to reevaluate the evidence and draw its own conclusions, bearing in mind that it did not see or hear the witnesses. Selle & Another v Associated Motor Boat Co. Limited & Others [1968] EA 123
30.Issues which emerge from the 11 grounds of appeal, are on: -
(1) Whether there was a contractual relationship between the Appellant and the 1st Respondent herein with regard to the cause of action.
(2) Whether the 2nd Respondent was an authorised agent of the Appellant and whether it was bound by the buy back agreement.
(3) Whether the trial court erred in awarding Kshs. 2,643,000/= which the 1st Respondent had not specifically pleaded and proved as required by the law.
(4) Whether the trial court erred in holding the appellant jointly and severally liable with the 2nd Respondent.
(5) Whether the trial court predisposing her mind to the position favourable to the 1st respondent, failing to consider the appellant’s pleadings, evidence, submissions and issues.
Whether there was a contract between the appellant and the 1st respondent
31.The appellant faulted the trial court for failing to acknowledge that there was no contractual relationship between the appellant and the 1st respondent in respect of the cause of action and the buy-back agreement.
32.The trial court found that there was a contract between the appellant and the 1st respondent because the appellant acknowledged that it received the balance of the purchase price of Kshs. 1,935,000/- from KCB Bank Kenya Ltd, the 1st respondent’s financier.
33.The trial court also noted that clause 7.6 of the agreement indicates that the seller shall register the vehicle in the names of the 1st respondent and KCB Bank Limited. It also noted that an invoice dated 4.10.2022 bore a stamp of KCB Bank Limited and indicated the amount of Kshs. 1,935,000/- which the appellant acknowledged to have received.
34.Therefore, based on the foregoing, the trial court found that the appellant’s denial that the parties had entered the contract dated 26.7.2022 was not supported by evidence such as an affidavit by its CEO denying the signatures appearing on the contract.
35.In a civil claim, burden of proof lies with the person claiming existence of any fact. The standard of proof is on a balance of probabilities. Section 107 (2) of the Evidence Act
36.The evidence on record supports the findings of the trial court that there was a contract between the appellant and the 1st respondent. This was not disproved.
37.The question of ostensible authority shall be discussed and determined next.
Whether the 2nd respondent was an authorized agent of the appellant
38.The appellant submitted that the trial court erred by holding that the 2nd respondent was its authorized agent. It faulted the court for failing to appreciate that the 2nd respondent is a company separate and distinct from the person known as Peter Mutuli.
39.From the record, the 1st respondent’s case was that he negotiated for the purchase of the subject motor vehicle with the appellant’s agent, Peter Mutuli who is a director in the 2nd respondent company.
40.In the impugned judgment, the trial court found that: -
“The contract of employment in respect of Peter Mutuli produced as part of the Defendants evidence attests to the fact that he was indeed a sales manager at Foton Kenya Ltd the 2nd defendant herein.
If indeed as DW2 stated in his evidence Peter Mutuli stopped working for Foton Motors in March 2022, actual notice of his termination ought to have been given promptly to all customers. The same he admits was only given through a newspaper advertisement dated 8th March 2024.
In the circumstances, it is my finding that Peter Mutuli has apparent authority to bind the 1st defendant herein. Failure to give such notice in my view entitled the Plaintiff to believe that the 2nd Defendant had authority to enter into a contract with him on the sale and purchase of the motor vehicle.”
41.From the above, the trial court’s finding that Peter Mutuli had the apparent authority to bind the appellant was due to its acknowledgement that he was formerly employed as his salesperson and the failure to notify all its customers that he had left employment in March 2022 until 8th March 2024. Peter played a critical role in the entire transactions on behalf of the appellant.
42.It was claimed that Peter had ostensible or apparent authority to bind the company-the appellant-in the transactions forming the basis of this appeal.
43.Ostensible or apparent authority developed as a legal doctrine to bind the principal by the agent’s actions, even if not authorized where the principal’s conduct or words reasonably led a third party to believe the agent has authority. It offers protection to innocent third parties who deal with the agent in good faith.
44. The Appellant acknowledged that Peter Mutuli was formerly employed as its salesperson and did not notify its customers that he had left employment in March 2022 until 8th March 2024. Peter played a critical role in all the transactions forming the basis of this appeal. And, the appellant was a major party and beneficiary of the transactions.
45.In these circumstances, this was a matter within the internal processes, mechanism and affairs of the Appellant. It would be onerous and inconsistent with the doctrine of ostensible authority to require a third party such as the 1st Respondent to enquire whether the said officer-Peter- had real or actual authority to transact the sale and purchase of the vehicle on behalf of the company-the appellant.
46. The doctrine of ostensible authority was developed to cover exactly such situations as in this case.
47. Evidence tendered made the trial court to find that the 1st respondent was entitled to believe that the 2nd respondent had authority to enter into the buy-back agreement. This court does not find any evidence to depart from this finding by the trial court.
48.As such, a company will not avail itself of the defense of corporate legal personality where ostensible authority has been proved.
49.Therefore, the trial court did not err in ruling out the defense of corporate legal personality against ostensible authority attributed to Peter Mutuli. It cannot also be faulted for not appreciating that the appellant did not know of the pre-existing relationship between the 1st and 2nd respondents.
Proof of cause of action
50.As regards the proof of cause of action, the trial court found that the contracts for the sale and purchase of the motor vehicle were not clear in the description. The trial court therefore applied the contra proferentem rule to construe the provision against the appellant which was the drafter, in finding that the contract was for the purchase of a brand-new vehicle. The trial court also referred to the letter of offer which reference to the purpose of funds being disbursed to be the purchase of a new Foton Sauvana. The trial court also noted that the letter dated 22.10.2022 captioned “Amicable dispute resolution” from the 2nd respondent, referred to the VIN which clearly stated in the inventory as brand new and that was the reason the asset finance process was allowed.
Proof of special damages
51.The appellant faulted the trial court for awarding the 1st respondent Kshs. 2,643,000/= yet the 1st respondent had not specifically pleaded and proved the said sum as required by the law.
52.But, the 1st respondent asserted that he proved the special damages.
53.The trial court based its award of Kshs. 2,643,000/= to the 1st respondent on the acknowledgement by the appellant’s witness that he received cash from the 1st respondent and his wife Isabel Wairimu Mwangi and the balance from KCB Bank Kenya Limited.
54.The law is that special damages must be specifically pleaded and strictly proved. David Bagine v Martin Bundi [1997] eKLR, Joseph Kipkorir Rono v Kenya Breweries Limited & Another Kericho HCCA No. 45 of 2003
55.The 1st respondent claimed special damages of Kshs. 2,643,000/=. The particulars were set out in para. 23 of the plaint, as follows: -
(i)...
(ii)Loss of the Purchase Price paid to the Defendant’s amounting to Kshs. 2,535,000/= made up as follows: - Deposit of Kshs. 600,000/= paid by the Plaintiff plus Kshs. 1,935,000/- paid by the Financier – KCB Limited.
(iii)Interest due to the financier at the rate of 13 % per annum.
(iv)Loan processing fees/ Bank loan negotiation fees – Kshs. 44,000/-
(v)Life insurance premium for the first year – Kshs. 34,000/-
(vi)Car track installation fees – Kshs. 30,000/-
56.From the record, the 1st respondent exhibited a letter of offer dated 2.9.2022 for the facility of Kshs. 1,935,000/-. He also produced a bank statement showing that he is repaying the loan and deduction of the negotiation fees and the life insurance premium.
57.Although the 1st respondent claimed refund of Kshs. 600,000/- deposit, comprised of Kshs. 341,000/- overpayment by his wife and Kshs. 259,000/- by him, he exhibited a receipt for Kshs. 215,000/- issued by the appellant.
58.The 1st respondent confirmed that there was an overpayment of Kshs. 900,000/- by the 1st respondent’s wife Isabel which was applied towards offsetting the purchase price for the SUV.
59.Having acknowledged the above and in view of the particulars of special damages and the evidence adduced, the appellant is estopped from claiming that the Kshs. 2,643,000/- was not specifically pleaded and strictly proved.
60.Notably of ‘strictly proved’ of special damages, ‘the degree of certainty and particularity of proof required depends on the circumstances and nature of the acts themselves.’ Court of Appeal in Hahn vs. Singh, Civil Appeal No. 42 of 1983 [185] KLR 716.
61.From the foregoing, I find that the special damages sought by the 1st respondent were specifically pleaded and strictly proved and that the trial court did not err in awarding Kshs. 2,643,000/-.
Disposal
62.The upshot is that the appeal herein is dismissed for want of merit with costs to the 1st respondent.
Dated, signed and delivered at Nairobi through Microsoft Teams online application this 12th day February, 2026
----------------------
F. Gikonyo M
Judge
In the presence of: -
Genga for Appellant
Ms. Kabuthi for 1st Respondent
CA Kinyua
Ostensible authority
1.This is an appeal from the Judgment and Decree of the Chief Magistrate's Court at Milimani Commercial Courts (Hon. Muthoni Mwangi) delivered on 29.10.2024 in MCCOMMSU No. E853 of 2023.
2.In the impugned judgment, the trial court found the appellant and the 2nd respondent jointly and severally liable to pay the 1st respondent Kshs. 2,643,000/-.
3.Dissatisfied with the decision, the appellant instituted this appeal.
4.The memorandum of appeal dated 26.11.2024, lists the following grounds: -
1)That the learned trial magistrate erred in law and fact by failing to appreciate that the cause of action as against the Appellant was unfounded and misconceived in law.
2)That the learned trial magistrate erred in law and in fact by failing to acknowledge the non-existence of a contractual relationship between the Appellant and the 1st Respondent herein with regard to the cause of action and the buy-back agreement.
3)That the learned trial magistrate erred in fact and law by holding that the 2nd Respondent was an authorised agent of the Appellant.
4)That the learned trial Magistrate erred in law and fact by failing to appreciate the fact that one Peter Mutuli was a natural person and the 2nd Respondent herein was a juristic person, making the two totally separate and not monolithic.
5)That the learned trial magistrate erred in law and fact by failing to appreciate that the Appellant was herein alien to any pre-existing relationship, between the 1st and 2nd Respondents.
6)That the learned trial magistrate erred in law and fact by awarding the sum of Kshs. 2,643,000/= despite the fact that the 1st Respondent had not specifically pleaded and proved the said sum as required by the law.
7)That the learned trial magistrate, in arriving at her decision, erred in law and fact in by failing to acknowledge and take into account the fact that the 1st Respondent had conceded to having adduced false documents as part of his evidence during trial.
8)That the learned trial magistrate erred in law and fact by holding the Appellant jointly and severally liable with the 2nd Respondent, despite the fact that it is only the 2nd Respondent who breached the buyback agreement with the 1st Respondent.
9)The learned trial Magistrate erred in law by misdirecting herself on the issues for determination by acting on issues she ought not to have acted on and failing to act on issues she ought to have acted on.
10)That the learned trial magistrate erred in law and fact in predisposing her mind to a position favourable to the 1st Respondent against the Appellant and thereby arrived at a wrong decision.
11)That the learned trial Magistrate erred in law and fact in failing to consider the pleadings, testimony, evidence, submissions and binding authorities submitted by the Appellant and thus arriving at a wrong decision.
Brief Background
5.The 1st respondent’s case before the trial court stemmed from a dispute which ensued after alleged breach of an agreement dated 7.11.2022 for purchase of a Foton Sauvana VX3 SUV. The agreement was between it and the appellant and the 2nd respondent. He paid the deposit as instructed by the 2nd respondent. Thereafter, his financier, KCB Bank Kenya Limited transferred Kshs. 1,935,000/- directly to the appellant.
6.The 1st respondent claimed that he had agreed to purchase a brand-new vehicle but the appellant and the 2nd respondent delivered a second-hand one. That upon inquiry, he was assured that he would be given a new vehicle once the next shipment arrived.
7.The 1st respondent stated that while he was using the second-hand vehicle, it developed a mechanical issue and the appellant refused to repair it unless he paid for the repairs, which he did.
8.Subsequently, the 1st and 2nd respondents entered a buy-back agreement following which the 1st respondent handed over the vehicle to the 2nd respondent. However, the 2nd respondent did not refund the 1st respondent as agreed.
Directions of the Court
9.The appeal was admitted to hearing and directions issued to the parties to put in their written submissions.
10.The appellant and the respondent filed written submissions dated 20.5.2025 and 23.6.2025, respectively.
Appellant’s submissions
11.The appellant submitted that from the onset, it maintained that the motor vehicle for sale was in used condition as per the sale agreement. That nowhere in the agreement reflects that the vehicle was new or of zero mileage.
12.The appellant relied on the parole evidence rule affirmed in Safari Eight Two Thousand and Two Co. Limited v Evanson Nyasani t/a Nyasani E. N. & Company Advocates (Civil Appeal 16 of 2019) [2020] KEHC 5420 (KLR). It argued that extrinsic evidence cannot be introduced to vary the express terms of the written agreement.
13.The appellant asserted that it was a stranger to the buy-back agreement, which was exclusively between the 1st and 2nd respondents. It submitted that the 2nd respondent acted as an intermediary and acknowledged responsibility in the buy-back agreement distancing it from any alleged misrepresentation. It urged the court to find that there was no misrepresentation on its part as there was no demonstration of the elements thereof. It relied on Kobilo Farm Limited & another v Elfam Limited; Commodities Fund (Interested Party) (Environment and Land Case 24 of 2020) [2024] KEELC 1567 (KLR) (14 March 2024) (Judgment).
14.The appellant contended that the trial court failed to distinguish between Peter Mutuli and the 2nd respondent, Tunica Auto Ltd.
15.The appellant relied on the caveat emptor doctrine to argue that the burden was upon the 1st respondent to investigate and satisfy himself as to the quality and conditions of the goods before finalizing purchase. It relied on Thrift Homes Limited v Kays Investment Limited [2015] KEHC 5591. It argued that in the absence of a warranty or express assurance by the seller as to the condition of the vehicle, and where the purchaser had the full opportunity to inspect or make inquiries regarding the same, the seller cannot be held liable for unexpressed assumptions or expectations on the part of the buyer.
16.The appellant faulted the trial court for failing to appreciate that the sale agreement was signed by 3 parties but the 1st and 2nd respondents completely disregarded it in the buy-back agreement. It referred to a letter dated 24.10.2022 addressed to the 1st respondent from the 2nd respondent to assert that at no point did they engage it. It cited Gimalu Estates Ltd & 4 Others v International Finance Corporation & another [2006] eKLR for the proposition that parties effect a variation of contract by modifying its terms by mutual agreement. It also relied on the contra-proferentem rule to argue that the buy-back agreement ought to have been executed by all parties to the original sale agreement.
17.The appellant submitted that the 2nd respondent’s express undertaking to assume responsibility amounts to an admission of liability. It relied on Trust Bank Ltd v Paramount Universal Bank Ltd & 2 Others [2009] eKLR. It urged the court to treat the statement as an admission and to apportion fault accordingly and hold the 2nd respondent severally liable. It cited City Council of Nairobi v Wilfred Kamau Githua t/a Githua Associates & another [2016] eKLR to the effect that contract cannot be enforced against a person who is not a party.
18.The appellant submitted that the failure to return the motor vehicle back to it negates any claim for default or liability on its part.
19.The appellant argued that the award of Kshs. 2,643,000/= was made without strict proof. It relied on Hahn v Singh [1985] KLR 716, to assert that special damages must not only be specifically pleaded but also strictly proved.
20.The appellant urged the court to allow its appeal with costs, to set aside the judgment and decree and all consequential orders and to dismiss the suit against it in MCCOMMSU No. E853 of 2023 with costs.
1st Respondent’s submissions
21.The 1st respondent emphasized that, in para. 2 of the agreement of 7.11.2022, the appellant acknowledged that he had negotiated for a brand-new vehicle. He also submitted that the agreement was ambiguous and relied on United Millers Limited v Nairobi Java House Limited [2019] eKLR to assert that if there is an ambiguity in a contract, it ought to be construed against the party that drew it.
22.According to the 1st respondent, there was material misrepresentation by the appellant and the 2nd respondent in offering a brand-new vehicle and delivering a second-hand one. Thus, the buy-back agreement was to remedy the material misrepresentation.
23.He submitted that by conduct, the appellant held out the 2nd respondent and its director, Peter Mutuli as its agent. He highlighted the appellant’s admission that Peter Mutuli was its former employee. He relied on Kariuki v Nakuru & 3 others (Environment and Land Case 308 of 2017 [2022] KEELC 3413 (KLR) where the court considered the definition of term agency.
24.The 1st respondent argued that the appellant is estopped from claiming caveat emptor when it benefited from the actions of its employee. He highlighted that the appellant admitted that it received Kshs. 2,835,000/- for the purchase of the motor vehicle, also confirming that Peter Mutuli was acting on its behalf.
25.The 1st respondent asserted that the buy-back agreement was negotiated, reviewed and agreed upon with the appellant’s full knowledge and that the 2nd respondent signed it as the appellant’s agent. He highlighted that the appellant received all the funds that the buy-back was based on. For this reason, he argued that the liability should be apportioned jointly and severally between the appellant and the 2nd respondent. He asserted that both parties breached the contract, that the 2nd respondent was the one that brought the business to the appellant.
26.The 1st respondent disputed the appellant’s claim that he did not carry out due diligence. He highlighted that he visited the appellant’s premises and was assisted by Peter Mutuli in selecting the vehicle.
27.The 1st respondent asserted that he proved his cause of action and special damages. He argued that the appellant does not deny receiving money from him and his financier. He explained that the damage suffered came about when the appellant’s employee and agent offered him a buy-back agreement in exchange for collection of the motor vehicle which he had not ordered. This led to him no longer having a motor vehicle and losing money already paid to the appellant and still having to pay the bank loan. He referred to the plaint where the damages incurred from the transaction were specifically broken down.
28.The 1st respondent therefore urged the court to find that there was a valid agency that existed based on conduct and that the award of damages was proper due to the appellant’s failure to honour the buy-back agreement. He urged the court to uphold the judgment with costs.
Analysis and Determination
Duty of court
29.The court’s duty in a first appeal is to reevaluate the evidence and draw its own conclusions, bearing in mind that it did not see or hear the witnesses. Selle & Another v Associated Motor Boat Co. Limited & Others [1968] EA 123
30.Issues which emerge from the 11 grounds of appeal, are on: -
(1) Whether there was a contractual relationship between the Appellant and the 1st Respondent herein with regard to the cause of action.
(2) Whether the 2nd Respondent was an authorised agent of the Appellant and whether it was bound by the buy back agreement.
(3) Whether the trial court erred in awarding Kshs. 2,643,000/= which the 1st Respondent had not specifically pleaded and proved as required by the law.
(4) Whether the trial court erred in holding the appellant jointly and severally liable with the 2nd Respondent.
(5) Whether the trial court predisposing her mind to the position favourable to the 1st respondent, failing to consider the appellant’s pleadings, evidence, submissions and issues.
Whether there was a contract between the appellant and the 1st respondent
31.The appellant faulted the trial court for failing to acknowledge that there was no contractual relationship between the appellant and the 1st respondent in respect of the cause of action and the buy-back agreement.
32.The trial court found that there was a contract between the appellant and the 1st respondent because the appellant acknowledged that it received the balance of the purchase price of Kshs. 1,935,000/- from KCB Bank Kenya Ltd, the 1st respondent’s financier.
33.The trial court also noted that clause 7.6 of the agreement indicates that the seller shall register the vehicle in the names of the 1st respondent and KCB Bank Limited. It also noted that an invoice dated 4.10.2022 bore a stamp of KCB Bank Limited and indicated the amount of Kshs. 1,935,000/- which the appellant acknowledged to have received.
34.Therefore, based on the foregoing, the trial court found that the appellant’s denial that the parties had entered the contract dated 26.7.2022 was not supported by evidence such as an affidavit by its CEO denying the signatures appearing on the contract.
35.In a civil claim, burden of proof lies with the person claiming existence of any fact. The standard of proof is on a balance of probabilities. Section 107 (2) of the Evidence Act
36.The evidence on record supports the findings of the trial court that there was a contract between the appellant and the 1st respondent. This was not disproved.
37.The question of ostensible authority shall be discussed and determined next.
Whether the 2nd respondent was an authorized agent of the appellant
38.The appellant submitted that the trial court erred by holding that the 2nd respondent was its authorized agent. It faulted the court for failing to appreciate that the 2nd respondent is a company separate and distinct from the person known as Peter Mutuli.
39.From the record, the 1st respondent’s case was that he negotiated for the purchase of the subject motor vehicle with the appellant’s agent, Peter Mutuli who is a director in the 2nd respondent company.
40.In the impugned judgment, the trial court found that: -
“The contract of employment in respect of Peter Mutuli produced as part of the Defendants evidence attests to the fact that he was indeed a sales manager at Foton Kenya Ltd the 2nd defendant herein.
If indeed as DW2 stated in his evidence Peter Mutuli stopped working for Foton Motors in March 2022, actual notice of his termination ought to have been given promptly to all customers. The same he admits was only given through a newspaper advertisement dated 8th March 2024.
In the circumstances, it is my finding that Peter Mutuli has apparent authority to bind the 1st defendant herein. Failure to give such notice in my view entitled the Plaintiff to believe that the 2nd Defendant had authority to enter into a contract with him on the sale and purchase of the motor vehicle.”
41.From the above, the trial court’s finding that Peter Mutuli had the apparent authority to bind the appellant was due to its acknowledgement that he was formerly employed as his salesperson and the failure to notify all its customers that he had left employment in March 2022 until 8th March 2024. Peter played a critical role in the entire transactions on behalf of the appellant.
42.It was claimed that Peter had ostensible or apparent authority to bind the company-the appellant-in the transactions forming the basis of this appeal.
43.Ostensible or apparent authority developed as a legal doctrine to bind the principal by the agent’s actions, even if not authorized where the principal’s conduct or words reasonably led a third party to believe the agent has authority. It offers protection to innocent third parties who deal with the agent in good faith.
44. The Appellant acknowledged that Peter Mutuli was formerly employed as its salesperson and did not notify its customers that he had left employment in March 2022 until 8th March 2024. Peter played a critical role in all the transactions forming the basis of this appeal. And, the appellant was a major party and beneficiary of the transactions.
45.In these circumstances, this was a matter within the internal processes, mechanism and affairs of the Appellant. It would be onerous and inconsistent with the doctrine of ostensible authority to require a third party such as the 1st Respondent to enquire whether the said officer-Peter- had real or actual authority to transact the sale and purchase of the vehicle on behalf of the company-the appellant.
46. The doctrine of ostensible authority was developed to cover exactly such situations as in this case.
47. Evidence tendered made the trial court to find that the 1st respondent was entitled to believe that the 2nd respondent had authority to enter into the buy-back agreement. This court does not find any evidence to depart from this finding by the trial court.
48.As such, a company will not avail itself of the defense of corporate legal personality where ostensible authority has been proved.
49.Therefore, the trial court did not err in ruling out the defense of corporate legal personality against ostensible authority attributed to Peter Mutuli. It cannot also be faulted for not appreciating that the appellant did not know of the pre-existing relationship between the 1st and 2nd respondents.
Proof of cause of action
50.As regards the proof of cause of action, the trial court found that the contracts for the sale and purchase of the motor vehicle were not clear in the description. The trial court therefore applied the contra proferentem rule to construe the provision against the appellant which was the drafter, in finding that the contract was for the purchase of a brand-new vehicle. The trial court also referred to the letter of offer which reference to the purpose of funds being disbursed to be the purchase of a new Foton Sauvana. The trial court also noted that the letter dated 22.10.2022 captioned “Amicable dispute resolution” from the 2nd respondent, referred to the VIN which clearly stated in the inventory as brand new and that was the reason the asset finance process was allowed.
Proof of special damages
51.The appellant faulted the trial court for awarding the 1st respondent Kshs. 2,643,000/= yet the 1st respondent had not specifically pleaded and proved the said sum as required by the law.
52.But, the 1st respondent asserted that he proved the special damages.
53.The trial court based its award of Kshs. 2,643,000/= to the 1st respondent on the acknowledgement by the appellant’s witness that he received cash from the 1st respondent and his wife Isabel Wairimu Mwangi and the balance from KCB Bank Kenya Limited.
54.The law is that special damages must be specifically pleaded and strictly proved. David Bagine v Martin Bundi [1997] eKLR, Joseph Kipkorir Rono v Kenya Breweries Limited & Another Kericho HCCA No. 45 of 2003
55.The 1st respondent claimed special damages of Kshs. 2,643,000/=. The particulars were set out in para. 23 of the plaint, as follows: -
(i)...
(ii)Loss of the Purchase Price paid to the Defendant’s amounting to Kshs. 2,535,000/= made up as follows: - Deposit of Kshs. 600,000/= paid by the Plaintiff plus Kshs. 1,935,000/- paid by the Financier – KCB Limited.
(iii)Interest due to the financier at the rate of 13 % per annum.
(iv)Loan processing fees/ Bank loan negotiation fees – Kshs. 44,000/-
(v)Life insurance premium for the first year – Kshs. 34,000/-
(vi)Car track installation fees – Kshs. 30,000/-
56.From the record, the 1st respondent exhibited a letter of offer dated 2.9.2022 for the facility of Kshs. 1,935,000/-. He also produced a bank statement showing that he is repaying the loan and deduction of the negotiation fees and the life insurance premium.
57.Although the 1st respondent claimed refund of Kshs. 600,000/- deposit, comprised of Kshs. 341,000/- overpayment by his wife and Kshs. 259,000/- by him, he exhibited a receipt for Kshs. 215,000/- issued by the appellant.
58.The 1st respondent confirmed that there was an overpayment of Kshs. 900,000/- by the 1st respondent’s wife Isabel which was applied towards offsetting the purchase price for the SUV.
59.Having acknowledged the above and in view of the particulars of special damages and the evidence adduced, the appellant is estopped from claiming that the Kshs. 2,643,000/- was not specifically pleaded and strictly proved.
60.Notably of ‘strictly proved’ of special damages, ‘the degree of certainty and particularity of proof required depends on the circumstances and nature of the acts themselves.’ Court of Appeal in Hahn vs. Singh, Civil Appeal No. 42 of 1983 [185] KLR 716.
61.From the foregoing, I find that the special damages sought by the 1st respondent were specifically pleaded and strictly proved and that the trial court did not err in awarding Kshs. 2,643,000/-.
Disposal
62.The upshot is that the appeal herein is dismissed for want of merit with costs to the 1st respondent.
Dated, signed and delivered at Nairobi through Microsoft Teams online application this 12th day February, 2026
----------------------
F. Gikonyo M
Judge
In the presence of: -
Genga for Appellant
Ms. Kabuthi for 1st Respondent
CA Kinyua