' (Being an Appeal from the Judgment of Honourable D.S. Aswani, Adjudicator, delivered in Milimani SCCCOMM No. E636 of 2023)
A. Background
The dispute herein concerns a loan agreement between the Appellant, Rosemary Kituva, and the Respondent, Rita Ndunge Ndunda, in which the Respondent borrowed Kshs. 500,000 at an agreed interest rate of 10% per month. The Adjudicator’s decision did not however uphold the agreed monthly interest rate thereby precipitating the instant appeal.
The Appellant’s case is that the learned Adjudicator erred in failing to uphold the contractual terms voluntarily entered into by the parties, particularly by substituting the agreed rate of interest with a different rate.
Memorandum of Appeal
The Appellant, being dissatisfied with the decision of the Honourable D.S. Aswani, filed this appeal on the following grounds:
The learned Adjudicator erred in law and in fact in failing to give effect to the parties’ contract.
The learned Adjudicator erred in law and in fact in re-writing the parties’ contract.
The learned Adjudicator erred in finding that the agreed rate of interest between the parties was unconscionable.
The learned Adjudicator erred in finding that the parties’ contract warranted interference by the Court.
The Appeal was canvassed by way of written submissions which I have considered.
From the record and submissions, the following issues arise for determination:
Whether the contract between the parties was freely entered into.
Whether the learned Adjudicator erred by interfering with the agreed contractual terms, particularly the interest rate.
Whether the learned Adjudicator misapplied the law and principles governing contractual freedom and judicial interference.
Analysis and Determination
Freedom and Validity of the Contract
It was not disputed that the Respondent borrowed the sum of Kshs. 500,000 from the Appellant on 5 th March 2020 at an interest rate of 10% per month. There was no allegation or evidence of coercion, fraud, duress, or undue influence.
My finding is that in the absence of such vitiating factors, the contract was valid and binding. In Pius Kimaiyo Langat vs. Co-operative Bank of Kenya Ltd [2017] eKLR it was held that: -
“We are alive to the hallowed legal maxim that it is not the business of courts to re-write contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleaded and proved.”
Taking a cue from the above cited case, I find that the learned Adjudicator had no legal basis to interfere with the agreed terms of the contract.
Interference in Contractual Terms
It is settled law that courts should not re-write contracts between parties. In National Bank of Kenya Ltd vs. Pipe Plastic Samkolit (K) Ltd [2002] 2 EA 503 , the Court of Appeal held: -
“A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.”
Similarly, in National Bank of Kenya Ltd vs. Peter Nyakundi & Another [2006] eKLR , the Court observed that: -
“Where parties have by their agreement fixed the rate of interest payable, the court has no discretion in the matter and must enforce the agreed rate unless it is shown that the rate is illegal or unconscionable or fraudulent.”
In the present case, I find that there is no evidence that the agreed rate of 10% per month was illegal or unconscionable. Both parties negotiated at arm’s length and with equal bargaining power. The Respondent was not in a weaker position and cannot later renege from her own agreement.
Misapplication of the Law
The record revealss that the learned Adjudicator substituted the contractual interest rate without sufficient legal justification. I find that by doing so, the Trial Court ignored the well-established principles in the above cited authorities. As the Court of Appeal stated in Savings & Loan (K) Ltd vs. Kanyenje Karangaita Gakombe & Another [2015] eKLR :
“A court of law cannot and should not re-write a contract between the parties. It is the duty of courts to enforce and uphold the sanctity of contracts entered into freely by the parties.”
This Court finds that the learned Adjudicator erred both in law and in fact by failing to give effect to the express terms of the contract.
Disposition
Having considered the pleadings, submissions, and authorities cited, the Court finds merit in this appeal. The Appellant has demonstrated that the trial court misdirected itself by re-writing the contract and disregarding the parties’ freely negotiated terms. Accordingly, the Court makes the following orders:
The appeal is hereby allowed.
The judgment and orders of the Milimani Small Claims Court in SCCCOMM No. E636 of 2023 are set aside.
Judgment is entered in favour of the Appellant for Kshs. 500,000, with interest at the contractual rate of 10% per month from the date of the agreement (being 5 th March 2020) until payment in full.
The Appellant shall have the costs of this appeal and those in the lower court.
'
A. Background
The dispute herein concerns a loan agreement between the Appellant, Rosemary Kituva, and the Respondent, Rita Ndunge Ndunda, in which the Respondent borrowed Kshs. 500,000 at an agreed interest rate of 10% per month. The Adjudicator’s decision did not however uphold the agreed monthly interest rate thereby precipitating the instant appeal.
The Appellant’s case is that the learned Adjudicator erred in failing to uphold the contractual terms voluntarily entered into by the parties, particularly by substituting the agreed rate of interest with a different rate.
Memorandum of Appeal
The Appellant, being dissatisfied with the decision of the Honourable D.S. Aswani, filed this appeal on the following grounds:
The learned Adjudicator erred in law and in fact in failing to give effect to the parties’ contract.
The learned Adjudicator erred in law and in fact in re-writing the parties’ contract.
The learned Adjudicator erred in finding that the agreed rate of interest between the parties was unconscionable.
The learned Adjudicator erred in finding that the parties’ contract warranted interference by the Court.
The Appeal was canvassed by way of written submissions which I have considered.
From the record and submissions, the following issues arise for determination:
Whether the contract between the parties was freely entered into.
Whether the learned Adjudicator erred by interfering with the agreed contractual terms, particularly the interest rate.
Whether the learned Adjudicator misapplied the law and principles governing contractual freedom and judicial interference.
Analysis and Determination
Freedom and Validity of the Contract
It was not disputed that the Respondent borrowed the sum of Kshs. 500,000 from the Appellant on 5 th March 2020 at an interest rate of 10% per month. There was no allegation or evidence of coercion, fraud, duress, or undue influence.
My finding is that in the absence of such vitiating factors, the contract was valid and binding. In Pius Kimaiyo Langat vs. Co-operative Bank of Kenya Ltd [2017] eKLR it was held that: -
“We are alive to the hallowed legal maxim that it is not the business of courts to re-write contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleaded and proved.”
Taking a cue from the above cited case, I find that the learned Adjudicator had no legal basis to interfere with the agreed terms of the contract.
Interference in Contractual Terms
It is settled law that courts should not re-write contracts between parties. In National Bank of Kenya Ltd vs. Pipe Plastic Samkolit (K) Ltd [2002] 2 EA 503 , the Court of Appeal held: -
“A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.”
Similarly, in National Bank of Kenya Ltd vs. Peter Nyakundi & Another [2006] eKLR , the Court observed that: -
“Where parties have by their agreement fixed the rate of interest payable, the court has no discretion in the matter and must enforce the agreed rate unless it is shown that the rate is illegal or unconscionable or fraudulent.”
In the present case, I find that there is no evidence that the agreed rate of 10% per month was illegal or unconscionable. Both parties negotiated at arm’s length and with equal bargaining power. The Respondent was not in a weaker position and cannot later renege from her own agreement.
Misapplication of the Law
The record revealss that the learned Adjudicator substituted the contractual interest rate without sufficient legal justification. I find that by doing so, the Trial Court ignored the well-established principles in the above cited authorities. As the Court of Appeal stated in Savings & Loan (K) Ltd vs. Kanyenje Karangaita Gakombe & Another [2015] eKLR :
“A court of law cannot and should not re-write a contract between the parties. It is the duty of courts to enforce and uphold the sanctity of contracts entered into freely by the parties.”
This Court finds that the learned Adjudicator erred both in law and in fact by failing to give effect to the express terms of the contract.
Disposition
Having considered the pleadings, submissions, and authorities cited, the Court finds merit in this appeal. The Appellant has demonstrated that the trial court misdirected itself by re-writing the contract and disregarding the parties’ freely negotiated terms. Accordingly, the Court makes the following orders:
The appeal is hereby allowed.
The judgment and orders of the Milimani Small Claims Court in SCCCOMM No. E636 of 2023 are set aside.
Judgment is entered in favour of the Appellant for Kshs. 500,000, with interest at the contractual rate of 10% per month from the date of the agreement (being 5 th March 2020) until payment in full.
The Appellant shall have the costs of this appeal and those in the lower court.
'