Understanding Contractual Terms and the Consequences of Breaching Agreements under Zambian Law

By Godfrey Chuulu

August 05, 2025

Introduction

On July 22, 2025, the High Court of Zambia delivered a significant judgment which revolved around a contractual dispute between the plaintiff and the defendant regarding a property lease and sale agreement. This case presents critical aspects of contract law, particularly concerning the need to fully understand the terms of a contract and the consequences of not honouring the obligations by either party, which they freely entered into.

Background

The dispute originated from a lease agreement dated November 20, 2008, between the Agriculture and Commercial Society of Zambia (ACSSZ) and the plaintiff, which allowed the plaintiff to erect a building on the leased property known as Stand No. 2374, Lusaka. In 2018, the plaintiff entered into a contract with the defendant to sell the unexpired term of the lease along with the improvements on the land. However, the defendant contended that the contract was for the outright purchase of the property itself, leading to conflicting interpretations of the agreement.

Plaintiff's Case

The plaintiff argued that the defendant was fully aware that they were purchasing the residue of the lease and not the outright ownership of the property. Witnesses testified that the contract clearly outlined the nature of the sale as a leasehold interest.

Therefore, the plaintiff sought, among other reliefs, the following: …

1. Rescission of the contract.
2. Damages for legal fees, agency fees, profits in the form of rentals and lease fees.
3. An order that the defendant forfeit money paid towards the purchase consideration.

Defendant's Case

Meanwhile, the defendant maintained that they believed they were purchasing the property itself and alleged a fundamental mistake regarding the nature of the transaction. The defendant argued that the contract should be interpreted against the plaintiff (Contra proferentum rule) in that the ambiguity was due to the plaintiff. The defendant further claimed that the plaintiff had no authority to sell the property, as ownership remained with ACSSZ. It is in that regard that the defendant sought the following reliefs:

1.    Rescission of the contract and

2.     A refund paid to the plaintiff

Determination by the Court

The High Court, presided over by Honourable Mrs. Justice K.E. Mwenda Zimba, ruled in favour of the plaintiff, emphasisingthe  several key points:

- In dismissing the claim of mistake and ambiguity by the defendant, the court held that the contract explicitly stated the sale pertained to the leasehold interest and not the title itself. The Court found that terms of the agreement were clear, and the defendant's claims of misunderstanding were not substantiated at all. Rendering the terms of the contract binding and enforceable on the parties.

- Citing various authorities, the court affirmed that the test for determining mutual mistake is an objective standard. This means that the court enforces the contract based on how a reasonable person in the defendant’s position would have understood it, even if the defendant had a mistaken interpretation.

In this case, the Court took note of the fact that the defendant was being represented by a legal practitioner who, in the circumstances, could not be said to have failed to understand the terms of the contract. The judge said:

‘‘Even if I were to find that the parties were at cross purposes, applying the objective test discussed in the above authorities to the circumstances of this case, I hold a strong view that the defendant would be precluded from setting up his mistake as a defence to this action’’ 

Regarding the reliefs sought by the plaintiff, the Court held the following:

1. Pertaining to the rescission of the contract as sought by the plaintiff, the Court held that the plaintiff was entitled to rescind the contract based on the defendant's defaults.

2. On the claim for damages as pleaded for legal fees, agency fees, profits in form of rentals and lease fees,

Ø The Court dismissed the claim for legal and agency fees due to a lack of evidence pointing to the same. Highlighting the need to ensure that in every allegation made, there must be evidence to prove the same.

Ø The claim for lease fees was successful because the evidence was available and the defendant did not contest it.

Ø On Mesne Profits, in the form of Rentals, the Court affirmed the principle of law that Mesne Profits are only applicable in a landlord & tenant relationship, which was not so in the instant case; consequently, the plaintiff was not entitled to the same. However, the Court took note that the defendant occupied and remained in occupation of the premises, benefiting and using the premises without paying. It is in that regard that the Court, citing with approval the case of London Ngoma & others v LCM Company Ltd, held that the plaintiff was entitled to compensation in equity. “Therefore, the plaintiff is entitled to be compensated in equity for the loss of use of its property during the period the defendant occupied it until the defendant vacates,” the Judge said.  

3.    The court upheld the forfeiture clause, ruling that the defendant's failure to meet payment obligations justified the retention of the sums paid towards the purchase price.

The defendant's counterclaim was dismissed based on the evidence presented before the Court.

What to learn

-The judgment points to the importance of understanding the terms in a contractual agreement, before you append your signature, have you understood the content of the document?

-Clarity must be at the centre of every purported contractual agreement because disregarding the same may lead to misunderstandings, as purported in this case.

-It serves as a reminder for legal practitioners to exercise due diligence when acting on behalf of their clients in contractual arrangements and to prioritise the client’s interests. As seen in this case, the defence of mistake failed, for among other things, what the judge said was the involvement of a legal practitioner in the transaction.

- An agreement entered into freely is binding, as noted in the enforcement of the ‘forfeiture clause’ by the Court, in that parties voluntarily agreed to it.

- The court is likely to dismiss a claim that lacks supporting evidence, as demonstrated in the dismissal of the plaintiff's claim for legal and agency fees due to insufficient evidence in the instant case.

- Mesne profits are applicable only where there is an established landlord-tenant relationship. However, equity will intervene to prevent unjust enrichment, ensuring that a party benefiting from the use of premises without payment compensates the innocent party. Thus, in such cases, the innocent party will receive equitable compensation as in the instant case.

- Breach of a condition in the contract entitles the innocent party to rescind the contract and claim damages for breach of contract, as in this case.

Case Citation: Propark Property Development Limited v Grandview Properties Limited 2022/HPC/0011.

Judgment Delivered on 22nd July 2025.

ABOUT THE AUTHOR

Godfrey Chuulu holds an LLB Degree from the University of Zambia.

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