Description
Authority by a company to its directors to borrow – right of third parties dealing with a company – change of name – judicial notice – Sections 58 and 59 of the Evidence Act – bound by their pleadings – judicial notice of the establishment and existence of a legal entity – deed of variation of a loan facility agreement and liability of a surety – variation without surety’s consent – impossibility as to performance – allegation to unfriendly terms of a credit facility agreement – retrospective effects of variation of a loan agreement – risk of onerous circumstances.
- Authority by a company to its directors to borrow – if there was any deficiency in the authority given to the directors by the company, that is an internal matter within the company that would not affect the right of third parties with whom the company enters into contracts (p. 23).
- Change of name – A loan was issued by the Tanzania Investment Bank Limited but later the name was changed to TIB Development Bank Limited by an Act of Parliament and the case was filed under the new name – it was held that this is one of the facts which the Court may take judicial notice of in terms of Sections 58 and 59 of the Evidence Act and it needs no proof. It was also held that the defendant’s cannot deny liability based on the change of names because they dealt with TIB Development Bank as if it were Tanzania Investment Bank in the continuous, ongoing process and they did not say that the fulfillment of the contract executed by TIB Development Bank was impossible by reason of change of name; also the lender’s change of name or entity was not raised as a line of defence (p. 24).
- Parties are bound by their pleadings. No party is allowed to present a case contrary to its pleadings (p. 24).
- Change of name – courts in this jurisdiction take judicial notice of the establishment and existence of a legal entity, and whatever changes thereto made by law. A change in the name of a legal entity cannot change its legal personality. In terms of Sections 58 and 59 of the Evidence Act, such fact does not require proof (p. 25).
- Deed of variation of a loan facility agreement and liability of a surety – the surety did not give its consent to the variance and did not consent to overdraft facility – it was held that the surety cannot be subjected to the terms of the variance and thus cannot assume any obligations arising therefrom (p. 32). It was further held that the surety was discharged from all the transactions subsequent to the variance, hence the surety cannot be held liable for anything done after the date of the variance – S. 85 of the Law of Contract Act (p. 32).
- Impossibility as to performance – payment of a certain rate of interest, and particularly 11% rate, cannot be said to be impossible to perform despite being unfriendly or even onerous to the extreme (p. 34).
- Allegation to unfriendly terms of a credit facility agreement – evidence showed that from the beginning the borrowers were struggling in their attempts to settle the loan and the bank agree to restructure the loan and vary its terms by transforming it into a Tanzanian Shillings loan instead of US Dollars and favorably adjusting the rate of interest – however, by then the borrower was already caught in a debt trap from which he could not escape – the Court agreed that repayment of the debt was impracticable and ordered a more affordable arrangement of debt repayment (p. 45). In doing so the Court ordered that the ordered that the variations of the agreement should take effect retrospectively from the dates of disbursement(s) until the date of filing the suit (p. 46).
- A party promises to perform a carefully planned agreement, and therefore assumes the risk of onerous circumstances. By adjusting the parties’ agreement, courts would threaten freedom of contract. But in appropriate cases, courts have gone into the contract and made adjustments to fit the situation (p. 42).
