Court of Appeal Upholds Business Agreement Judgment in Sakwa v. Muaka

On March 28, 2025, the Court of Appeal in Nairobi upheld a High Court decision in the case of Beryl Awinja Sakwa v. Angaluki Muaka (Civil Appeal No. 148 of 2019). This case highlights the importance of clear business agreements and the role of arbitration clauses in resolving disputes. At Kubwa & Company Advocates, we break down the key lessons from this judgment to help businesses and individuals understand their legal obligations.

Case Background

The dispute arose from a business agreement signed on February 14, 2013, between Beryl Awinja Sakwa (the appellant) and Angaluki Muaka (the respondent). The agreement was for a joint venture to establish a “Colon Cleansing and Beauty Shop.” Muaka provided Kshs. 1,977,797 as start-up capital, with terms that Sakwa would pay him Kshs. 300,000 monthly for June and July 2013 and a 5% penalty for late payments.

Sakwa argued that the business failed due to Muaka’s actions and that she was not obligated to repay the funds, claiming the agreement was a domestic arrangement since they were allegedly married. Muaka, however, insisted it was a binding commercial contract and sought repayment of the capital, monthly instalments, and penalties.

High Court Judgment

The High Court, presided over by Justice Tuiyott, ruled in favor of Muaka on February 1, 2019. The court found that the agreement was a valid contract, and Sakwa’s obligation to repay the Kshs. 1,977,797 was not tied to the business’s success. The court awarded:

Kshs. 1,977,797 for the start-up capital
Kshs. 600,000 for two months’ instalments (June and July 2013)
Kshs. 30,000 as a 5% late payment penalty

The total award was Kshs. 2,687,797, with interest at court rates from the date the suit was filed, with costs to Muaka.

Court of Appeal’s Findings

Sakwa appealed, raising concerns about the High Court’s jurisdiction, the nature of the agreement, and the awarded damages. The Court of Appeal, comprising Justices M’Inoti, Ochieng, and Korir, addressed three key issues:

Jurisdiction and Arbitration: Sakwa argued that the agreement’s arbitration clause meant the High Court lacked jurisdiction. The court found that the agreement allowed litigation if arbitration failed. Muaka had attempted arbitration by declaring a dispute and requesting Sakwa to propose arbitrators, which she ignored. Thus, the High Court had jurisdiction.
Nature of the Agreement: Sakwa claimed the agreement was domestic due to their alleged marriage. The court rejected this, noting the document was explicitly titled a “Business Agreement” and signed by both parties, with witnesses, confirming its commercial nature.
Damages and Interest: Sakwa challenged the awarded amounts, arguing they were not properly pleaded or proven. The court upheld the High Court’s findings, as Muaka had clearly outlined the capital, instalments, and penalties in the contract and plaint. The court also found that the interest award justifies compensating Muaka for pursuing the claim.

The appeal was dismissed with costs to Muaka, affirming the High Court’s judgment.

Four Key Takeaways for Businesses

This case offers four valuable lessons for individuals and businesses entering into agreements:

Draft Clear Contracts: It’s crucial to clearly outline obligations, repayment terms, and dispute resolution mechanisms in your contracts. This will help you avoid ambiguity and ensure you’re well-prepared for any potential disputes.
Understand Arbitration Clauses: Arbitration clauses are binding, but it’s important to remember that parties can resort to courts if arbitration fails, as seen in this case. This knowledge can provide reassurance about your legal options.
Document Evidence: As seen in this case, Muaka’s letters declaring a dispute and requesting arbitrators were crucial in proving his attempt at arbitration. This highlights the importance of documenting evidence to secure your legal position.
Commercial vs. Domestic Agreements: Courts prioritize the written terms of an agreement over claims of personal relationships.

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