Seed Co awarded US$1,1m for contract breach
Seed Co Limited has won its High Court case against local company Credcorp, securing a US$1,1 million judgment award after the latter failed to fulfil a seed production contract.
The plaintiff is a Zimbabwean company that supports seed crop production by sponsoring growers. Under its business model, Seed Co supplies farmers with parent seeds and covers the production costs associated with growing the new seed crops. The price of the parent seed is predetermined. Farmers cultivate the seed crops, following specified practices.
After harvest and processing, the farmers deliver the seed produced to Seed Co.
The value of the newly produced seed is negotiated and agreed upon. Seed Co deducts the initial production costs and the cost of the parent seed it provided. The remaining profit is then shared with the grower.
Seed Co took legal action against Credcorp after the latter breached the agreement for seed production in the 2018/19 season. Credcorp failed to deliver the contracted seed crops of soya bean, sugar bean, and sorghum grown on its four farms.
Despite Seed Co fully funding the production costs with the expectation of receiving all the newly produced seeds, Credcorp only delivered 44,7 tonnes of sugar bean seed.
Credcorp then sold the remaining seed to third parties, a practice widely known as “side marketing.” In breach of the contract, it sold 75 tonnes of sorghum, 70 tonnes of sugar beans, and 560 tonnes of soya beans to third parties.
Seed Co further alleged that at a meeting of the parties on September 24, 2019, it was agreed that the defendant would trace the seed it had side-marketed. It was also agreed it would repay the production costs plus the cost of some centre pivots. Seed Co asserted that Credcorp was fully aware its conduct violated the parties’ agreement. Due to Credcorp’s breach, Seed Co sustained financial losses and sought compensation.
The Zimbabwe Stock Exchange-listed company also requested reimbursement for legal expenses incurred during the lawsuit.
However, Credcorp denied all significant claims from Seed Co in its court statement. Credcorp claimed a settlement agreement was reached during a September meeting, requiring Seed Co to set a price for the 44 tonnes of delivered sugar beans by 30 September 2019, and for Credcorp to pay off the remaining debt by 15 October, 2019.
Credcorp argued that it fulfilled its part of the alleged agreement by paying $364 265,62 on October 15, 2019, considering its full and final settlement of Seed Co’s claims. The company therefore asserted Seed Co’s lawsuit had no legal basis.
Having paid for the initial seed and supplies provided by Seed Co, Credcorp argued the contract was fulfilled, allegedly making damage claims baseless. It claimed the remaining seed should be valued at the market price, not any higher contractual price.
The High Court determined that Credcorp did not provide sufficient evidence to support its claim regarding the ownership of seed stipulated in the original contracts between the parties. In addition, the meeting records relied upon by Credcorp offered no evidence to support their case.
The minutes clearly showed that the discussion regarding the missing seed and the outstanding debt were treated as separate matters.
Justice Joseph Mafusire ordered Credcorp to pay Seed Co US$1,014,483 (or the equivalent in local currency, at the current official exchange rate) with interest accruing at the prescribed rate from the date of judgment until the full amount is paid.
In addition, Credcorp is responsible for covering the costs of the lawsuit.-herald
