Seed Co to pay US$1,1m for underfulfilled contract

Credcorp Investments has won its High Court case against Zimbabwe Stock Exchange (ZSE) listed Seed Co, securing a US$1,1 million judgment award after the latter failed to fulfill a seed production contract.

The plaintiff is a Zimbabwean company that supports seed crop production by sponsoring growers. Under its business model, Credcorp supplies farmers with parent seed and covers the production costs associated with growing new seed crops.

The price of the parent seed is predetermined. Farmers cultivate the seed crops, following specified practices.

After harvest and processing, they deliver the newly produced seed to Credcorp. The value of the newly produced seed is negotiated and agreed upon. Credcorp deducts the initial production costs and the cost of the parent seed it provided. The remaining profit is then shared with the grower.

Credcorp leverages its established channels to sell the new seed to local and export markets.

Credcorp took legal action against Seed Co after the latter breached their agreement for seed production in the 2018/19 season. Seed Co failed to deliver the contracted seed crops of soya bean, sugar bean, and sorghum grown on its four farms.

Despite Credcorp fully funding the production costs with the expectation of receiving all the newly produced seeds, Seed Co only delivered 44,7 tonnes of sugar bean seed.

The ZSE-listed firm then sold the remaining seed to third parties, a practice widely known as “side marketing.” In breach of contract, it sold 75 tonnes of sorghum, 70 tonnes of sugar beans, and 560 tonnes of soya beans to third parties.

Credcorp 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.

Credcorp asserted Seed Co was fully aware its conduct violated the parties’ agreement.

Due to Seed Co’s breach, Credcorp sustained financial losses and sought compensation.

It also requested reimbursement for legal expenses incurred during the lawsuit. However, Seed Co denied all significant claims from Credcorp in its court statement. Seed Co claimed a settlement agreement was reached during a September meeting, requiring Credcorp to set a price for the 44 tonnes of delivered sugar beans by September 30th, 2019, and for the seed breeder to pay off the remaining debt by October 15, 2019.

Seed Co 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 Credcorp’s claims. The company therefore asserted Credcorp’s lawsuit had no legal basis.

Having paid for the initial seed and supplies provided by Credcorp, Seed Co argued the contract was fulfilled, making damage claims baseless.

It claimed the remaining seed should be valued at the market price, not any higher contractual price.

The High Court found Seed Co 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 Seed Co offered no evidence to support their case.

In fact, the minutes clearly showed that the discussion regarding the missing seed and the outstanding debt were treated as separate matters.

Justice Joseph Mafusire ordered Seed Co to pay Credcorp 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, Seed Co is responsible for covering the costs of the lawsuit.-herald