1 July 2017

Ethiopia: Court Turns Down New York Café's Contract Extension Claim

The Federal High Court rejected the request of Cosmo Trading Plc, owner of New York Café, to order Assai Public School to extend its rental contract, on June 27, 2017. The parties have been in a legal battle after the conclusion of their thirteen-year rental contract ended up in disagreement on January 01, 2017.

The rented area includes the Café and six other shops that were allowed to be subleased by Cosmo to third parties in the contract.

Cosmo and Assai had entered into a rental contract of 100 Br a square meter monthly for a total of an 894sqm space, with a renewal of contract every five years.

However, when the last renewal of contract concluded in January 2014, the rent price grew close to 175,000 Br monthly, costing Cosmo about 195 Br a square meter.

Accordingly, the school requested Cosmo to evacuate. But Cosmo, which is mainly engaged in cosmetics and perfume import businesses, turned down the request and lodged a lawsuit at the Federal High Court on January 30, 2017.

Cosmo pleaded for the fifth civil bench of the High Court to extend the contract for 26 months, alleging the building was not operational due to a fire accident that broke out in May 2014 and a road expansion project the government took five years ago.

The fire accident forced the company to borrow five million Br from United Bank for refurbishment, Cosmo's pleading alleges. Consequently, it demanded a 9.5 million Br payment for the damage it sustained in the process of renovation.

The school, founded by Weldegebriel Teklehaimanot as a boarding school, requested the High Court for evacuation of Cosmo and the six sub-leasers, indicating that their contract had ended.

The school advocated before the court the restaurant caused the fire accident. Also during the construction of the road, Cosmo could have closed the business, claimed the school.

On the other hand, Assai filed a case on March 13, 2017, demanding Cosmo to pay close to 1.4 million Br that it claimed to have lost after the latter refused to leave the building and for the unpaid rent.

In the second case, Cosmo was the first defendant with six other co-defendants, individuals who sub-rented the shops.

On June 27, 2017, the Court heard Assai's response over Cosmo's preliminary objections.

Presided by Judge Rutha Gebretsadiq, the bench rejected the request of Cosmo for the contract extension explaining a contract agreement can be created or renewed only upon the will of concerned parties.

"There was no specified agreement on the contract that forces the school extending the agreement on conditions raised by Cosmo," said Rutha, while reading the judgement to the parties in the courtroom. "So, there is no legal duty on the school to extend the contract."

The fire accident destroyed movable properties such as curtains and some parts of the building which was restored by Cosmo, according to both parties. Assai argued that Cosmo had to renovate the building as it was responsible for the accident.

"Cosmo's people never claimed that the school is in charge of the fire until now," argued Awlachew Desalegn, the lawyer of the school, mentioning that Cosmo is resurfacing the issue only to buy time.

The court adjourned the case for July 15, 2017, to hear Cosmo's claim over the alleged damage which is ordered to be re-framed in detail.

Rutha ordered Cosmo to amend its pleading, stating it has not specified the contractual and legal grounds for its request to be refunded for the renovation cost.

Assai also demanded the court to order Cosmo to pay the amount they would have earned had Cosmo evacuated the building upon the expiry of the contract.

Similarly, Cosmo expects to get a favourable decision on their second claim.

Founded in 1965, Assai Public Primary and High School is located on Cameroon Street in Bole. It constructed the commercial building in 2004 with a fund raised from the public, aiming to secure revenue for covering the school's expenses permanently.

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