Introduction
Many Ugandans enter contracts with confidence, expecting that both parties will fulfill their promises. But when the time comes to deliver—especially when it comes to payments—some people start making excuses, delaying, or even blaming the other party for asking for what is rightfully theirs.
A client promises to pay by a specific date, but when the time comes, they suddenly become unavailable. A supplier agrees to deliver goods only to demand additional fees or change terms unilaterally. Worse still, when you try to demand what is due, they tarnish your reputation, act offended, or even accuse you of being the problem.
This behaviour not only damages business relationships but also undermines the legal and economic system. The principle of Pacta Sunt Servanda—which means “agreements must be kept”—is a fundamental rule in contract law that ensures reliability in business transactions.
In this article, I’ll discuss:
• Why honouring contracts is essential for business and economic growth.
• The legal implications of failing to fulfil contractual obligations.
• How businesses can protect themselves from defaulting clients or dishonest partners.
What Does Pacta Sunt Servanda Mean in Business?
The phrase Pacta Sunt Servanda means that contracts must be respected and enforced as agreed upon. It is a core principle of contract law in Uganda and globally. Once a contract is legally signed, both parties are bound to fulfil their obligations—unless the contract is lawfully set aside (e.g., due to fraud, coercion, or impossibility).
This principle applies to all types of business agreements, including:
When one party fails to meet their obligations, they breach the contract, leading to financial loss, business instability, and legal consequences.
The Cost of Not Honoring Contracts
1. Business Reputation Damage
When someone defaults on a contract, they lose credibility. In Uganda’s business community, word spreads quickly about people who don’t pay debts or break contracts. For example, A contractor agrees to build an office within three months but delays for six months, causing financial losses for the business owner. The contractor’s reputation is damaged, and future clients hesitate to work with them.
2. Legal Consequences
Failure to honour a contract can lead to legal action, including:
• Being sued for damages.
• Being taken to court for breach of contract.
• Paying penalties or facing business closure.
3. Financial Instability and Business Losses
If a business constantly fails to honour contracts, it will struggle with:
• Delayed cash flow (clients avoid dealing with them).
• Legal costs from multiple lawsuits.
• Loss of investors or business partners who prefer working with reliable businesses.
Why Do People Fail to Honor Contracts?
Despite the legal and financial risks, many Ugandans still fail to meet their contractual obligations. Common reasons include:
???? Lack of integrity – Some people never intend to pay but sign contracts to gain trust.
???? Poor financial planning – Businesses or individuals overcommit without assessing their ability to fulfill agreements.
???? Overreliance on trust – Many contracts are signed informally, without enforcement mechanisms.
???? Avoidance culture – Instead of renegotiating or admitting financial difficulties, people disappear or shift blame.
However, contracts are not optional promises—they are legally binding obligations that must be fulfilled.
How to Protect Yourself in Business Transactions
If you’ve ever dealt with a defaulting client, a dishonest business partner, or an employer who delays payments, you know how frustrating and financially damaging it can be. Here’s how you can protect yourself and your business:
1. Always Sign Written Contracts
• A verbal promise is not enough—always document agreements in writing.
• Clearly outline payment terms, penalties for late payment, and dispute resolution procedures.
For example: If you are supplying goods, have a signed contract stating:
2. Include Legal Consequences in Contracts
• Specify what happens if the other party defaults.
• Use clauses that allow penalties, interest on late payments, or contract termination.
3. Demand Partial Payments or Deposits
• To reduce risk, request deposits before delivering goods or services.
• Never rely entirely on verbal assurances—ensure there is a financial commitment upfront.
4. Use Legal Demand Letters
If a client refuses to pay, send a formal legal demand letter before taking further legal action.A well-drafted letter from a lawyer often forces the other party to act.
5. Report Chronic Defaulters to Authorities
• In Uganda, businesses can report fraud cases to police or other agencies.
• If someone repeatedly defaults on payments, publicizing their behavior can warn others.
Conclusion
Business Integrity and Legal Accountability
Uganda’s business sector can only grow if people honor their contracts. Failing to pay debts, deliver promised goods, or fulfill agreements damages business trust, causes financial loss, and leads to legal battles.
Before entering any agreement, ask yourself:
If the answer is no, take steps to renegotiate, secure legal protection, or ensure financial stability before signing.
Contracts are not favors—they are legal commitments. Let’s build a business culture where Pacta Sunt Servanda is the standard, not an exception.
Have you ever dealt with someone who failed to honor a contract? Share your experience in the comments!