Thinking of funding a joint business with a romantic partner? Get it in writing — with clear terms outlining each party’s roles, financial contributions, and profit-sharing arrangements or risk losing everything in the event of a fallout.
Without such documentation, your financial input may be legally deemed a gift, and you could lose it all when the romance fades away.
A high school teacher has become the latest cautionary tale after a court ruled that Sh166,700 he gave to his estranged partner for a bar venture was not a business investment, but an irrecoverable love gift.
Voi High Court Judge Asenath Ongeri upheld the decision of the magistrate’s court, stating that the funds were not evidenced as a loan or joint investment.
“Phelister Masamo’s assertion that the money was a token of appreciation for their relationship remains plausible, especially given the lack of written agreements or independent witnesses,” the judge stated.
The court found that Mr Mkala Maghanga, the teacher, failed to prove that the money was business capital and concluded it was given out of affection—making it legally unrecoverable.
“I find that the woman is not liable to refund the amount, as the man did not prove it was a recoverable business contribution,” the judge ruled on May 16.
This was Mr Maghanga’s second failed attempt to recover the money. His initial suit was rejected by the magistrate’s court, which found no evidence of a legal business agreement enforceable by law.
Mr Maghanga had appealed that decision, arguing that the magistrate erred in law and in fact by failing to recognise the existence of an oral agreement between him and Ms Masamo.
He insisted that the magistrate disregarded his evidence and submissions and arrived at a flawed conclusion.
“The trial court was wrong in concluding there was no offer between me and Masamo despite clear evidence of an oral understanding,” he said.
He faulted the magistrate for deciding that the money was a token of appreciation for a romantic relationship rather than a business contribution.
Mr Maghanga maintained that the magistrate’s judgment delivered on July 11, 2024, was erroneous, inconsiderate, and contrary to law.
“The magistrate ignored critical legal principles and relied on unsubstantiated claims, resulting in a miscarriage of justice,” he said
He argued that the existence of the oral agreement was supported by Ms Masamo’s conduct and prior communication acknowledging the debt.
He further submitted that the law recognises oral contracts and that such agreements can be inferred from conduct.
According to him, the magistrate disregarded important pieces of evidence, including WhatsApp messages, receipts, and records of his capital contribution.
He said these documents reflected a business relationship and showed Ms Masamo’s admission of liability.
By ignoring this evidence, he said, the magistrate reached an incorrect conclusion.
“The trial court should have objectively assessed the parties’ conduct to determine whether a binding agreement existed, the law does not require all contracts to be in writing,” he said.
In his view, courts have previously held that oral agreements are enforceable based on the conduct of the parties involved. He faulted the magistrate for failing to apply this principle.
Mr Maghanga also contested the court’s finding that the funds were a token of appreciation, arguing that there was no credible evidence to support this.
He insisted that the judgment was rooted in irrelevant considerations and overlooked the weight of his evidence.
In her response, Ms Masamo dismissed the suit as baseless and claimed it was filed in bad faith after she discovered Mr Maghanga was married and ended their relationship.
She opposed the appeal, stating that Mr Maghanga failed to prove the existence of an enforceable oral agreement.
She described herself as a young woman who was misled by Mr Maghanga, whom she said concealed his marital status.
She further asserted that the money and assets were given out of affection and were never intended as a loan or business investment.
Ms Masamo pointed out that the only documents presented—handwritten notes, WhatsApp messages, and receipts—were unsigned, undated, and unverifiable.
“No witnesses were called to support Maghanga’s claims," she said, adding that his behaviour, including frequenting her home under the pretext of discussing business, undermined his credibility.
She told the court that gifts exchanged in romantic relationships are legally unrecoverable and asked the court to uphold the lower court’s ruling.
She insisted that the trial court had correctly found that Mr Maghanga failed to prove a valid contract or justify his claim and requested that the appeal be dismissed.
In its final ruling, the High Court upheld the magistrate’s decision.
On whether a valid oral contract existed between the two, the judge ruled that the teacher failed to establish such a contract.
“While Maghanga claimed there was an oral agreement to start a business, there were no clear terms on profit-sharing or roles were established,” said the judge.
Ms Masamo denied any such arrangement and maintained that the money was a gift tied to their romantic relationship. Mr Maghanga failed to present strong rebuttal evidence, such as witness testimony or formal business records.
Although he presented receipts and WhatsApp messages, the court noted these were unsigned, undated, and lacked clarity about whether they referred to business contributions or personal gifts.
The court also noted that the teacher’s claim that Ms Masamo initially agreed to refund the money but later refused pointed to a romantic fallout rather than a breach of business agreement.
“The trial magistrate rightly noted the romantic context, which undermines Mr Maghanga’s contractual argument,” said Justice Ongeri.
The court also questioned the legality and capacity of the alleged agreement. It found that even if such an agreement existed, it was undermined by
Mr Maghanga’s concealment of his marital status, which may have influenced Ms Masamo’s consent.
The Judge found no fault with the magistrate’s ruling, reaffirming that gifts exchanged in a romantic context are irrecoverable.
