A contract can be defined as an agreement which the law with recognize as affecting the legal rights and duties of parties.
Tobi JCA defined contract thus: “An agreement between two or more parties which creates reciprocal legal obligations to do or not to do particular things”.
Also, in (Akinyemi v. Odu’A Investment Co. Ltd), the Supreme Court defined contract according to black’s law dictionary thus:
“An agreement between two or more parties creating obligations that is enforceable or otherwise recognizable under the law”
As there is freedom of contact, there is also the freedom to bargain which involves Negotiations where both parties presents what he has to the table. Negotiation is necessary in order for both parties’ minds to meet otherwise known as Consensus ad idem. In (Bilante Nigerian Ltd v. Nigeria Deposit Insurance, the court held that: Contract between parties, there must be a meeting of the mind often referred to as consensus ad idem”
Furthermore, before a contract is made, it is always preceded by some forms of bargain by the parties. The court held thus in (Enuga Bawe v. O.B.C Limited):
“…where negotiations is in progress between the parties intending to enter into a contract, the whole of the negotiations must be considered as to determine whether or if not at all, the contract came into being”
In any given case, parties to a contract are at liberty to determine the terms of the contract. In (Nigerian Ports Authority Plc v Lotus plastic Ltd & Anor), the Supreme Court held:
“Parties are free to negotiate the term of their relationship“
However, as the law provides for freedom of contract there is also the sanctity of contract which means contracts are meant to be respected or hallowed. A breach of contract attracts punishment of specific performance or awarding of damages to be paid by the one who breaks the terms of the offer.
It is also noteworthy to mention that every contract is an agreement but not all agreements are contracts.
1 FORMAL CONTRACT
A formal contract is always in writing. It is also known as contract under Seal or deed. It is executed and given full legal effect by the signing, Sealing and delivering of it by the party executing it. The seal is the most important feature of a formal contract. It is known as authentication. Historically in Red Wax. Once this is done it become binding on the party who prepares the contract. In Awojugbagbe light Ind. Ltd v. Chinuawe ), the supreme court opined that:
“A deed is binding on the maker of it, even though the parts have not been exchanged, as long as it has been signed sealed and delivered”
A formal contract is useful on land matters.
- SIMPLE CONTRACT
On the other hand are contracts other than a formal contract. The major distinguishing factor between a simple contract and a formal contract is the seal. A simple contract can be in written or oral form (parole). Only a person who has furnished consideration can enforce a simple contract.
In (Odutola v Paper Sack Nig. Ltd), the Supreme Court held that: “A party alleging an oral agreement is duty to prove such agreement to the hilt’’
- EXPRESS AND IMPLIED CONTRACTS
An express contract is one whose terms or contents are clearly and specifically stated and agreed upon by the parties.
Implied contact on the other hand is that type of contract which its terms are not expressly stated. The court therefore determines in this case whether there is a contract or not considering the conducts of the parties.
In (Brodgen v Metropolitan Railway Co), the defendant was held bound by a contract with the plaintiff in spite of the fact that the defendant failed to sign the document containing the contract. It was established that both parties had been acting on the terms of the unsigned contract over a reasonable period of time.
- BILATERAL AND UNILATERAL CONTRACT
Bilateral contract is simply exchange of promise between parties. The offeror promises to do something or refrain from doing something in exchange for what the offeror promises to do in return. The consideration on both sides is known as Executory consideration. In Amana Suits Hotels Ltd v. PDP:
“A Bilateral contract consists of the offeror promising to do something else in exchange for the offeree promising to do something in return”
UNILATERAL CONTRACTS on the other hand exists were the consideration consists of an actual performance in return for a promise. The offeror makes a promise and becomes bound by the promise. The offeror is at liberty whether or not to do his own part. Once he does his own part, the offeror must fulfill his promise.
In the famous and celebrated case of Carhill v Carbolic smokeball CO., an advertisement was made in the newspaper by the defendant to pay 100 euros to anyone, who uses a smoke ball as prescribed and still succumbed to influenza…
An offer may be defined as a definite undertaking or promise made by one party with the intention that it shall become binding on him (the maker) as soon as it is accepted by the party to whom it is addressed. The person making the offer is known as the offeror while the person it is addressed to is known as the offeree.
In Sparkling Brewries Ltd & 5 Ors v Union Bank of Nigeria Ltd), the Supreme Court defined offer thus:
“An expression of readiness to contract on the terms specified by the offeror which when it is accepted by the offeree will give rise to a binding contract….”
An offer is meant to be definite and unambiguous, full and final. The offeror must place at the doorstep of the offeree an intention to enter into contract on clearly defined terms. In (Neka BB Manufacturing C. Ltd v African Continental Bank Ltd), the court held:
“An offer capable of being converted into an agreement by acceptance must consist of a definite promise by the offeror to be bound , provided that certain specified terms are accepted.’’
An offer can be made to specific person or persons or to the whole would (Carlill v Carbolic Smoke Ball Co.)
An offer can be made expressly or impliedly by conduct (Buses at the bus stop with designated routes indicate invitation to treat, passengers makes the offer).
INVITATION TO TREAT
An invitation to treat is a preliminary move in negotiation which may produce a valid offer and thereafter lead to a contract. An invitation to treat is not an offer, it is a solicitation for an offer i.e. offers to receive offers. Bowen L. J. Opined in (Carlill v Carbolic Smoke Ball Company) thus:
“In invitation to treat, … you offer to Negotiate, or you issue advertisement that you have a stock books to sell, or house to let in which case, this is no offer to be bound by any contract. Such advertisement are offers to negotiate. Offer to receive offers – offeres to chaffer …”
Invitation to treat is not capable of an acceptance which will result to a contract.
In (Olaopa v OAU), the defendant had discussions with the plaintiff as to the prospects of putting some landed property of the defendant in Ibadan to commercial use. On that basis the plaintiff prepared designs and sketch drawing, which he sent to the defendant. He followed this with a claim for damages for what he has done as the first stage of the project. The university did not pay and he sued. The Supreme Court held that on the evidence adduced, what had taken place was a discussion preparing to the formation of a contract.
Invitation to Treat exists in different forms including:
- DISPLAY OF GOODS IN A SUPERMARKET
It has been held that the display of goods in supermarket and shops is not an offer but in Invitation to Treat. A customer makes the offer when he picks up the goods and presents to the representation of the store, and contract occurs when the shopkeeper accepts the offer.
In (Lasky v. Economy Grocery Stores), the plaintiff picked a bottle labeled “tonic” in the store owned by the defendant. Whilst placing it in the carrier basket provided, it exploded and severely injured the plaintiff.
The court dismissed the case, holding that there was neither a sale nor an agreement to sell at the time the bottle exploded.
- ADVERTISEMENT OF GOODS FOR SALE IN NEWSPAPER, TRADE CATALOGUE ETC
This is another instance of an invitation to treat. In Granger & Son v Gough), The defendant circulated a catalogue which contained price list for its product. The plaintiff ordered some bottles of wine from the catalogue and where the defendant refused to deliver those at stated price, the plaintiff alleged that a contract had been formed.
It was decided that the price list was an invitation to treat.
Also, in (Harri v Nickerson), the defendant advertised in a Newspaper about a public auction. The plaintiff went there not knowing that the auction has been cancelled. He then sued for everything he has expanded on the journey.
The court held that there was no binding contract because in the same way, a shop owner who closes her shop without notice will not be liable to an action by anyone who feels disappointed.
An auctioneer’s request for a bid is not an offer but an invitation to treat. The bid itself is the offer, and acceptance occurs where the auctioneer’s hammer falls – Payne v Cave
The auctioneer is bound to sell to the highest bidder if he has not indicated at the beginning that there is a reserved price attached to the goods.
Thus, in the case of Adebaje v Crude, The court held that an auctioneer did not indicate that the auction was subject to a reserved price, he is bound to sell to the highest bidder.
Also, what is known to be “referential bid have been held to be invalid bids. A referential bid as made when a bider makes a bid of a specified amount of money in addition to a bid of specified sum over another bid than his own. Thus, in Harvela Investments v Royal Trust Co. of Canada, The court invalidated the referential bid placed by one Sir Loenard and the court awarded the auction to Harvela, the original highest bidder.
4 BUSES, TAXES, TRAINS, ETC
The Bus at the park make an invitation to treat, by entering into the bus, one impliedly make an offer. Acceptance is made and a contract is concluded at the part when it is impracticable for the parties to withdraw from the transaction.
5 INVITATION TO TENDER
This is an invitation soliciting offers from interested parties. Therefore the highest bid for any goods on tender, or the lowest tender may be rejected without any legal consequences. The tender (bid) is only an offer which may be accepted or rejected.
Another constituent part of a contract is acceptance, i.e, for there to be a contract, there have to be acceptance. In (Zackem Construction Nig. Ltd v. Emmanuel Nneji), the court held thus:
“An offer must be accepted in order for a transaction to crystalize into a contract”.
Acceptance can be define as the final and unqualified expression of assent to the terms of an offer. It was defined in Akin Akinyemi v. Odu’A Investment Co. Ltd thus:
‘’ Acceptance is the agreement of the offeree to enter into a legally binding contract with the offeror in the terms of the offeror’s offer’’
To be effective and valid, an acceptance must be plain, unequivocal, unconditional and without variance of any sort to the offer. In (Bilante International Lrd v Nigeria deposit Insurance corporation), the court held: “An offer must be unconditionally and unequivocally accepted”.
any deviation or distraction from the terms of the offer does not amount to an acceptance.
In Dalek Nig Lrd v Ompadec), the court held that:
“A qualified acceptance of an offer cannot give rise to a binding agreement between the parties”.
Furthermore, an acceptance must be communicated either expressly or impliedly for it to be able to stand as valid or effective. Silence does not constitute Acceptance.
Thus, in (Felt House v Bindley), the court dismissed the application of the plaintiff to rely on a silence acceptance given by his Nephew who wants to sell a house to him.
An acceptance can however be impliedly accepted. In this situation, the court will have to determine objectively from the conduct of the parties whether there have been an acceptance to constitute a contract. In (Brodgen v Metropolitan Railway Co.), the court established that both parties had been acting on the terms of an unsigned contract over a reasonable period of time.
However, it has been established that some acceptance are invalid despite their purported form of validity. These include:
(a) COUNTER OFFER
In (Bilante International lrd v Nigeria Deposit Insurance Corporation), it has been established that an offer must be unconditionally and unqualifiedly be accepted.
A valid acceptance is one which does not vary the terms of the offer in any form. Where an offeree claims to accept an offer made to him by the offeror but it turns out that he did not totally agree with the term contained in the offer and goes further to subtract or add to the terms of the offer, it is known as a counter offer. In (Invite v Ferando Agro Consortium Ltd), the plaintiff replied an offer with:
“Thank you for the offer but we will kindly request that period of payment be extended”
It was held that the statement was a counter offer.
A counter offer when presented does two things. It destroys the previous offer and present a new offer.
Thus, in Hyde v Wrench, Wrench offered to sell his farm to Hyde for 1200 euros, an offer which Hyde declined. Days after, Wrench wrote to Hyde offering to sell the farm for 1000 euros, stating that it was the final offer. Hyde offered 950 euros which Wrench rejected. Hyde later accepted to buy the farm 1000 euros but Wrench refused.
The court held that when a counter offer is made, this destroys the original offer. A new offer is a new offer which follows the rule of offer and Acceptance.
- CONDITIONAL ACCEPTANCE
A conditional acceptance is not a valid acceptance, when acceptance of an offer is predicated on a condition, there is no contract between the parties until the specified condition has been fulfilled. Conditional acceptance can be in two forms:
- SUBJECT TO CONTRACT
In (I.T.I v Aderemi), it was held:
“When the phrase ‘subject to contract is employed in an appropriate situation, with a clear measure of intention, there cannot be valid contract until formal contracts are exchanged”
Based on the foregoing, where agreement is made “subject to contract”, a binding contract does not ensure between the parties until a formal contract has been executed between them. This is a rule of long standing and has been regularly applied since the 19th century.
In Win v Bull, the court held that the clause that makes the agreement subject to preparation of a formal contract prevents the contract from being enforced.
- PROVISIONAL AGREEMENT
The interpretation of the term provisional agreement has been a source of some uncertainty, confusion and controversy due to the fact that the court has held it to constitute a non binding contract and binding contract in some other instances.
Thus, in (Brance v Cabarro), the defendant agreed to sell a farm to the plaintiff. The agreement contained the following clauses
“This is a provisional agreement until a fully legalized agreement drawn up by a solicitor and embodying all the conditions herein stated signed”.
The plaintiff cancelled the contract and brought this proceeding to recover the deposit he made on the ground that there was no concluded agreement.
It was held that the parties intended to be bound from beginning. This was based on the words used in conjunction with the term “provisional” and other factors like the payment of a deposit and the use of a witness to the agreement all which pointed towards the intention of the parties that the agreement should be binding from the beginning.
Also, in the Nigerian case of (Attorney General of the Federation v Awodu), an offer of scholarship was made to the defendant by the plaintiff with a clause which reads.
“your acceptance of the provisional award does not place you under any obligation whatsoever with the Federal Government until you sign and execute this bond to that effect”.
The defendant accepted on these terms, but did not sign the bond during the 4 years of his course of study. When he refused to observe the requirement of him serving the federal government, the plaintiff sued to recover the cost of his sponsorship. The court held that he was bound to make the refund that the word “provisional” in the agreement indicated that the agreement was binding from the beginning such that failure to sign the bond was immaterial.
The above court decision has led to various logical debates. Although the court relied on the decision in Branca V. Cabawo, it can be observed that the context which the word “provisional” is used in both cases are not similar. Hence, the decision of the High court of Lagos could be criticized.
On the other hand, a line of reasoning can also opine that since the defendant understood the terms of the offer to serve the Federal Government for 5 years after the completion of his scholarship and nevertheless accepted by his conduct, he cannot feign pretense of ignorance by playing on the words in the clause of the offer.
From the foregoing, it can be concluded that the word “provisional” in an agreement does not automatically make the agreement binding on the parties. The context of its usage should be carefully considered.
- CROSS OFFERS
Cross offers occurs when two offers, identical in terms are sent by two parties to each other. When an offer proceeds from one party to another by some coincidence and in total ignorance by both parties, it is known as cross offers and there is no contract yet between the parties because for a contract to emerge, there must be a meeting of the minds (Consensus adidem).
In (Tinn v Hofman $ Co), the defendant wrote to the plaintiff offering to sell him 800 tons of iron at 69 shillings per ton. He requested a reply to this offer by post. On the same day without knowing of this offer, the plaintiff wrote to the defendant offering to buy 800 tons at 69 shillings per ton. The letters crossed in the part.
It was held that there was no contract. There must be offer and acceptance in order to have a valid contract.
- ACCEPTANCE IN IGNORANCE OF OFFER
This is a situation where someone claims to accept an offer he was not aware of. Someone ignorantly acts based on the terms of an offer but he does not have the knowledge of the offer. The problem arises mainly from the “reward” cases or unilateral contracts. There can be no acceptance in ignorance of offer, not even if what a person did was exactly what the offeror has requirement to be done in acceptance of his offer, it will amount to an invalid acceptance.
Therefore, in (Fitch v Snedaker), in consequence of the murder of a woman the defendant promised a monetary award to any person who gives information leading to the apprehension and conviction of the murderers. Jones, one of the plaintiffs claimed that he gave the information the day the woman was found dead. The court held that he was unaware of the offer, he did it for public good and therefore cannot lay claim to the benefits.
- ACCEPTANCE OF TENDERS
Advertisement for tenders by contractors are known to be invitation to treat. The submission of the tender by a party is the offer. Acceptance is when the contractors chooses the bid. When it is communicated; a contract is thereby made.
However a distinction has been made between when a tender for the supply of a number of goods is specific and when it is not specific.
When it is specific, there would be a firm contract right from the beginning for the supply of the specified quantity.
In the other situation where it is not specific, there is no binding contract. The supplier’s tender is merely a standing offer and a contract merely comes into existence on each occasion the contractor makes a specific order. The implication of this is that in between order, any of the parties is at liberty to bring an end to the agreement but there must be notification.
In (Great Northern Railway v. Witham), the court held that the defendant failed to give notice of their refusal to supply the goods at the fixed price anymore. They are therefore bound by the contact.
COMMUNICATION OF ACCEPTANCE
- WHERE PRESCRIBED
Where the offeror stipulated a particular means of communication of the acceptance, the offeree must comply with this mode if it is mandatory except the offeror is willing to wave his prescription. The mode of communication where stated by the offeror is part of the terms of the offer, it is not meant for the offeree to deviate from it by adopting another means of acceptance unless it will amount to something else other than acceptance.
In (Eliason v Henshaw), the court held that an offer is not meant to be qualified or deviated from when accepted. And that the offer were entitled to reject the acceptance since the offeree did not abide by the means of communication prescribed.
Although, the English law looks a bit different from this. Contrary to the position in Nigeria, English cases suggests that where a mode of acceptance is prescribed but the offeree choose to accept the offer by an equally faster means, the acceptance does not become invalid in so far as the means adopted is not less advantageous to the offeror. In (Tinn v Hofman & Co), acceptance was requested by return post. The court held that it does not mean exclusively a reply by return post, but that you may reply by any other means not later than a letter written by return post.
- WHERE MODE OF COMMUNICATION OF ACCEPTANCE IS NOT PRESCRIBED.
Where no form of communication of acceptance is prescribed by the offeror, it suffices if the offeree communicated the acceptance by the same means used by the offeror in making the offer. Thus, an oral offer implies an oral acceptance. If the offer is by telegram, fax, or email then a prompt reply is indicated and acceptance should be by the same means.
In most cases, acceptance does not occur until received by the offeror.
ACCEPTANCE BY POST
Acceptance by post has been treated as a different form of acceptance entirely. Unlike other modes of acceptance where agreement does not take effect until communication of acceptance reaches the offeror, the rule with acceptance by post is that acceptance takes effect and therefore the contract comes into existence the moment a letter of acceptance is posted.
This rule was laid down in the locus classicus case of Adams v Linsell. The defendant, a wool merchant, through a letter on September 2 offered to sell a quantity of wool to the plaintiffs and required a reply by post. The defendant misdirected the letter and it did not reach the plaintiff until September 5. That same day, the plaintiff posted a letter of acceptance which reached the defendant on September 9th Meanwhile on September 8, not having received a reply from the plaintiffs, the defendants sold the wool to another person. The plaintiff argued for breach of contract.
The question for the court to determine was whether a contract of sale had been entered into before 8 September when the wool was sold to the third party. The court held that in a contract concluded by post, the contract comes into existence the moment the letter of acceptance is ported and so a valid contract had come into existence on the 5th.
Subsequently, similar cases have been decided the same way. Thus, in (Household fire Insurance v Grant), the defendant applied for shares in the plaintiffs company. The shares were allotted and letter of allotment was duly posted. The letter was lost in the post and never delivered and so the defendant was not aware that he was already a share holder in the plaintiff’s company. When the company went into liquidation, the defendant refused to pay for his shares claiming that he was not a shareholder.
The court held that acceptance of the defendant’s offer was held to be completed the instant the letter was ported and that the fact that the letter was never delivered did not change the legal position of both parties.
Generally, due to the error-prone nature of posting, acceptance of offer should not be communicated by post except it was stipulated in the terms of the offer.
Exceptions to the Rule in Adams v Lindsell include:
- The rule will not apply where the offeror indicated, expressly or impliedly, that acceptance will not be effective until received.
- Where the application of the rule will produce manifest inconvenience and absurdity
- Where the letter of acceptance was wrongly addressed or inadequately stamped.
- Where the letter was not properly posted.
Thus, in (Re London & Northern Bank, ex p. Jones), Dr. Jones makes an offer to the bank. At 7.00AM, a letter of acceptance was handed by the bank’s employee to a post man at a General Post Office who had no authority to receive letters. The post man posted it at a district office and the letter was not delivered till 7:80pm. Meanw3hile, earlier that day, Dr. Jones had written a letter withdrawing his offer. This letter was received at the bank at 9:30am. The court held that postal rule did not apply due to incorrect posting.
- By Revocation
An offer may be revoked any time before acceptance. The revocation of an offer before acceptance involves no liability on the part of the offeror even though he promises to keep the offer open for a specific period of time and nevertheless revokes the offer before the expiration of that period of time because such promise is not supported by any consideration from the offereee.
Thus, in (Routledge v. Grant) the defendant wrote to the plaintiff offering to purchase the lease of his house, “with a definite answer to be given within 6 weeks.’’ He however changed his mind about the purchase and wrote to the plaintiff once again that he has withdrawn the offer. After receiving the second letter (which has revoked the offer), the plaintiff purport to accept the defendant’s offer.
The court held that the first letter did not bind the defendant to keep the offer open for a full 6 weeks, and as such it had been validly withdrawn by the defendant, and the plaintiff’s purported acceptance was ineffective.
However, it would have been a different case if the promise to keep the offer open had been met by some consideration moving from the offeree, i.e. on the above case, had it been the plaintiff had finished consideration to the offeror to have him keep the offer open for the stipulated time, the offeror cannot validly revoke the offer before the expiration of that period. Thus, in (Mountfond v Scott), the defendant granted the plaintiff an offeror to purchase his house within the period of 6 months. Mountford then gave 1 Pounds as consideration for the offer to be left for the 6 months.
Scott then purported to withdraw the offer before the expiration of the 6 months. The court held that other withdrawal or revocation was void and invalid.
Also, the revocation of offer must be brought to the notice of the offeree before he accepts the offer. A revocation of offer that was done subsequent to the communication of acceptance would be invalid.
The communication of revocation can also be carried out by a third party whether with the knowledge of the offeror or not. i.e, where the offeree finds out about the withdrawal of the offer from a reliable fluid party, the revocation is effective and the offeree can no longer claim to accept the offer. In (Dickinson v Dodds) the defendant offered to sell some houses to the plaintiff, giving two days in which to accept. A day later someone told the plaintiff that the defendant was negotiating to sell the housed to a third party. Shortly after that, the plaintiff purported to accept the offer.
However, the defendant had already sold the houses to the third party before the plaintiff’s acceptance.
The court held that the offer had been effectively revoked before any acceptance by the offeree. And that a communication by a friend or other party that an offer had been withdrawn was valid and would be treated as if it came from the person themselves.
However, the revocation of unilateral contracts raises peculiar problems. It has been said that in unilateral contracts, the acceptance takes the form of performance. Thus, acceptance is not complete until the offeree completes performance. If this is followed to its logical conclusion, it means that even though the offeree has commercial performance, the offeror can revoke the offer any time before its completion.
As against this logical conclusion, it has been held that once performance commences, acceptance is taken to have been made and although the offeree is not entitled to the reward until he completes the performance, the offeror no longer has power to revoke.
In (Errington v Errington), a father bought a house for his son and daughter to live or (on a mortgage arrangement). He paid 250 euros in cash and borrowed 500 euros from a building society on the security of the house, the loan being repayable with interest by installments a week. The house was in the father’s name and he was responsible to the building society for the payment of the installments. He told his daughter in law and son that if they repaid the loan, the house would be theirs. They accordingly commenced payment of the installments, and a substantial part of the loan had been thus repaid before the father died. After his death, his widow purported to revoke the father’s promise and revert the house to the father’s estate. It was held that the father’s promise was a unilateral contract and therefore the widow could not revoke, since the father could not have revoked were he to be alive.
- By Lapse of Time
An offer may be terminated if there is no acceptance after an appropriate lapse of time. Where the offeror states that the offer is open for a specific period of time then the offer will be terminated after the passage of that period of time.
Where no particular period was stated, an offer would still lapse after the expiration of a reasonable period of time; what is reasonable would be determined by the nature, subject matter, and the peculiar circumstances of the offer in each case.
Thus in (Ramsgate victoria Hotel v. Montefoire) the defendant offered to buy shares in the plaintiff’s company at a certain price and he paid a deposit to his bank account to beg them on June. He did not hear anything until November when the offer was accepted by the plaintiff. By this time, the value of shares has fallen and the defendant was no longer interested.
The court held that the offer was no longer open as due to the nature of the subject matter of the contract. The offer lapse over a reasonable period of time.
- BY DEATH OF THE OFFEROR OR OFFEREE
Where the offeree has noticed of the death of an offeror before acceptance, he cannot validly accept the offer.
Where the offeree accepts without notice of the offerer’s death whether the acceptance will lead to a contract depends on the nature of the contact itself. If the contract is such that can be performed from the offerer’s estate, the offer will not lapse.
Thus in (Bradbury v Morgan), Jim Leigh wrote, requesting the plaintiff to give credit to his brother promising to guarantee the repayment of the credit peradventure there is any default. After Leigh died the plaintiffs, who were ignorant of his death continued to give credit to his brother. The executions of Leigh’s estate refused to repay any debts resulting from credits given to the deceased brother.
The court held that since this was not a contract requiring personal performance from Leigh, it could be performed from his estate.
With regard to the death of the offeree on the other hand, an offer lapses if the offeree dies before he accounts it.
An offeree might reject an offer made to him by the offeror.
A rejection has no effect unless it is actually communicated to the offeror. A counter offer also operates as a rejection of the initial offer.
For a party to be entitled to bring an action on an agreement, he must demonstrate that he contributed to the agreement. It is this contribution that is called consideration.
A more comprehensive definition of consideration was given by Lush J in (Currie v Misa).
“ valuable consideration in the eye of the law may consist either in some rights, interests, profits, benefits accruing to one party, or some forbearance, responsibility or loss suffered or undertaken by the other. Thus, consideration does not only consist of profit by one party but also exists where the other party abandons some legal rights in the present or limits has legal freedom of action in the future as an inducement for the promise of the fort…”
In a simple language, consideration is the price for the contract. It is the advantage one party conforms on the other or the disadvantage he would suffer in exchange for what he would get from that other party.
While emphasizing the importance of consideration the court hold In (Best (Nigeria) Ltd V Blackwood Hodge (Nigeria) Ltd & Ors).
“It is basic that to constitute a binding contract there must be an agreement in which the parties are ad idem on essential terms and conditions thereof. The promise of each parties must be supported by consideration”
In a like manner the court held on (Pada Chabasaya v Joe Anwasi) thus “A contract in which consideration has not been met is one that can be said has been breached and is unenforceable, as consideration is one of the terms of a contract”
A promise which is not supported by consideration cannot be enforced. The party cannot rely on moral obligation to bring an action in court. This was laid down in 1840 in the case of (Eastwood V Kenyan) Eastwood was a guardian to Mrs. Kenyan whilst she was an infant. He had spent a considerable amount of his money in improving her estate and in bringing her up. When she reached maternity she promised to reimburses for his expenses. Her husband also promised to do so independently. When they failed to carry out their promises, he sued them. The plaintiff relied on the defendant moral obligation to him to fulfill their promises.
The suit was dismissed and moral obligation was rejected as the basis of an action,
Natural love and affection also cannot equate consideration. In (Faloughi v Faloughi) the court held thus
“Love and affection is not valuable consideration in the eye of the law, as it cannot be quantified in terms of money value”
Rules Governing Consideration
- CONSIDERATION MUST MOVE FROM THE PROMISEE
Only a person who has furnished consideration in a contract is the one that can bring an action to enforce a promise given by the defendant.
Conversely, a party that has furnished no consideration in a contract cannot bring an action to enforce that contract, else his action will fail for lack of consideration. In other words, the plaintiff must show what he gave in exchange for the promise given to him by the defendant. Thus, in Tweddle v Atkinson.
A couple was getting married. The father of the bride entered an agreement with the father of the groom that they would each pay the couple a sum of money. The father of the bride died without having paid. The father of the son also died and so was unable to sue on the agreement.
The groom made a claim against the executors of the will but the court held that the groom was not a party to the agreement and the consideration did not move from him. Therefore, he was not entitled to enforce the contract.
INSTANCES OF LACK OF CONSIDERATION
1 Gratuitous Promise by defendant
A promisor can withdraw his promise at anytime without liability if the promisee has furnished no consideration to the promise that has been made to him, and any attempt to enforce the promise against the promisor will fail for lack of consideration.
The implication of this is that where a party cannot show what he promised or did in exchange for the promise of the other party, it would mean that the other party’s promise was gratuitous and not binding on the promise.
Thus, in (L.A Cardoso v The Execution of the Late J. A Doherty).
The plaintiff obtained various loans from the late Deherty using his properties as collateral for the loan. On his failure to repay the loans, the ownership of the properties passed to Doherty who proceeded to sell them leaving only the one which the plaintiff was living, with a promise that the plaintiff would be permitted to live in it for the rest of his life. Upon the Doherty’s death, the executors of his estate also reaffirmed the promise, but later changed their discussion and made sell the house. The plaintiff sought a declaration that he was entitled to live on the property for the rest of his life, and an injunction restraining the defendants from selling it.
The West Africa court of Appeal held that the declaration and injunction would be refused on the ground that the plaintiff finished no consideration for the promise.
- Non-performance by the Plaintiff
In (BFI Group Corporation v Bureau of Public Enterprise), the court held
“A person seeking to enforce his right under a contractual agreement must show that he has fulfilled all the conditions precedent and that he has performed all those terms which ought to have been performed by him”.
Going by the foregoing, it is the position of the law that he must have furnished consideration to the contract before attempting to enforce it under the law, otherwise, his action will fail.
In the case of (Banks of West Africa v Fagboyegun)
The defendant signed a contract of guarantees which he agreed to guarantee a debt owed by a third party to the bank. The third party could not pay the debt and the defendant repaid part of the debt to the bank. The bank then brought an action to recover the balance of the debt.
The court held that the plaintiff could not recover the balance because it did not furnish consideration for the guarantee. Apparently, the guarantee was made with an exchange of consideration that a further loan would be advanced to the third party but the bank has failed to perform.
- Where consideration is furnished by a third party and not the plaintiff
Where the plaintiff is relying on a consideration furnished by a third party, the action will fail and the consideration will be regarded as invalid to the contract.
This principle is a blend of the doctrine of privity of contract and the principle that consideration must move from the promisee to the promisor. By operation of the doctrine of privity of contract, only a party to a contract can of course bring an action to enforce it and the third party is regarded as a stranger to the contract between the plaintiff and the defendant.
Thus, in (Gbadamosi v Mbadiwe), the Action Group gave a loan to the defendant and his party (Democratic Party) in 1959 to fund the party’s contest in the federal elections of that year. The plaintiff who was then the federal treasurer of his party (Action group) sued in his personal capacity rather than in a representative capacity to recover the loan.
The court held that the plaintiff did not furnish any consideration in respect of the loan and so the action failed.
- Claim in excess of benefit provided for in an agreement
Where one of the parties to a contract confers an extra reward on the other party after the main contract itself has been concluded, it is assumed that a new contract has emerged which the beneficiary has to furnish consideration to in order to be able to enforce the extra reward.
The promisee cannot rely on the consideration furnished in the initial contract to lay claim to the extra benefit.
The principle was applied (Egware v shell BP petrol Development Co. of Nigeria) The defendant acquired land from the plaintiffs, paying in full for the acquisition of the land. In ancillary to this contract the plaintiff claimed they will allow the defendants to use the land for drilling purposes on the promise that all minor contract jobs would be awarded solely to the plaintiffs.
The court held that the promise could not be enforced against the defendants who had full rights over the land (upon full payment for the land) because the promise was not supported by any consideration from the plaintiff.
- CONSIDERATION MAY BE EXECUTORY OR EXECUTED
Consideration is executory when the offer and acceptance consist of promises, i.e. promise against promise. The offeree is making a promise in return for the offeror’s promise. Both parties become bound in the contract prior to actual performance. A contract is constituted by the exchange of promises.
On the other hand, a consideration which initially was executor becomes executed at the pointt where what was promised by a party to the contract has been carried out or fulfilled.
However, in a unilateral contract, a consideration becomes executed when it consists of actual performance in return for an offer.
It is taken that performance of the offeree consists both of acceptance and consideration.
- CONSIDERATION MUST NOT BE PART
The consideration which the plaintiff is relying on while instituting an action must not be in the past, unless his action will fail subject to certain conditions.
A consideration is considered to be in the part when the act of consideration antedates the promise made by the other party i.e, he has performed the act prior to when the promise was made and was in fact not expecting the promise at all at the time he was performing the purported consideration. Such consideration will be deemed to be invalid.
Thus, in (Akenzua II Oba of Benin V Benin Divisional Council)
The defendant approached the plaintiff to help use his influence to persuade a company to release some forest areas over which the company had exclusive right. The company conceded as a gesture of goodwill. Later on, the plaintiff requested the defendants to release one of the four forest areas secured to him for exclusive, exploitation, and they agreed. They later withdraw their consent and the Oba instituted these proceedings for breach of contract.
The court held that the plaintiff’s consideration was past. His services in securing the release of the forest areas had been done before the defendant resolved to grant him exclusive use of one of the forest areas.
Similarly, in (Re McArdle) a deceased left a house jointly to his children. The wife of one of the children, who was living in the house with her husband spent a lot of money making improvements and carrying out alterations to the house. Later on, the other children jointly signed a document agreeing to pay a sum of money for her expense.
The court held that the promise to make payment was not binding as it was made after the consideration had been performed.
However, there are exceptions to the above principle subject to certain conditions, a past consideration can stand as a valid consideration in the cause of an action.
The exceptions or conditions include the following
- The act was done at the request of the promisor
- The parties understood that the act was to be remunerated whether by payment or the conferment of some other benefit.
- Payment, or the conferment of a benefit must have been legally enforceable had it been promised in advance.
Thus, in (Lamplaigh v Brathwat), the defendant who had killed someone requested the plaintiff to endeavor to obtain a pardon from the king for his offence. The plaintiff managed to get the pardon, in the course of which he spent many days riding and journeying at his own cost across the country to where the king was and back again.
The defendant then promised to pay him 100 pounds for his efforts but failed to pay. The court grave judgment for the plaintiff holding that there was good consideration as the plaintiff acted upon the defendant’s request. The defendant original request which contained an implied promise to reward the plaintiff for his efforts and the subsequent promise to pay were to be treated as the same transaction.
However, considering the above case, it would be observed that the exception principle more pronounced is that a mere prior request by the defendant constituted an exception to the principle of past consideration. If this is to be followed, it means the decision of the court on (Akenzua II Oba of Benin v Benin Divisional Council) is questionable as there was the occurrence of prior request too.
This led to the second exception of previous request that the parties must have understood that the act was to be renumerated, whether by payment or the conferment of some other benefits.
Thus in (Stewant v Casey), the defendant managed some patents owned by the plaintiffs. After Casey had worked on the patents for two years and completed most of the work, the plaintiff signed a document promising to award him one third share of the patents. Subsequently, the plaintiff claimed that the defendant was not entitled to the one third share because he furnished no consideration for the promise and if any, it was past.
The court held that the consideration was not past because at the time the defendant rendered the services to the owners of the patent, it was understood that the service would be paid for the work due not in a matter of goodwill but something a manager would have expected to be paid for. The subsequent promise was, therefore the affirmation of an already existing obligation.
iv Manufacturer’s Guarantee
In Commercial Transaction, guarantees are given most times to customers after the customer has bought the goods.
Scientifically following the rule of past consideration, the consideration given by the customer to the promise of guarantee of the manufacturer apparently falls to the part and should be considered invalid.
Nevertheless, it is still considered as valid and enforceable.
- Application of the Limitation Act
Sec 27(1) of the Bill of Exchange Act 1882 provider that valuable consideration for a bill may be constituted by
- Any consideration sufficient to support a simple contract
- An antecedent debt or inability
The implication of this is that a party can rely on a previous debt as a consideration to enforce a contract.
- Consideration needs not adequate but must be sufficient in law.
Adequacy of Consideration
It is not the business of the court to determine whether what a party is giving as a consideration for a promise is enough or adequate i.e. they do not compare the valves of consideration furnished by the plaintiff with the defendant’s promise because parties have the freedom to contract as they wish. This is what is meant by the ascertion that consideration need not be adequate.
In (BFI Group Corporation v Bureau of Public Enterprise), it was held thus
“Once consideration is of some value in the eye of the law, the courts have no jurisdiction to determine whether it is adequate or not”.
Thus , in (African Petroleum Ltd v Owodunni), the appellant provided accommodation for the respondent which was worth N65,000 per annum at market value but for which the parties agreed that he should be paying N400 per annum.
The court held that there was a consideration regardless of the adequacy or otherwise.
See also (Thomas v Thomas)
Indeed, in the observe of any vitiating, such as fraud, duress, undue influence, mistake or misrepresentation, the court will be ready to enforce the contract.
In the presence of any vitiating element if provide the contract will be declared as invalid.
Sufficiency of Consideration
While consideration need not be adequate, it must however have some value in the eye of the law. It must comprise some element which can be regarded as the price of the defendant promise. It must be ascertainable and not vague, useless, unascertainable or meaningless.
Something of Value in the eye of the law
It has been unsettled as to what is meant by the expression “something of value in the eye of the law”. No judicial discussion has disclosed any principle that the court use to analyse the term on any certain way.
However, whatever act or promise that is offered as price for the promisor’s promise, it must not be illusory, it must carry some relatives meaning in itself
Thus, in (Chappell & Co. Limited V Nestle Co. Ltd), the plaintiff owned the copyright of a popular tune which had been made into records. In order to promote the sales of their chocolates, the defendant company bought a large number of the records which they then retailed to the public at I shillings 6 pence plus 3 empty wrappings of their chocolate as against the normal retail price which was 6 shillings 8 pence.
The implication of this is that the royalty of 6.25% which the plaintiff were entitled to on the retail price will now be on the 1 shillings 6 pence and the 3 wrapping. The question therefore was whether the 3 wrappings which had no apparent economic value, formed part of the consideration for the
It was held that the chocolate wrapping form part of the consideration. They formed part of the price for each record as stipulated by the defendant. See also, (Youms v Chidiak).
However, in (White v Bluet) a son’s promise to his father to stop complaining that how the father had distributed his property among his children was held not to be a valid consideration for the father’s promise to discharge him from his debt he owed the father.
From the foregoing cases, it can be deduced that for something to be of value in the eye of the law the promise must show that at the request of the promisor he had parted with something he could have kept or refrained from exercising a right he could have assented.
PERFORMANCE OF EXERTING DUTY
Whether or not performance of an existing duty will constitute good consideration may largely depend on the nature of that duty. There are 3 basic types
1 Duty Imposed by Law
Generally, a party cannot enforce a promise made to him in return for his performance of a public duty. Since he is already under an obligation to discharge the existing public duty imposed on him by law, enforcing such a promise made to him would be contrary to public policy since it might encourage extension by public officers.
Thus, in (Collins v Godefroy), the plaintiff has been subpoenaed to give an evidence on labour of the defendant’s case. The defendant Godefroy was keen to ensure that the plaintiff shows up to give evidence, and therefore promised to pay him 1 Guinea per day. After 6 days that he has been attending court and not being called to give his evidence, he demanded for the accumulated amount of 6 days which the plaintiff had promised.
The court held that Collins was under a public duty to attend court due to the subpoenaed. Therefore a promise to give him any remuneration is a promise without consideration.
However, if the plaintiff acts or promises to act more than his duty under the law, then this would constitute consideration.
Thus, in (Glassbrook Bros v Glamoungan County C0uncil )
The owners of a coal mine at which there was a strike applied to the local police authority to station a force of policemen at the mine to protect the mine from strikers. The police were willing to protect and control the situation by a mobile force which would be rushed to the mine at the first hint of trouble. But the manager wanted police to be stationed at the coal mine agreeing to bear the expenses or agreed to pay for the additional service. At the end of the strike the police requested for the fee but the defendants refused to pay arguing that the police were acting under their public duty.
The court held that by providing officers stationed at the coal mine, the police had gone beyond their public duty. Therefore, there is a valid consideration and the contract was enforceable. See Also (Ward v. Byham)
- Duty imposed by contract with the promisor
If a party to a contract simply promises to carry out or carries out an already existing contractual duty to the defendant, he has furnished no consideration for any fresh promise that might have been made by the defendant.
In (Stilk v Myrick), two section dissected a ship in the course of a voyage between London and the Baltic. The ship’s captain who could not find substitute promised the rest of the crew extra wages if they could work the ship back home. The captain never made the extra payment promised.
The court held that there was no consideration for the promise to make the extra payment. Under the seamen’s contract, they were obliged to sail the ship under these circumstance and so the suit was dismissed.
However, like the way it is in duty imposed by law, also, where the plaintiff acts or promises to act in excess of his contractual obligation to the defendant, it can be said that a new contract has been entered into between the parties, and the extra performance by the plaintiff can stand as a valid consideration for the extra promise of the defendant. Thus, in (Hartley v Pronsonby), the circumstance were similar to Stilk v Myrick, but the ship was so short-handed that it would have been extremely dangerous to sail the ship without additional crew. 17 out of 36 crew of the ship deserted. Pronsonby (the defendant) then promised to pay the remaining crew extra money to sail back which they did
The court held in this case that they could enforce the promise. Their agreement to sail the ship under those circumstances amounted to them entering into a new contract with the captain.
Duty imposed by contract with a third party
Where parties are already into a contract with each other i.e. they both owe themselves contractual obligation, and a third party comes in to make a promise of reward for a party to perform his obligation under the contract, the party can rely on the performance of that act as consideration for the fresh promise made to him by the third party.
Unlike the two earlier situations in which the law regards the performance of the already existing duty as no consideration, in this third situation the courts have consistently held that there is consideration. Thus in (Shadwell v Shadwell), the plaintiff had already entered into a contract to marry one Nicholl. He then received a letter from his uncle congratulating and promising to pay him #150 yearly during his (the defendant) life time and until the plaintiff’s income is increased to 600 gram. When the uncle died, the plaintiff sought to recover outstanding amounts from his estate.
The court gave the judgment in favour of the plaintiff that there was good consideration for the promise by the Nephew’s marriage to Nicholl.
The court’s attitude to this category of duty is promised on the fact that the third party has special interest in the performance of the contract and that the party who is induced by the promise of the third party to perform has suffered detriment by limiting his freedom in that he might for good reason want to repudiate the contract and pay for damages.
Arguably, this is also one of the element of contract. The parties must have intended to enter into a legally binding arrangement before such contract can be enforceable, otherwise, the court will lack the jurisdiction to entertain such matter.
Professor Williston argued that animus contrahandi which is another name for intention to create legal relation should not be compulsory as element of contract since there is already the doctrine of consideration.
However, despite the arguments, it is a settled position of law that under the common law and in Nigeria, intention to create legal Relation is prerequisite as an element of contract. In Akin Akingun & Associates v Odu ‘A Investment Co., the court held that “where there is failure of any of the requirement of a valid contract such as intention to create legal relations, then there is failure of contract as it is incomplete”
In determining whether there is an intention to enter into legal relation by the parties, the court will do it objectively looking at each circumstances and conducts of the parties.
In RTS Flexible Systems Limited V Molkerei Alois Muller & Co, the court held that both parties had intention to enter into legal relation based on the fact of the case. Both parties had been acting based on the terms of a contract which was impliedly “subject to contract” and has the probability of boding to a formal contract.
SOCIAL OR DOMESTIC AGREEMENTS
Generally, the presumption of law is that social or domestic agreements are not intended to be legally enforceable. They are merely gentleman’s agreement binding in honour only.
Thus, in Balfour v Balfour, an unfulfilled promises by an husband to his wife which was enforced by the wife was dismissed by the court reason because she furnished no consideration for the promise and that there is no intention to create legal relation in a domestic agreement.
Also, in Jones v Padavatton, a mother promised her daughter a house and fulfilled the promise, she latter sought to recover the possession of the house after both of them fell out. The court held that the agreement was a domestic one and lacked intention to create legal relation, and that mother can also claim the house if she wishes since domestic contract is only binding in honour.
However, the principle can be upturned in a situation where spouses are not living in amity and their relationship had become a hostile one.
Thus in Meritt v Meritt, given the fact of the case, it was shown that the couples are not in amity, the agreement of the transfer of the ownership of house which they extended into was then held as binding by the court.
In determining whether there is an intention to create legal relation in instance of spouses who are not living in amity, the court will carefully consider the language used. In Gould v Gould, a separating husband promised the wife $15 so long as he had it. The court held that the agreement was unenforceable since it was not sufficiently certain.
In commercial transactions, there is presumption that parties intended to create legal relations. This assumption is very heavy to be rebutted by a party objecting to it.
In Esso Petroleum Co. Ltd v Commission of Customs and Excise, the court held that there was an intention to create legal relations by the plaintiff’s unilateral offer of a world cup coin for wherever purchase 4 gallons of petrol.
Instances where the assumption to create legal relations in a commercial contract may be rebutted include.
- Inserting an express statement to this effect in a written statement. Where a clause is inserted that the agreement will only be binding in honour.
In Amadi V Pool House Group & Nigerian Pools Co. The defendant denied the receipt of the coupon which the plaintiff had won a prize by pointing to the defendant of a clause stating that the agreement is only binding in honour. The court uphold the effectiveness of the clause.
Another possible rebuttal of the presumption may also be found in the cases of advertisement where the defendants assets that their statements are to be regarded as a mere puff in that they puff up the product in order to make it more attractive, and such words are not to be taken seriously. This is the line of argument that failed in Carbill V Carbalic Smoker Ball Co.
Simply put and given a stringent elucidation, capacity to contract is the competence or ability that a person has to enter into a contract. It looks beyond the purpose of the contact.
Capacity to contract is the legal competence or legal ability of a person to validly enter into a contract under the existing legal framework.
The rationale for disqualifying certain categories of person from validly entering into a contact flows for the essential principle of contract where requires that the parties to a contract must have consensus ad idem.
Certain categories of persons are deserving of protection in contractual transactions. This is especially because these category of persons can be easily exploited or taken advantage of at the course of negotiating contract. Although the general rule is that parties have freedom of contract, the lack of competence based on the person’s states as imposed by the law is an exception to this general rule.
Flowing from the above, a contract can be declared invalid not because of the purpose of the contact in itself but because of the status of the persons entering into the contract
Categories of Persons that lacks the Requisite legal capacity
- Infants or Minors
- Unincorporated entities
In some jurisdiction, the capacity of some other persons may also be denied justly or unjustly by the state. e.g. The 2011 Hammon-Beason Act in the state of Alabama which restricts immigrants from entering into certain categories of contract.
The issue of capacity will arise only where the contract is in a written form. This solely because illiteracy does not necessarily suggest some invalidity or infirmity. The basis for considering the states of an individual arises where their ability to read and comprehend terms as contained in the contractual document need to be ascertained to validate such contract.
For the purpose of the law, illiterate does not mean the dictionary meaning of illiteracy.
Who is an illiterate?
There is no definition for an illiterate person under the extant provision of the law governing contract. However, the court have at different times tried to give an insight into the concept of illiteracy.
1 A person may be deemed illiterate based on the language used in the contractual document.
In Pz and Co V Gusau and Kantoma (1961) 2NRNLR Pg.1, The court in that widely criticized case adopted a narrow definition of the word illiterate.
But happily in Otitoju v Governor of Ondo State (1994) NWLR part 340 pg 510, the supreme court have held that the determination of illiteracy is based on a person’s knowledge of the language that was used in the course of negotiation of the contractual document. See also, Ntiachagwo v Amodu (1959) WRNLR pg 1
In summary, illiteracy is relative depending on the language of the transaction in question. Osefor v Uwania (1971) 1 ALR pg. 421
2 The test of illiteracy is determined by functionality and is never to be assumed.
In Scoa Zarta v Okon (1960) NRNLR Pg 34, the court held that the fact that a person could sign a document does not suffice to assume that he could read and childe stand the content of the document signed see Also Lawal V Gb Olivant (1970) 2ALR pg. 208.
3 The burden is on the party that is objecting to the enforceability of a contact to prove illiteracy. Otitoju v Governor of Ondo State.
In Anaeze v Ayanso (1993) 5 NWLR Pt 291, the respondents claim of illiteracy failed woefully as he was unable to prove same, rather the appellant was able to establish the Respondent’s literacy by leading evidence to show that he respondent had a letter headed paper and that he has previously signed so many other similar document.
4 For the purpose of determining literacy or illiteracy, the content of the contractual document must have been properly and fully explained to the person in question. In Salami v Savanna Bank (1990) 2 NWLR Pt 130, the court upheld the claim of illiteracy by the appellant as it was shown that the condition of the guarantee which he gave was not fully explained to him.
LEGAL PROVISIONS FOR THE PROTECTION OF ILLITERATE
- Illiterate protection laws
- Land instrument Registration Laws
The illiterate protection laws requires the fulfillment of certain conditions in transactions involving illiterate
1 The law requires the writer of the document in question to include his name and address. This requirement will suggerst the following
- That he was to write the document
- That the document contained and represent the instructions given to the writer
- That the document was read over and explained before it was either signed or thumb printed by the illiterate person.
2 Under the land Instrument Registration Law. Section B requires that any document that is to be signed or thumb printed by an illiterate person must be executed before the magistrate or the justice of peace. Failure to do this will make it impossible to register such document or to admit such document in evidence for the purpose of establishing title to land.
The definition of the writer of a document have been the subject of controversies. In UAC V Edems & Ajayi (1958)NRLW pg 33. The decision reached in this case emphasizes that the requirement and provisions of the law are sacrosanct and meant to be obeyed. In Igbadume v Bentworth Finance Ltd, the court held that the requirement of the law is an integral part of the document preparation process and as such, it cannot be satisfied subsequently. There are two views.
The first view is that which emphasizes purpose. The contrary view is that the law requiring the writer to put his name and address must be seen to have been complied with even before the illiterate person signs the document. Doing otherwise may aid fraud. The exception to the requirement in the illiterate protection law as in respect of document prepared on behalf of the client by a legal practitioner.
Illiterate protection laws are meant to be used as a shield for the protection of the illiterate and not as a sword and as such, the court will carefully consider the fact and circumstances of each case before allowing an illiterate person to rely in compliance with the law as an excuse to evade his contractual obligation.
In Lawal v UBA, the supreme court favoured the strict and rigid interpretation of the provision of the law. Again, in another decision, the supreme court in the case of Anaeze v Ayanso held that technical non compliance will not avail an illiterate person to escapes liability unless he can establish that he lacks understanding of the content of the document signed by him.
The Rationale for the decision in Lawal’s case can be assumed to be based solely on the requirement for registration, whereas in the latter case, registration was not the issue before the court.
Note that where there have been non compliance by the writer of the document, such a person cannot see to enforce the document against an illiterate person see Agbara v Amara (1995) 2NWLR Pt 40 Pg 712.
Strict compliance is therefore obligatory on the writer.
The only exception to this may be when he have been able to successfully establish that the content of such document was sufficiently explained and understood by the illiterate person.
As regards third party, an executed document can be used by a third party against an illiterate person if he can establish that the document is the true intent of the illiterate person and that the illiterate person derives some benefits from such document. See Anaeze v Ayanso
Lastly, an illiterate person will ordinarily be allowed to enforce a document which does not comply with the provisions of the law. The rationale for this as stated in Edokpolor v Edokpolor (1994)7 NWLR pt 358 pg 311 is that the illiterate person has no fault attributable to him in the series of event that brought about the non compliance.
The age of minority varies in Nigeria depending on the specific purpose in question. For contractual purposes, 21 years is the age of maturity and as such, persons below the age of 21 are considered infants for the purpose of entering into contractual transactions.
The general rule under the common law is that contracts made by an infant are not binding on the infants but will however be binding on the other party in certain circumstance.
The common law position was modified in 1874 by the provision of the Infant Reliefs Act. The following are the position of the law under the 1874 Act:
- Just as it is under the common law, the 1874 Act also recognizes the validity of any contract that is entered into by infant for necessary goods and services
- Under the 1874 Act, contract for loans, non necessary goods and services and account stated are void
- With respect to number 2 above, such a void contract cannot be ratified upon attainment of the age of majority.
Under the common law, the fact that the contract can be ratified upon attainment of the age of majority by an infant cannot be denied and as such an infant under the common law principles can ratify a contract even where such a contract has been deemed voidable.
Concerning ratification of such contract, such ratification to be valid must be done within a reasonable time upon attainment of age of majority.
- Under the common law and 1874 Act an infant who does not repudiate a contract during infancy or within a reasonable time thereafter will be bound by such a contract.
What are necessary Goods?
Section 2 of the sales of goods Act 1878 provide that:
“Necessary goods are goods that are suitable to the condition of life and the actual agreement of an infant or any other person at the time of sale and delivery of such goods”
Such a goods must be necessary
Section 2 further provides that an infant, minor, drunken person or a person with mental incapability to pay a reasonable price for necessary goods sold and delivered to him.
In Chapple v Cooper (1944) 13 M&W Pg 253, necessary goods was defined as things without which an individual cannot reasonably exist and which are essential to the existence reasonable advantage and comfort of the infant.
The position of life of a person may be considered in determining what is necessary and what is luxury.
5 Under the provisions of the 1878 sales of goods Act, an infant is expected to pay not necessarily the contractual prices but a reasonable price.
In the case of contract for necessary services, the time of delivery may not be easily ascertainable. In such contract, the requirement for delivery may be modified depending on the circumstances of each case. Necessaries for an infant wife and children are deemed to be necessaries for the infant. The question that arises is “what happens where such wife is not an infant?”
From the foregoing, it appears that an infant may as well go ahead to deliberately purchase non necessary items with the intention of avoiding liabilities.
Where an infant misrepresents his age, the plea of infancy will still be open to the dishonest infant especially since it appears as though the burden of ascertaining the age of the person is on the seller or the other party.
In cases of fraud, the principles of equity particularly restitution will demand that the infant is not allowed to use the protection afforded by the law as an instrument of fraud. As such, equity will demand that whatever goods or sum that had been paid or given to the infant be returned to the seller.
Note however, that restitution here should not result in seeking to enforce the void contract. In Leshe v Shell (1914) Lord Sumna was of the firm view that restitution ends where repayment begins. Some authors have argued that repayment may be allowed to the extent that what is being paid back is exactly what was collected and nothing more, i.e. the exact monies that were received should be what is being given back. If this is not the case, it will no longer amount to restitution.
Contract for necessaries entered into by lunatics will be valid by virtue of the provision of section 2 of the sale of goods Act. The definition of a lunatic or a person of an unsound mind is not so controversial and as such once there is a medical report evidencing mental imbalance or unsoundness of mind or any mental condition by whatever name called, such a person will qualify as lacking legal capacity to enter into contract.
In addition, evidence of unstable behaviour may also be admissible where this has been exhibited notoriously over a period of time.
For a contract to be enforceable against a lunatic, the following must be established.
- There must have been some forms of consent, though not necessarily express consent, on the part of the lunatic
- There must be evidence that the contract was not forced on the lunatic
- The other party to the contract must not have presented himself as a benefactor or as someone rendering assistance to be the lunatic.
- For the contract to be enforceable, the lunatic must not have entered into the contract during his lead interval.
A contract that is entered into by a lunatic would be voidable at the instance or at his option. To render such contract voidable, he must show:
- That he had no understanding of what he was doing
- That the other party was aware of his mental incapacity
Section 2 of the sales of goods Act also applies to drunkards and as such contract for necessaries would be valid and enforceable against the drunkards. The contract will be voidable at the option of a drunk person where he can establish that the other person was aware of his state of intoxication.
See Core v Gibson (1853) 13 M & W P. 623
Ordinarily, unincorporated associations should not have the legal capacity to enter into contractual transactions in their unincorporated names.
Under the relevant provisions of the company and allied Matters Act (CAMA), incorporations of a company is what clothes an organization with the requisite legal personality to contract in its name, to sue in its name, and to be sued in its names.
An organization that is registered as a business name under CAMA cannot sue and cannot be sued in such name. The owners of such organization would be the proper parties to sue or the proper parties that can be sued. This suggests that any contract that is to be entered into by such an organization should rightly be entered into the owners of such association. The same will also apply to organizations that re not registered at all under CAMA.
As a general rule, where a party under a contract performs or promise to perform less than his obligation in full discharge of the contract with the consent of the promisor (the other party) this does not discharge the promisee from the contract and the promisor can come back to demand performance of what is left by the promisee on the bases that no consideration for the promise was furnished by the promisee.
The principle was laid down in Pinnel’s case (1602), in that case, the defendant owed the plaintiff 8 pounds 10 shilling which was due to be paid in November. The defendant paid 5 pounds, 2 shillings 2 pence to the plaintiff in October claiming to have done so at the request of the plaintiff and with the understanding that the plaintiff had accepted this payment in full discharge of the contract.
The court gave judgment in favour of the plaintiff (pinnel) holding that the payment of a lesser sun could not discharge a debtor from the obligation to pay the full amount of debt except at the promisor request for payment is made either
- Before the due date
- With a chattel instead of money
- To a different destination to that originally specified
Judgment was still given in favour of the plaintiff (despite that he made the agent) due to flaw in the defendant’s pleadings.
The fact that what was being given as a chattel for the discharge of the contract must carry relative meaning and that the defendant must not rely on the plaintiff’s precarious situation to vary the contract was emphasized by Lord Denning in (D & C Builder v Rees). There, the plaintiffs did some renovation and reconstruction work for the defendants. The agreed fee was 482 pounds. After completion of the work and fully aware that the plaintiffs were desperate for funds, the defendants offered to pay 300 Pounds in full discharge of the debt, or nothing. The plaintiff reluctantly accepted. The defendant paid by cheque and as soon as they cashed it, the plaintiff brought an action to receiver the remaining debt.
The court held that the defendant could not rely on estoppel as there was no true agreement to accept less than the agreed sum. The document only took advantage of the precious condition of the plaintiff. Also, it is the view of the court that the case did not create a valid exception to the rule in Pinnel’s case as “no sensible distinction can be taken between payment of a lesser sum by cash and payment of it by cheque”.
This doctrine is to the effect that when a party by his word or conduct makes a promise to another party with the intent to be acted upon by that other party and infact acted upon, the promisor will not be allowed to go back on his word.
It is a defense to an assertion of contractual rights where one party has given a promise not to assert his legal right if a condition is fulfilled by the other party and that other party fulfills that condition, the promisor would not on good law and equity be allowed to go back on his word.
The attempt to rely on the doctrine failed in Jordan v Money. In that case, Jordan promised to forego Mr. Money’s debt. In reliance on the promise, money went on expending a lot on his wedding. The plaintiff reversed his promise after 5 years. Mr. Money raised a defense of promissory Estoppel but failed. Although on a farther appeal promissory estoppel was allowed to be relied upon by the defendant.
However, in Hughes v Metropolitan Railway Company, the court did not allow the plaintiff to renege his implied promise to forego a 2 month of Negotiation with the defendant for the sale of his (the plaintiff) house out of the 6 month ultimatum given by him for the defendant to repair the house.
The doctrine was made popular in High Trees Case. After the war broke out in 1939 and the landlord found most part of his apartment desolate, he reduced the ground rent of the house from $2,500 to $1,250, although he did not specify for how long the reduction will last. The war ended at early 1945 and the whole apartment was occupied again. The landlord then brought an action to claim for the arrears of the amount he reduced during the war time.
The court held that promising Estoppel would not avail the landlord to go back on their promise to waive half of the grand rent during the war times but can however claim the full amount from when the war ended to when the action is being instituted as the condition that brought about the promise is over.
The principle was applied in the Nigerian case of Tika Tore Press v Abina, the defendant bought some books which have stayed for some time in the store of the plaintiff for some time without being sold with the agreement that payment will be made when the defendant are able to sell the books. They were also unable to sell the books for a long time and indeed the books have began to go bad. The parties then agree that the defendant should pay approximately half of the initial agreed price. The defendant paid and the plaintiff subsequently sought to recover the forgone balance.
The Supreme Court held that the plaintiff were bound by their promise and would not be allowed to go back on it.
However, it should be mentioned that promissory Estoppel can only be used as a shield and not as a sword in the sense that it can only be used to raise a defence and not be used to raise a cause of Action.
This does not mean that a person seeking to rely on promissory Estoppel cannot himself be the plaintiff by initiating an action. However, in such a case, he may only use the plea of promissory Estoppel in support of a cause of action.
Thus, in Combe v Combe, a divorced wife whose divorced husband failed to fulfill the promise of giving her $100 per year failed in her action in court because she based her case on promissory Estoppel. She attempted to use promissory Estoppel as a sword rather than a shield
However, the assertion that promissory Estoppel cannot found a cause of action has seemingly come under criticism.
In Bard Textile Holdings V Mank & Spencer The court allowed promissory Estoppel to institute a course of action but dismissed the appeal of the appellant based on the fact that there was no intention to create legal relation.
In the application of the doctrine of promissory Estoppel, the following are condition precedent.
- PRE EXISTING CONTRACT OR LEGAL OBLIGATION
There must have been an existing legal relationship between the parties pre dating the promise. The relationship is not limited to contractual obligation.
Thus, in re Wyvern, the court imposed a legal relationship by the virtue of Bankruptcy, legislation. Also, in Durham fancy goods v Michael Jackson fancy goods, a legal relationship imposed by the Companies Act of 1948 (UK) was considered sufficient and a promise not to rely upon rights arising out of that relationship was enforced.
However, in Evenden V Guildfond City AFC, there was no pre-existing legal relationship but it was held that promissory estoppel still applied. The plaintiff’s employment was transferred from the supporters club to the football club. He became redundant after some time and he claimed for redundancy fee of both the years he spent at the supporting club and the football club.
The court held that the football club had agreed when his employment was transferred that Evenden’s employment was continuous and on this basis, he could claim for the full years he spent at both appointment.
- Clear and unambiguous promise either expressly or impliedly
iii. Reliance on the promise by the promisee
- It would be inequitable to allow the promisor to go back on his promise
The party raising a defence of promissory estoppel must be able to prove that it will be inequitable to allow the promisor to go back on his promise. In deciding this, the court will look at the conduct of both parties. Thus, if the promise was given by undue influence or pressure, the court will allow the promisor go back on his promise.
It is sufficient if the party relying on promissory estoppel can prove that he has relied on the promisor’s promise. He needs not to establish that he has suffered some detriment in consequence of the promise. The promise should have altered his position in reliance on the promise.
The decision in the case of WJ Alan V EL Nasr shows that detriment is not a requirement for the plea of promissory estoppel. The plaintiff countered the defence of promissory estoppel raised by the defendant on the basis that there was no detriment on the part of the defendant. The court refused their claim.
However, in Nigeria decision in some cases would appear to suggest that detriment is a condition precedent to the plea of promissory Estoppel. Despite this, the position in Nigeria will not be considered as different to that of England. Detriment will only provide easy proof but it is not compulsory it must be present.
Generally, promissory estoppel only suspends the right of the promisor to go back or his promise for some time such that the promisee will be able to have appropriate notice and as such reposition himself to stop relying on the promisor’s promise.
However, in a situation where it is impracticable for the promisor to go back impracticable for the promisor to go back on his promise, it would then mean that promissory estoppel has extinguished his legal right.
Thus in Tool Metal Manufacturing Co. Ltd V Tungsten Electric Co., the plaintiff were estoppel from going back on their promise made in a period of war to wave a payment they were entitled to from the defendant because it was difficult for the latter at that period. But they could go back on the promise after the war ends.
Similar to the above case is the High Trees Case where promissory Estoppel only disallowed the landlord to enforce his promise during the war times alone. The promisor must give a notice whether formal or informal indicating that he is going back on his wood.
Whether promissory Estoppel will extinguish or suspend the legal right of the promisor will depend on the nature of the case.
When it is not Inequitable to repudiate the promise (Where it is equitable for the promisor to go back on his promise)
Where it is equitable for the promisor to go back on his words, he would be allowed to do so based on the fact of the case. For example, it might be that the promise had been gotten unjustly, i.e maybe the promise was not made willingly. .
In D & C Builders V Rees, the court held that it was equitable for the plaintiff to go back on their promise as it had not been freely given: the conduct of the promisee itself was adjudged unconscionable.
COMPOSITION WITH CREDITORS AND PART PAYMENT OF A DEBT BY THIRD PARTY
In a situation where creditors owed by a common debtor agree with themselves to accept a smaller sum each in discharge of the entire debt, the creditors are bound by their promise and the debtor is free from the debt. None of the creditors can legitimately come back to claim the balance of the debt. Such an attempt will be a fraud.
Also, the debt owed by one party to another party may be settled with a smaller sum by a third party due to the inability of the debtor to pay the debt. In such a case, the debtor is discharged from the debt and the creditor cannot come back for it again.
Thus, in Hirachand V Temple, the action of the plaintiff failed because he claimed for the balance of a debt which the part payment in satisfaction of the whole debt had been paid by the defendant’s father.
After the preliminaries of Negotiations, which culminated into offer and acceptance with the requisite intention to create legal relations, the next important thing is the main body of the contract i.e. the terms are items that are well articulated and agreed upon by the parties. Whether a contract is orally or partly in writing, it must contain terms which will determine the full extent of the parties liabilities or obligations. Not all the statement made by the parties in the course of negotiation will be binding as the terms of contract. It is only those intended statements by the parties at the time of the agreement which form part of the contract and it is called contractual terms. But a distinction has to be made between a term of contract and a more representation.
A statement is a term of the contract if it creates a legal obligation while a mere representation is a statement made in the course of negotiation which is intended to induce the other party into the contract but which is not part of the contract. Whether a statement is taken or regarded as a term of the contract or mere representation is a matter of construction but the importance of the distinction between the two lies on the fact that the cause of action in the court will have to be determined by reference to the classification.
Whether statement is a term or mere representation, it is determined by some criteria:
1 The first criterion is the stage in the negotiation (The point in time the statement was made).
Usually, the time gap between the period a statement is made and the actual formation is taken into account.
If there is a long gap, it may imply that it is a statement of mere representation and not intended as a term of contract. Thus in Routledge v MCkay (1954) All Indian Law Report P 255 where the time gap was one week, it was held that the statement was mere representation. In this case, the interval between the negotiation and the contract was well marked.
2 The second criterion is the importance of the statement of the parties. If the statement is made with some force, obviously it will be regarded as being of sufficient importance to be regarded as the term of the contract.
Thus, in Bamerman v White (1861) 142 AIER pg. 685, a prospective buyer of hops asked the seller whether sulphur has been used in their cultivation adding that if it was so, he will not even bother to ask for the price, the seller assumed that the hops have not been treated with sulphur. It was held that it was a term of the contract.
A statement which is not strong may well be regarded as a mere representation.
3 The third criterion is Relative strength. The Relative strength of the two parties. If there is an inequality of bargaining power, the law will very often favour the weaker party. This is especially so where the stronger party is an expert sales man and the weak is inexperience members of the public, it will follow them that the statement of the stronger party tends to be a term of the contract. In Shawel v Reade and Esso petroleum limited v Mardon, the statement in each case was made by an expert and relied upon by layman and in both cases, the statement were held to be terms of the contract. If however the statement is made by a person who has less knowledgeable about the subject matter of the contract, it is regarded as a mere representation.
This is illustrated in the case of Oscar Chess Limited v Williams (1957)1 WLR pg 370. The contract concerned a moriss car. The plaintiffs were car dealers, the defendant mother bought it is 1984. The log book showed it to have been registered on 1948. In 1985, the defendant traded it in part exchange with the plaintiff dealers for a new eman car. The car was traded as a 1948 model. The plaintiff allowed 290 euros on it. In fact, the car was a 1939 model upon which they will only have allowed 175 euros. The plaintiff discovered this some 8 months later and sued for the interest of 116 pounds and breach of contract. It was held that the plaintiff were experts who could have test by confirming the engine number and number four the maker since they are export the representation made by the defendant as to the year of make was not treated as a contractual term.
4 Another grade in determining whether a statement is a fact or mere representation is the verification Test. A statement will not be regarded as a term of the contract of the person making it expects the other to verify the truth of it. The case of Ecay v Godfrey
EFFECTS OF CONTRACTUAL TERMS
After ascertaining whether a statement on a contract is a term or a mere representation, it is necessary to consider in more details the various categories of contractual terms since all the terms are not of equal importance.
At present, 4 categories of terms have been identifies in the following order of importance:
- Fundamental Terms
- Irominate or Intermediate Term
Fundamental Term is a term which constitution the mean purpose of the contract. It is of the greatest importance in a contractual obligation, and the failure to comply with it is equivalent to non performance of the contract. It is something which underlines the whole contract so that if it is not complied with the performance becomes, it something totally different from that which the contract contemplates. It is the breach that goes to the root of the entire contact. For instance, a contract to buy groundnut from a seller and the seller supplies beans, it is a fundamental breach and amounts to non performance of the contract.
A breach of fundamental term gives the innocent party option to sue even if there is an exception clause.
A locus classicus case to illustrate this is the case of Karsals Ltd v Wallis (1956) 2 ALLER pg. 866. Wallis entered into a contract of hire purchase of a motor car which he has inspected and found to be in excellent condition. The contract contained a clause:
“No condition or warranty is given whether the vehicle is road worthy or fit as to its age condition or fitness for any purpose is given by the owner or implied.’’
The car was shortly afterwards delivered at night. The next morning, when Wallis came to inspect it, he found it to be in a deplorable condition. Many of the original parts have been removed and the car will not move. It was held by the court that the car delivered was not the thing contracted for. There was a fundamental breach of contract irrespective of the exception clause.
A condition may be defined as a statement of fact which forms an essential term of a contract. If the statement or the promise is unfulfilled, the innocent party may plead the breach or repudiate the contract which discharges him from further obligations.
Condition inherent is relevant to our study. It qualifies the obligation in the contract and it is not external to it. In this sense, a condition is an important part of the contract, the breach of which entitle the injured party to treat himself as discharged from future obligation under the contract or to sue for damages immediately. If he does not exercise the right to elect, he will remain bound by the contract.
On the other hand, warranty means an agreement which is collateral to the other purpose of a contract. The breach of which gives right to a claim for damages but not to a right to reject the contract and treat it as repudiated. The destruction between condition and warranty is more blurred but useful guides can be found on the definition provided by sales of goods Act 1893.
Contracts are concluded within the context and framework established practices. This means it necessary not to take all terms in a contract expressly. Thus implied terms are not mentioned by the parties to a contract. Nevertheless, terms can be implied by the court, statute, and by the custom in order to promote commerce and business efficacy.
- Terms implied by court:
Court are not always anxious to temper with contract made by the parties but they imply a term where it is really necessary in order to give the contract a business efficacy, i.e. to make it work. This is based on the idea that the parties must have intended the term to be in the contract although they did not expressly make it so. The test to determine the presumed intention of the parties which the court may imply is the officials by stander test which was first propounded in the case known as Morcock’s case
In the case of Okotete v Electricity Corporation of Nigeria (Unreported) PHC
- Terms Implied by Statute
The provision of sales of goods Act 1893 which have been locally exacted on some states in Nigeria is a good example of terms implied by statute.
- Terms implied by Custom
A contract is made subject to customary term or usages preventing within sphere of the subject matter of the contract even though such term have not been expressly mentioned in the contract. This is based on the assumption that it was intention of the parties to be bound by the custom. A good example of a term implied by custom in a contract is in the Maine insurance when there is an implied undertaken that the premium will be paid by the broker, i.e. he (the broker) is deemed to provide the insurer that he will be liable for the payment of premium in the event of default on the part of the assured.
It must be noted however that a custom can be excluded from an agreement by express term. Thus, when a custom is expressly excluded, the custom will not operate to override the express provision in the contract.
In the case of Mainland Nig Ltd v Dizengoll, the court held that no evidence of custom can override the express terms of a contract.
Another thing about importing custom into a written contract is that the custom must be sufficiently well established so as to be known to all those engaged on the trade. If the custom have not been well established, it cannot be applied to a contract on which notice of which have not been given to one of the parties.
An exception or exclusion clause is a contractual stipulation purporting to exclude the liabilities of one of the parties in the contract. In exception clause, one party to a contract seeks to keep his right but reduces his obligation. Where a standard form of contract is involved, it is not unusual for the parties who draw it up to take advantage of the dominant position by including exception clauses. It is essentially a picture of standard contract.
The court do not like exception clauses. This is because they go against the whole basis of what contract should be, i.e. an assumption of rights and duties on both sides. However, if a document is to be regarded as an integral part of a contract, it must first be seen if it is signed or has not been signed. If it is unsigned, the question will be whether reasonable notice of the term have been given. In the case of Parker v South Eastern Railway Co, the court decided that the plaintiff had notice of exception clause written at the back of the receipt such that the company could rely in it in their defence.
For an exception clause if it is unsigned, to be taken as binding, the notice must be given before the contract is formed, i.e. pre contractually. A belated notice may be useless. In Olley v Marlbough (1949) P 532. The plaintiff, a woman had booked into the defendant hotel with him husband and paid in advance to stay for a week. They had never been to the hotel before. They went to their room upstairs. On the wall, there was the notice. “The proprietors will not hold themselves responsible for articles lost or stolen unless handed to the manageress for safe custody.”
The couple went out for a while leaving the key to their room at the reception section. Somebody took the key and stole several items of the plaintiff. The plaintiff sued and the hotel management attempted to rely on the exception clause as excepting them from liabilities.
It was held that the contract has been formed at the desk before they went to the room and since the notice came through, thus, it cannot be regarded as effective notice.
In Thomton v Shoe Lane Parking (1971) 2 Qb P163. The plaintiff parked his car in an automatic car park. On his way out, a ticket emerged from a machine where terms excluding the defendant from liability was written.
It was held that the notice was not brought to the notice of the plaintiff before the contract was formed.
Ojeniyi v Zand and Co (1972) 2 UILR pg 34 from the fact illustration in the above cases it is clear that before a notice can be held to create an exception clause, the notice must be effective and must be given pre contractually. However, if the parties have dealt with each other before the notice may be given by these previous course of dealings.
NOTICE BY SIGNATURE
If somebody signs a document containing an exception clause without reading it, he is bound by it in the absence of misrepresentation, fraud and duress. This is exemplified by the case of L’estrange v Graucob (1934)2 Kb p. 394. The plaintiff ran a café. She bought a cigarette machine where she signs a sales agreement which included a number of clauses in regrettably small prints but quite legible. She did not read the document neither was it read over to her. The defendant did not draw her attention to the exemption clause. In fact, she had no real idea about what she signed. When the machine broke down, she complained to the defendant but they hide behind the exemption clause.
It was held by the court that when a document containing contracted term is signed in the absence of fraud and misrepresentation, the party signing it is bound and it is immaterial whether he has read the document or not. When misrepresentation or fraud is alleged, it will constitute an exception to it.
EXCEPTION CLAUSE AND THE DOCTRINE OF FUNDAMENTAL OBLIGATION
Fundamental breach of contract have been defined as an event resulting from the failure by one party to perform a primary obligation which has the effect of depriving the other party of substantially the whole benefits expected from the contract. It is the general belief that a party guilty of the fundamental breach of contract cannot rely on exception clause to avoid liability.
In Boshallis case (Adel Bashalli v Allied commercial exporters limited), where a contract for the supply of clothes was entered into between the plaintiff (buyer) and the defendant (supplier). The sample was found very much inferior in quality to the sample which form the basis of the agreement. The supplier relied on an exception clause to avoid liabilities.
The court held that the clause do not avoid the defendant any protection. It forth held that the clause can only avail the party if he is carrying out the contract in his essential respect.
In the Nigerian case of Shotayo and Arekegbe v Nigeria technical company (1970) 2ALR P 129. The plaintiff bought a second hand lorry from the defendant under a hire purchase agreement which contained a clause excluding all warranties and conditions as to fitness or road worthiness. The lorry turned out to be unfit, the plaintiff spending most of his time for repair works. The defendant relied in the exception clause.
It was held that the defendant had committed a fundamental breach and could not therefore rely on the exception clause.
However, before 1966, it has been thought that the doctrine of fundamental breach and its effect in relation to exception clause constituted a rule of law that nobody was allowed to rely on it.
This seemingly settled position of law was shaken in Suisse Atlantique’s case (1967) 1 AC p 36 when the matter was reexamined and the House of Lords held that there is no rule of law by which an exception clause could be eliminated or rendered ineffective as a result of a breach of contract whether fundamental or not, that since parties are free to include exception clause in the agreement, it is a matter of construction of the whole contract including the exception clause. As a result, the court finally held that although the defendant were breach of the obligation, the exception clause was clear and unambiguous and protected the defendant from liability.
Although, Suisse Atlantique’s case is regarded as deciding that there is no law which established that a fundamental breach of term destroys exception clause. The ghost of the rule of law reappeared in Harbutts Plasticine’s case (1970)1 KB 447. The plaintiff own a factory and contracted with the defendant to design and install equipment in the factory for storing and dispensing a heavy wax. The contract incorporated printed conditions including clause number 15 which provided that until take over, the defendant will not indemnify the plaintiff against direct damage to their property caused by their negligence but not excluding the contract price. The defendant used unsuitable material for the purpose. In an attempt to test if the defendant switched on the heating plant and lift it unattended to overnight. The factory was totally destroyed.
The court held that there have been a fundamental breach of contract which denies the defendant from relying on the exception clause.
The uncertainty and contradiction between the decisions in Sussie Attlantique and Hebutt Plastiscine’s case was finally settled in the case of Photo productions Limited v Securico Transport (1980) All Er p 556.
The plaintiff owned a factory and entered into a contract with the defendant (A security company to provide security services to the factory). While carrying out a night patrol, an employee of the defendant company deliberately started a fire which got out of control and destroyed the whole factory. The plaintiff sued and the defendant pleaded an exception clause which had the effect that the defendant shall not be responsible for any injurious act or default of the defendant employee unless the default would have been foreseen.
The House of Lords overruling Harbutt Plastiscine case held that there is no rule of law by which an exception clause can be rendered ineffective as a result of a breach of contract whether fundamental or not. The court further held that parties are free to agree to whatever exclusion or exception clause they want on their obligation, and any breach is a matter of construction of the whole contract.
The rule of construction in accordance with the House of Lord decision in photo production case is the method being employed to interpret exception clauses in England.
However, the negative effect or result which may arise from this interpretation has been taken care of by the unfair contract Terms Act 1977 which is not applicable in Nigeria.
The initial attitude of the Nigerian court to the exception clause is that of employing the Rule of law approach, i.e. no exception clause will apply where a fundamental breach of contract was alleged. In line with the decisions in Karsals V Wallis, Shotayo Arekegbe’s case and Harbutt Plastiscine case. This apparently ignores the new development in England where the rule of construction is employed.
Unfortunately in 1989, the Nigerian Supreme court stated to employ the rule of construction. In Akinsanya v UBA in heavy reliance on the authority in the English case of photo productions Limited. This is an alter disregard to the socio cultural environment and state of development in Nigeria.
It is the view of text writers that the supreme court need not follow the decision of the English court slavishly but instead he should adopt the rule of law interpretation which is move in time with our level of development in Nigeria and more so when there is no general legislation to protect the consumers from oppressing exception clauses.
Meaning of Mistake
In the legal word, the word ‘’Mistake’’ takes a different form from the original meaning of Mistake in a layman’s word.
Mistake in contract law is an incorrect understanding by one or more parties to a contract and maybe used as grounds to invalidate the agreement. That is, where one or two parties to contract enter into the contract without fully understanding the facts of the contract, that contract can become void due to the incorrect understanding of the contract.
When entering into a contract, there must be consensus ad idem (the meeting of minds) between the parties. When both parties enter into the contract on a mistaken assumption of some fundamental facts, the consensus ad idem is lost. This then mean that the contract can be nullified.
In the case of Bell V. Lever Brother Ltd, the House of Lords held that common mistake does not lead to a void contract unless the mistake is fundamental to the identity of the contract.
If mistake operates at all, it operates to negate or in common law cases, to nullify consents. A mistake which produces this effect is called an operative mistaken.
The general rule is that there must be consensus ad idem, that is, the meeting of minds. In Olanlege V. Afro Contractor Co Nigeria Ltd 1996, it was stated by the judge that the parties much reach a consensus ad idem orelse the contract cannot be regarded as legally binding and enforceable.
Lord Atkin demonstrated in his judgment in the famous case of Bell v. Lever Bros Ltd as follows:
‘’A buys B’s horse, he thinks the horse is sound and he pays a price of a sound horse. He would certainly not have bought the horse if he had known as a fact that the horse is unsound. If B has made no representation as to soundness and has not contacted that the horse is sound, A is bound and cannot recover back the price.’’
Types of Mistake
According to Cheshire and Fifoot, there are 3 types of mistake. Other legal writers have their own classification of the various types of mistake. For better understanding, it is better to classify the types of mistake under the 3 categories of Cheshire and Fifoot which are:
1) Unilateral mistake
2) Common mistake
3) Mutual mistake
1) Unilateral mistake:
This is when one party misunderstands what the terms of a contract are and because of that, leads to a breach of contract. This could be mistake as to the terms of the contract or the identity of the contract.
Entering into a contract requires that both parties fully understands the terms and responsibilities of the contract. Unilateral mistake can arise from any part of the contract. It can be from the product or quantity, the definition of terms or technical phrases or the definition of the word or phrase.
In Kings Norton Metal V. Edridge Merret, a rogue named Wallis ordered some goods on notepaper headed ” Hallam& Co’’ from king’s Norton. The goods were paid for by a cheque drawn by “Hallam& Co”. King Norton received another letter purporting to come from Hallam& Co, containing a request for a quotation of prices for the goods. In reply, King’s Norton quoted prices, and Hallam then by letter ordered some goods, which were sent off to them. These goods were never paid for. Wallis had fraudulently obtained these goods and sold them to EdridgeMerret, who bought an action to recover damages for the conversion of the goods. It was held by the Court of Appeal that if a person, induced by false pretenses, contracted with a rogue to sell goods to him and the goods were delivered, the rogue could until the contract was disaffirmed give a good title to a bonafide purchaser of value. The plaintiff intended to contract with the writer of the letters.
If it could have been shown that there was a separate entity called Hallam& Co and another entity called Wallis then the case might have come within the decision in Cundy V. Lindsay. In the option of Al Smith, there was a contract by the plaintiff with the person who writes the letters by which the property passed to him. There was only one entity, trading it might be under an alias, and there was a contract by which the property passed to him.
A single unilateral mistake during the contract drafting process can affect the entire editing the specific part of the contract or by voiding the entire contract.
2) Common Mistake:
A common mistake occurs when both parties to the contract have a common mistake or misrepresentation to the fact on the contract. It must be shared by both parties to the contract. It must relate to a matter of existing fact or law and can affect the contract in two basic ways:
1) They were both mistaken
2) About the same thing
In the case of Great Peace Shipping Ltd V. Tsaoliris salvage Ltd, the English law did sometimes apply a doctrine of mistake in equity which rendered a contract voidable at the instance of an affected party.
For example, if Tope and Yemi entered into a contract under common mistake, it means that although X and Y perfectly understood each other and their respective intentions X and Y were mistaken about some underlying and fundamental fact, e.g. that thing which is the subject- matter of the contract does not exist or has ceased to exist.
In the case of a common mistake, there is no dispute between the parties because both parties perfectly understood the contract before entering into the contract. But, what is urged is that because of a common error as to some fundamental fact, the agreement or consensus is nullified.
Common Mistake has two areas which are:
1) Res Extrincta
2) Res Sua.
This means thenonexistence of the subject-matter of the contract. This is where the subject-matter of the contract does not exist at the time of the contract, that is, both parties under the contract believed that the subject-matter was in existence while unknown to them that at the time of the contract was made, the goods was not in existence.
In the case of Couturier V. Hastie, a man bought a cargo of corn which he and the seller thought at the time of the contract to be in transit from San Lonica to England, but unknown to them, had fermented and had already been sold by the master of the ship to a purchaser at Tunis in order to prevent complete loss. The plaintiff nevertheless sued the defendant for the contract price. It was held that, the claim failed because the contract proceeded on the assumption that the corn was in existence at the time the contract was concluded. In other words, the contract was void of mistake; therefore the buyer was not liable for the price of the cargo. The Lord Chancellor reading the unanimous judgment of the House of Lords stated:
‘’the contract plainly imports that there was something which was sold at the time of the contract and something to love purchased. No such thing existing; I think the Court of Exchequer has come to the only reasonable conclusion upon it.’’
The above rule received statutory blessing in Section 6 of the Sales of Goods Act, 1893, which provides that: where there is a contract for the sale of specific goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void. In order words, the effect will be the same if the contract is for the sale of specific goods that have already perished.
The case of MC Rae provides a clear illustration of this solution. The defendants sold a tanker supposedly at the bottom of the Pacific Ocean to the plaintiffs. The plaintiffs were unable to find it for the simple reason that it did not exist. They sued the defendants for breach of contract and the defendants’ defense of common mistaken belief in the existence of the tanker was dismissed because the contract contained an implied contractual promise that it did exist. The breach of contract was the nonexistence of the promised tanker. If there had been no allocation of risk to the defendants, they would have succeeded in the basis of res extincta doctrine.
Professor Sir John Smith and others have argued that the implied term theory can be taken further such that where there is no express or implied allocation of risk the contract is void because if an implied condition precedent to the effect that the assumed circumstances must exist otherwise there is no contract. It is necessary to note that cases of Res Extrincta have operated also in areas other than those of buying and selling of articles.
Thus, in Scott V. Coulson, X agreed to assign to Y a policy of assurance upon the life of Z was already dead before the contract was made. It was held that the contract was void.
Similarly in Strickland V. Turner, the plaintiff brought and paid for an annuity on the life of a man who unknown to the parties had already died. He was allowed to recover the purchase money as the annuity ceased to exist at the time of sale.
In Galloway V. Galloway, a man and woman entered into a separation deed, on the false assumption that there was a valid marriage between them. In other words, they erroneously believed they were lawfully married as husband and wife, when in fact; the marriage between then was void. It was held that the separation deed was a nullity.
In Griffith v. Brymer, an agreement to hire a room for the purpose of watching the coronation ceremony of King Edward the 7th was held to be void because unknown to the parties, the ceremony had been cancelled at the time the contract was concluded.
Finally in Norwich Union Insurance Society Ltd V. W.H. Price Ltd, the privy council decided that where an insurance company paid insured the value of a cargo of lemons which the company believed was destroyed by reason of an accident to the vessel, which was an insured risk, whereas the damage had been caused by over-ripening, an uninsured risk, the company could recover the amount paid. In cases of Res Extrincta, the contract is void because there is nothing to contract about, not truly because of mistake. Cases are rare because it will usually be possible through construction techniques to find some alternative contractual subject-matter, either in one party’s promise that the subject of a sale exists, or in cases like Galloway by construing the contract as one to provide financial support on the breakdown of a relationship.
2) Res Sua:
This occurs where there is absence of title in the seller of the subject-matter. In the case where the parties’ contract in circumstances in which unknown to them the subject-matter of the transaction belonged to the purchaser, the contract would be void for mistake.
Both parties must have accepted in their minds as an essential and integral element of the contract, that the seller had a right to sell and the purchaser could purchase the subject-matter of the contract.
Thus, in Copper V. Phipps, the contract purported to lease a fishery but the lessee was already the holder of a fee tail estate in the property. The lease was rescinded which might make it seem like the contract was voidable rather than void but this case was brought in the Irish Court of Chancery before the judicature Acts presumably because it was necessary to cancel the lease and the lease and the chancery had better machinery for doing this. The contract was void because there was no subject-matter that could have passed under it.
A similar and more likely occurrence than Res Sua is where the seller of property has no title to sell but usually in cases like these, the seller is in breach of an implied condition that he or she has sufficient title to sell or the parties agree that the buyer will purchase whatever title the seller has.
The leading case of Bell V. Lever Brother is authority for the proposition that a common Mistake about the quality of the subject-matter of a contract will undermine the parties assent and make the contract void where that mistake “makes the thing without the quality essentially different from the thing as it was believed to be.
Bell V. Lever Brothers is a very difficult test to satisfy but at least it makes the law clear. The law became very unclear, however, after the decision of the Court of Appeal in Soller V. Butcher. Denning L.J’s judgment with which Bucknil L.J agreed has been understood to mean that Bell V. Lever Brothers applied to those mistakes which prevented a contract from being formed; and that there was a further doctrine of “mistake in equity, which vitiated the contract.
Vitiated contracts were voidable and gave a party adversely affected by the mistake the right to seek rescission. The mistake had to be a fundamental common misapprehension about the facts or the parties’ respective rights.
Also in Abraham V. Chief Oluwa, the odd fellows Faith Lodge, on whose behalf the plaintiff brought this action, bought a piece of land from one Savage in 1917. Savage himself had earlier bought it in 1883 from the holder of a ‘crown grant’ without any deed of conveyance being executed. In 1943, the defendant, who was a judgment creditor of one Oloto wrongly through the property belonged to Oloto and attached it under a write off fifa (fiery fact), and the sale of the land was advertised. The plaintiff put up a caution notice, warning all persons against purchasing the lease which he claimed belonged to the lodge. Furthermore, the plaintiff, fearing that it either had a defective title or no title at all, bid for the property when it was auctioned by d defendant, and bought it for £68.
Consequently, on confirming that its title had all the time been valid, the plaintiff brought an action for the agreement to be set aside and the purchase money refunded to it, on the ground of mistake, it was held that, in the circumstances, the contract was void.
A mutual mistake is a misunderstanding or mistake by both or all parties to a contract, which is not cancelled as a result of superficial mistake but is void if the mistake is with regard to a fundamental or essential part of the agreement i.e. a mistaken assumption, which both parties to a contract make as to the conditions surrounding the contract.
In a mutual mistake, there must be:
1) A mistake.
2) The mistake must be material, meaning it must concern substantive characteristics of the subject of the contract.
3) The mistake was mutual, meaning both parties had the same mistaken belief.
There is a meeting of minds, but the parties are mistaken. Hence the contract is voidable. A mutual mistake will only affect the validity of the contract if the mistake is so fundamental that it nullifies consent. If the mistake goes to the heart of the contract, the contract will be rendered void.
In Raffles V. Wichelhaus, there was an agreement to ship goods on a vessel named peerless, but each party was referring to a different vessel. Therefore, each party had a different understanding that they did not communicate about when the goods would be shipped. In this case, both parties believed there was a meeting of mind, but discovered that they were each mistaken about the other party’s different meaning. This represents not a mutual mistake but a failure of mutual assent. In this situation, no contract has been formed, since mutual understanding is required in the formation stage of contract.
In the case of Scriven Bros V. Hindley, the defendants bid at an auction 42 lots, believing both to be hemp. In fact Lot A was hemp but Lot B was tow, a different commodity in commerce and of very little value. The defendants declined to pay for Lot B and the sellers sued for the price. The defendants’ mistake arose from the fact that both lots contained the same shipping mark ‘sl’, and witnesses stated that in their experience hemp and tow were never landed from the same ship under the same shipping mark. The defendants’ manager had been shown bales of hemp as samples of the SL goods. The auctioneer believed that the bid was made under a mistake as to the value of the tow. Lawrence J. said that as the parties were not ad idem, the plaintiffs could recover only if the defendants were estopped from relying upon what was not admittedly the truth. He held that the defendants were not estopped since the mistake had been caused by or contributed to by the negligence of the plaintiffs.
In Wood V. Scarth (1858), the defendant offered in writing to let the pub to the plaintiff at £63 rental was the only payment under the contract. In fact, the defendant had intended that £500 premium would also be payable and he believed that his clerk had explained that to the plaintiff. The defendant refused to be complete and the plaintiff brought an action for specific performance. The court refused the order of specific performance but the defendant was liable in damages.
From the decided cases, it is evident that the courts have usually upheld the plaintiff’s contention in cases where mutual mistake affects the very essence or character of the subject-matter of the contract.
In Smith v. Hughes (1871), the defendant was shown samples of oats by the plaintiff and he bought them thinking that he was buying old oats (which was what he wanted). They were in fact new oats which were useless for the defendant. It was held that, the contract was valid because, although the parties are at Cross – purpose, they are not in agreement at all for a mistake as to quality by which the thing is indefinite.
Effects of Mistake in Equity
The fact that mistake may not render a contract a nullity does not mean that there is no relief at all, for in all cases of mistake, be it unilateral, common mistake or mutual mistake, equity has somehow intervened in order to reduce hardship.
Equity may help the plaintiff in the following ways:
1) By Rectification. See Oyadiran v. Bagget (1962)
2) By setting aside the agreement. See Sodipo v. Coker.
3) By refusal to grant specific performance.
The fact that one of the parties to a contract acted under a mistake does not, as a general rule, affect the validity of the contract. In other words, a party cannot avoid a contract merely on the ground that he made a mistake in entering into it (unless he has been induced to contract by some positive misrepresentation by the other party).
When the representations of a contract are false or tries to mislead the other party to enter into the contract, this is known as ‘’Misrepresentation’’. When this occurs, the aggrieved party may have a legal remedy. In order to succeed in a claim, the misrepresentation must be proved.
In the legal word, the term “Misrepresentation” refers to a statement someone makes an untrue statement in order to encourage someone else to sign a contract. For example, misrepresentation occurs when a person signs a contract, and then suffers damages as the result of taking the other person’s advice.
Mr. A agrees to a contract with Mr. B the details of the contract state that, if Mr. A subscribes to the magazine for a year, he will receive a gift worth over $100. After signing the contract, Mr. A realizes that the gift is not actually free, but Mr. B has instead incorporated the price of the gift into the contract for the magazine subscription. Had Mr. A known that beforehand, he would never have subscribed. Now, he is out over $100 because he has both an expensive magazine subscription and a “free” gift that he ultimately ended up paying for anyway.
A misrepresentation is a statement made that is untrue or false either by law or fact by one party in order to induce the other party to enter into an agreement or contract. In misrepresentation, mere silence is not a misrepresentation.
Types of Misrepresentation
There are 3 types of misrepresentation.
1) Innocent misrepresentation
2) Fraudulent misrepresentation
3) Negligent misrepresentation.
This is a false statement of material fact at the time of contract signing that the statement was untrue. The remedy in this situation is usually rescission or cancellation of the contract, the representee (i.e., the injured party) has no claim in damages.
In equity, the party misled by misrepresentation can obtain an order for rescission of the contract affected by innocent misrepresentation, but this must be made within a reasonable time or else the plaintiff to equitable right of rescission will be lost. This right may also be lost if the plaintiff affirms the contract. A representation which is true when made but to the knowledge of the party making it, become untrue before the contract is entered into must be corrected. If it is not, the contract can be rescinded.
In With v. O’Flanagon, in negotiating a sale of a medical practice in January, X represented the taking to be at rate of £2,000 a year. In May, when the contract was signed, the takings had, owing to X illness, fallen to £5 a week. It was held that, the contract could be rescinded owing to X’s failure to disclose the fall in the taking.
In an innocent misrepresentation, if found to be valid, the solution is to simply pretend the contract or transaction never happened. If an item is purchased due to innocent misrepresentation, it is simply returned for a refund.
In a fraudulent misrepresentation, a party makes a false claim regarding a contract or transaction but knows it isn’t true or a statement made recklessly not caring whether it is true or false. It is defined by Lord Hershell in Derry v. Peek (1889) as a false statement made
1) Knowing or
2) Without belief in its truth or
3) Recklessly, careless whether it is true or not.
If the person making the representation honestly believes that what he is saying is true, the misrepresentation is not fraudulent.
Peek v. Gurney, the plaintiff brought an action for false statements in a company prospects. It was held that, because the prospect was issued only to mislead the public into being original subscribes of shares of the company, as the plaintiff had bought shares in the market, he could not succeed in his actions as it was not the intention of those responsible for the issue of the prospect to mislead purchaser of shares in the market.
Also in Derry v. Peek, it was held that as the directors honestly believed the statement in the prospectus they were not guilty of fraud. Fir ascertainment of fraud, the best of honest belief is partly subjective, the question is not whether the belief that the statement was true could be reasonably entertained on an objective consideration of its falsity, by the test is whether the person who made the statement believed it to be true in the sense in which he understood it albeit erroneously when it was made.
In Akarhielm v. De Mane (1959), it was held that there was no fraudulent misrepresentation as the defendant honestly believed the statement to be true in the sense in which they made them.
In the case of Abba v. Mandilas and Kalabaris Ltd, it was held that on evidence before the court, there had been no representation at all, and that an official of the defendant company had no personal basis merely helped the plaintiff to find a buyer for her car. There was no promise to sell her another car in a place of her own.
Just like an innocent misrepresentation, a fraudulent misrepresentation is valid if the other party depends upon the false claim in order to decide whether or not to proceed with the transaction.
In this situation, a party makes a false claim in the contract or transaction, but is not aware of its falsehood, but unlike innocent misrepresentation, that party should have taken the initiative to find out before making a statement about the item. It is one made carelessly or without reasonable grounds for believing it to be true.
In Norton v. Ashburton (1914), a mortgage sued his solicitor, alleging that by improper advice, the solicitor had induced him to release part of the security for the mortgage and that the remaining security had become insufficient. He also alleged that the solicitor was fully aware of this fact bud had nevertheless given the advice because he stood to benefit from the action. It was held that although fraud in the sense defined in Derry v. Peek had not been proved against the solicitor, the mortgage was nevertheless entitled to the relief sought, for the solicitor had committed a breach of the duty imposed on him by the relationship in which he stated to the client.
The test of negligence is the objective one of reasonableness. A person of unusual simplicity of mind who makes a statement which he believes to be true but which any reasonable man could not make without investigation of the fact, is liable for negligent misrepresentation.
REMEDIES FOR MISREPRESENTATION
1) Fraudulent misrepresentation: In a fraudulent misrepresentation, the contract will be tendered void. The aggrieved party must:
- a) Sue for rescission
- b) Repudiate the contract and plead fraudulent misrepresentation as a defense.
2) Innocent Misrepresentation: No remedy at common law but in equity, such content is voidable and the aggrieved party may:
- a) Sue for rescission
- b) Repudiate the contract and plead the misrepresentation as defense
3) Negligent Misrepresentation: The aggrieved party in a contract induced by negligent misrepresentation can only bring an action in tort for damages resulting from such misrepresentation.
Limits to Rescission
1) Lapse of time
2) Third party Right
3) Affirmation of the contract
4) Executed Contract
5) Where restitution is impossible.
Duress is pressure exerted upon a person to coerce that person to perform an act they ordinarily would not perform.
Money was taken from Mr. A under a threat to close down his market stall and to seize his goods if he did not pay. These tolls were, in fact, demanded from him with no right in law from Mr. B.
Where one party is pressured to enter into a contract by means of threat it is called ‘’Duress’’. For example, economic duress occurs when one party makes threats to the other party that they will damage their property or cause them financial loss unless that individual agrees to sign a contract. If this sort of duress is found to exist, the contract will be considered void in a court of law. The justification to this rule is that contracts falls in the realm of private law, the basis of which must be the free consent of the parties.
Types of Duress
There are 2 type of duress:
1) Duress at common law
2) Economic Duress.
Duress at Common Law:
Duress in common law doctrine means any actual or threatened violence, imprisonment or restraint of personal liberty of a person, his wife, child, patient or relatives which induces him to enter into a contract against his will.
Duress renders the contracts voidable at the instance of the party who was forced to enter into the contract. But the violence or threats of violence must be to the person on the contracting party. Threat to one’s property will not amount to duress.
But in Friedeberg-seeley v. Class(1957) current law year book, the plaintiff was alone in her flat, there was a knock at the door, the defendants entered and refused to leave, they physically forced her to sign a receipt for jewel case and its contents which they took away. When they had gone, she found on the table a cheque of £90. It was held that, the receipt was obtained by duress, and the transaction was therefore set aside.
Duress makes the contract voidable when there is:
1) Actual or threatened physical violence
2) Threatened criminal proceedings
3) Implied threat of criminal proceedings
4) Wrongly detention or threatened seizure of property.
The doctrine of economic duress was established in the case of PaoOn V. Lau Yiu Long.
InNorth Ocean Shipping Co Ltd V. Hyundai Construction Company Ltd, It was held by Mocatta J, that the action of the defendant constituted economics duress.
This is very similar to duress. It occurs when one party has power over another person and uses it is a means of negotiating a contract. Some of the most common conditions under which this occurs are with the elderly disabled or anyone who is isolated and vulnerable.Undue Influence can be described as the practice of affecting the will of the other person by the use of the relation existing amidst the parties. Further, to employ undue influence one party has to be dominant and the other being weaker, so as to use the position to get an unfair benefit over the other.
Mr. A, an old man suffering through cancer, is induced by Mr. B his doctor, to pay an exorbitant amount for the professional services provided. Mr. A transfers the money to Mr. B’s account.
Undue influence mostly occurs when a more powerful party exerts its influence over a less powerful party in order to achieve its desired outcome. That is when an individual is able to persuade another decision due to elevated status, higher education, or emotional fears. The more powerful individual uses this advantage to coerce the other individual into making decisions that might not be in their long term best interest.
Some relationships, such as one between a patient and a doctor or a parent and a child, are considered to run the risk of undue influence and are legally outlined. The onus in this type of relationship is on the person with influence to prove that he was not using his position to take advantage of the other party. Undue influence is a doctrine of duress as too narrow.
The allegations of undue influence is therefore based on the face that the complaint entered into the contract (or made a gift of property) without free consent, in that the other party exerted an influence over him, which prevented him from exercising an independent judgment in the matter and, for influence to be regarded as undue within the meaning of the rule of law which will be sufficient to vitiate a will, it must be an influence exercised by coercion or fraud. Boyse v. Rossborough.
Undue Influence can be described as the practice of affecting the will of the other person by the use of the relation existing amidst the parties. Further, to employ undue influence one party has to be dominant and the other being weaker, so as to use the position to get an unfair benefit over the others.
Mr. A, a landlord induced Mr. B, his tenant to sell his new motorbike to the former at a price which is less than its market price, to live in the house for the next few months. Due to the influence, Mr. B sold his motorbike to the Mr. A.
Undue influence may arise in cases where there exists a special fiduciary relationship between the contracting parties, and where no special fiduciary. A presumption can be rebutted if the dominant person can show that in fact he exercised no influence for the purpose of obtaining the contract and independent of the will of the plaintiff.
In Taylor v. Brew, the settlor, Mrs. Taylor, inherited a considerable fortune on attaining 21 under the will of her maternal grandmother. Her father who was also her solicitor and for whom she had an intense dislike persuaded to make a settlement of her property by a trust deed. A clause was inserted without the instructions or knowledge of the settler. This clause vested the whole property in the father should the daughter die interstate. It was held that the trust deed was null and void on the ground of undue influence exercised by the father over his deceased daughter.
The case above is similar to the case of Lancashire Loans Ltd v. Black. Here, a daughter married at the age of 18 and thereupon left her parental home and lived with her husband. Her mother was very extravagant and frequently borrowed money from lenders. When the daughter came of age she, at her mother is request, raised £2,000 on her father’s will in order to pay off her mother’s debts to money lenders. The mother continued to borrow money from money lenders, and a year later she asked her daughter to sign a document so that she (her mother) might be able to borrow some more money, the mother and daughter signed a joint and promissory note. The daughter, who did not understand the transaction, signed the document at the request of her mother. The only advice the daughter received that of a solicitor who also prepared the document.
Undue Influence can be described as the practice of affecting the will of the other person by the use of the relation existing amidst the parties. Further, to employ undue influence one party has to be dominant and the other being weaker, so as to use the position to get an unfair benefit over the other.
Mr. A, the lawyer of Mr. B induces him to transfer his agricultural land, so as to save him from imprisonment from the fraud case charged on him. Accordingly, Mr. B transfers his land.
In an action by the money lenders on the promissory note against both the mother and the daughter, it was held that, the daughter was under the influence of her mother when she entered into the transaction in question, and also that she had no independent advice and that as the money lenders had notice of the facts which constituted undue influence on the part of the mother, they were in no better position than the mother. The transaction was therefore void so far as the daughter was concerned.
Where there is no special fiduciary relationship between the parties, yet the court may hold that the circumstances were such that one of the parties to the contract exerted undue influence over the other party to the contract. The term undue influence is regarded as any conduct on the part of one of the parties which affects the contract between them and makes it unconscionable to allow the parties to be bound by the contract concluded under such circumstances, Williams v. Bayley.
The term ‘’illegality’’ is used in a wide, vague and imprecise manner in relation to contracts. It embraces simply illegal and void contracts, contracts rendered illegal by statute and those contracts which are rendered illegal and void under the common law. A court of law will not enforce an illegal contract, even though all the elements required for the formation of a valid contract are present.
The main reason for this is that it is not the policy of the law to aid citizens in carrying out unlawful agreements. In general, the law is inclined to enforce an illegal contract. However, the doctrine of illegality is notoriously complex, and what constitutes an illegal contract goes beyond agreements that have been banned by Statute, or agreements to commit an offence.
In the case of Ting Siao May v. Boon Lay Choo, the Singapore court of appeal set out a series of guidelines to determine exactly when a contract is unenforceable for illegality. The court held that in the case, the option was not enforceable as it was a contract entered into with the object of committing an illegal act. Although, the option in itself was not prohibited, there was an unlawful mention behind the option thus rendering the contract itself unlawful.
Classification of Illegality
1) Contract rendered illegal at common law
2) Contract rendered illegal by statute
3) Contract rendered void at common law.
Contract rendered illegal at common law:
Depends on whether the contract in question is prohibited by any heads of public policy. A straight forward example is that the contract to:
a.)Commit a crime, tort or fraud would be unenforceable at common law: a contract between two or more persons to murder or assault another person, or rape a woman or to commit any other crime is illegal. The breach of such agreement cannot be the subject- matter of an action in a court of law.
An agreement to take shares in a company in order, fraudulently, to induce the public to believe that there is a market for the shares as an indictable conspiracy and is illegal.
In Scott v. Brown, an agreement by the prosecutors of a newspaper to indemnity the printers against claims arising out of labels published in the newspaper is void.
In Clay v. Yates, a debtor made a composition with his creditors to pay 6s- 8d for every poundowed. He then entered into a separate agreement with the plaintiff, one of the creditors, to pay him a part of his debt is in full. This agreement was declared void as a fraud on all other creditors.
- b) Contract affecting the freedom of a marriage: contract within this category are normally treated as merely void not illegal. However, we are classifying such contracts here under illegal contract because such contract if actually performed would result in the commission of a crime. For example where a person who is already married, makes a promise to marry another woman on the death of his wife, it is against public policy if the woman knew that the man was married at all material times, Spires v. Hunt.
In Shawn v. Shawn, an agreement to make provision for a wife so long she lives apart will be void as it encourages separation and immorality. Contract which restrains the freedom of marriage is Prima Facie void. This is aimed at maintaining the sanctity of marriage.
Thus, a contract whereby a person promises to marry no other person than a particular man or woman, as the case may be is void. If an already married man concludes a statutory marriage with another woman, he will be guilty of bigamy under Section 370 of the Nigerian Criminal Code and liable on conviction to a maximum of 7 years imprisonment. Where a man is already married under customary law, concludes a statutory marriage with another woman or if already married under the statute married another woman under customary law, he will be guilty of an offence under the Marriage Act, and is punishable on conviction by imprisonment for 5 years.
- c) Contract injurious to a friendly state or detrimental of state: in the interest of a good relationship between states, an agreement which contemplates hostile action against a friendly state which involves doing an act which is illegal under the law of a friendly state is illegal. Any contract which is hostile or injurious to another country that is friendly with Nigeria is unlawful and unenforceable. Hostile activities may include things done to cause a breach of laws of a foreign and friendly country or actions done to bring about anarchy in a friendly state.
In Regazzoni v K. C Sethia, a contract was concluded for the export of Indian just to Italy with a view to re- export it to South Africa. Indian law prohibited any trade between India and South Africa, including exports from India to South Africa. The House of Lords refused to order the enforcement of the contract because it was contrary to the laws of a friendly country India prohibiting the export of Indian goods to South Africa.
In Foster v. Driscoll, it was held that the partnership agreement was illegal in English law; consequently, the court refused to enforce the contract for it was in violation of the laws of a friendly state.
- d) Contract prejudice to the administration of justice: Any which tends to prevent the cause of justice is illegal. A contract not to execute or to compromise in a criminal proceeding is illegal as well as that in civil cases. Such a contract intended to stifle prosecution is contrary to public policy and thus illegal.
McGregor V. McGregor, a separation agreement between husband and wife who had earlier brought cross summons against each other for assault. It was held valid in spite of the fact part of the term of the agreement required that the parties should withdraw the suits for assault. An agreement between a prisoner and a person who has stood bail for him to indemnify him against the bail is void, as tending to defeat the object for which bail was granted.
- e) Contract to defraud the revenue: Any contract deliberately entered into by parties with the intention of depriving the state of revenue it is lawfully entitled to, is contrary to public policy and therefore illegal and void.
In Napier v. National Business Ltd, it was held that the contract was to evade tax and Illegal, and since it was impossible to server the part dealing with salary from the dealing with expenses, the whole was enforceable.
In Miller v. Karlinski, under the terms of a contract of employment, it was agreed that the employees’ salaries should include not only the repayment of expenses, but also an amount under the same head of expenses, equivalent to the amount of income tax due in respect of his salary. This meant that for the extra amount, no income tax would be computed and the state would thus loss the amount it would normally be entitled to, as income tax. In an action brought by the employee to recover 10 weeks arrears of salary, and expenses, the tax evasion device was revealed. It was held, that the contract was illegal for being a fraud on the revenue. Therefore no action lay to recover even the arrears of salary, since the contract for the payment of salary was part and parcel of the illegal mode of remuneration of the employee under the contract of employment.
Contract Rendered Illegal by Statute:
Some contacts which are prohibited under the express or implied provisions of statutes and declared to be lawful or void in the sense that they are illegal. Contracts illegal by statute can be discussed under the following heading:
- a) Express prohibition of some specific type of contract
- b) Regulation of a particular trade, profession, etc.
- c) Protection of a class of person, public or promotion of an object or public policy
- d) The raising of revenue
Express prohibition of some specific type of contract: where statute expressly prohibits or bans the making of certain types of contracts such contract subsequently make it illegal and void.
In Chief A.N Onyuike V.G.F. Okoke suite, the plaintiff brought a claim of £1,650 being the value of 110 tons of palm oil sold and delivered to the defendant in the Republic of Biafra sometimes in 1969. It was admitted by both parties that the transaction was in Biafra currency. The defendant argued that the contract was illegal, because of the currency in which it was expressed. The Supreme Court held that the contract was illegal, for it had contravened the provisions of Act No 48 1969, which made it an offence to possess or claim the BiafraCurrency.
Also, in Alhaji Rabiu Busari v. Olabisi Williams, the defendant who was the recipient of a hackney carriage license issued by the Lagos City Council hired it to the plaintiff for the operation of the plaintiff’s taxi for £600. This was in breach of the city council’s bye- laws which prohibited transfer of carriage license. When as a result of dispute between the parties, the defendant seized the license from the plaintiff; the latter brought an action to recover his £600. It was held that the court would no lend itself in any way to assist a person who has taken part in an illegal transaction there the action failed.
Regulation of a particular trade, or profession, or the dealings:
This includes regulations governing the practice of a profession such as law, medicine, pharmacy etc. An illustration of this can be seen under Section 21 of the Land Use Act 1978, which prohibits holders of any customary right of occupancy of land to alienate it by assignment, merger, transfer of profession, sub lease without the consent of the government of the state or in some cases l, without the consent of the relevant local government council.
Protection of a class or the public, or the promotion of an object of public policy:
Where a statue is enacted specifically for the protection of a class of citizens or the public generally, any contract that is entered into in the breach of such statute would be illegal and void. In the case of Oseofo V. Uwania, the defendant who owed the plaintiff a small sum of money refused bluntly to pay, relying on the Illiterate protection Act. He claimed that he was an Illiterate person and that since the receipt recording the loan transaction did not hear the name and address of the writer (the plaintiff), the defendant was not bound by the contract of the receipt. The court stated that the object of the Act was to protect an Illiterate person from possible fraud, and dismissed the action for the plaintiffs’ non-compliance with the statute.
Contracts rendered void at common law:
There are contracts that are regarded as merely void at common law, on the ground of public policy:
- a) Contracts to oust the jurisdiction of the courts. See Bennet v. Bennet.
- b) Contracts involving sexual immorality. See Uphill v. Wright.
- c) Contracts in restraint of trade. See the case of Foster and Sons Ltd v. Suggett.
Contracts rendered void by statue:
A contract may be void, although not illegal. The best example of this is what is known as wagering contract. A wagering contract has been defined by Hawkins J in Carlill v. Carbolic smoke ball Co.
It must however be noted that although the 1845 Act rendered wagering contracts null and void. The Act did not affect the rights of a Staker to recover from the stakeholder his deposit before it is actually headed over to the winner. If the stakeholder neglects such request and hands over the winning to the other party, the loser can successfully sue the stakeholder to recover his deposit. Thus in Diggle v. Hill, it was held that the he could recover as the money had not at the time of the request been paid over to the winner.
A contract cannot confer enforceable rights or impose obligations arising under it or any person, except parties to it. Thus, only parties to a contract can sue on it. It also follows that only those who have furnished consideration towards the formation of the contract can bring an action to it.
The Doctrine of Privity of Contract is to the effect that a contract cannot confer enforceable rights or impose obligations under it on any person except parties to it. The doctrine of privity of Contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract.
Mr. J enters into a purchase contract for a rental property in which Mrs. A is already living with a one-year lease. As part of the purchase agreement, Mr. J assumes the existing lease. The home’s air conditioning unit is not working properly at the time of the purchase, and the seller, Mr. M, agrees in the contract to have the unit repaired or replaced. Two months later, Mr. J is collecting lease payments from Mrs. A, but nobody has shown up to take care of the air conditioner. When Mrs. A calls Mr. J, he tells her that it is Mr. M’s responsibility.
If Mrs. A were to file a civil lawsuit against Mr. M, asking the judge to order him to repair or replace the air conditioning unit as he had agreed, her case would likely be dismissed. This is because Mr. M has no contract with Mrs. A, meaning there is no privity between Mr. M and Mr. J and therefore Mrs. A cannot sue him for performance of his obligations under the property sale contract.
In Driver v. William Wilet Contractors limited, in this case, a safety consultant employed by X was held to owe a duty of care to X’s servant. The doctrine of privity of contract in common law can be summarized as follows:
- a) A person cannot enforce right under a contract to which he is not a party.
- b) A person who is not a party to a contract cannot have contractual liabilities imposed on him.
- c) Contractual remedies are designed to compensate parties to a contract, not third party.
However, it should be noted that this doctrine is closed in some circumstances; there are cases where judgment was given in favor of the third party. For example, see the case of Dutton v. Poole.
The doctrine of privity of contract is a common law principle which provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract.
Mrs. A however, sues her landlord, Mr. J to force him to perform his obligations under their lease contract. If Mr. J wants to enforce his contract with Mr. M, he must sue Mr. M himself.
In Tweddle v. Atkinson, the plaintiff’s Father was promised a sum by the defendant if the plaintiff married his daughter. He did but the defendant refused to pay the sum to the plaintiff’s Father. The plaintiff sued, the House of Lords held he could not enforce the promise because he was not a party to the contract. However, in as much as the nature and operation of the doctrine recognizes that performance by a 3rd party may discharge one of the contracting parties from his obligation on his behalf.
However, the case of Price v. Easton illustrates its point Easton promised A that if he worked for him, he would help him to discharge his debt to price. Price action to get Easton to fulfill his promise failed, the reason being that he was a stranger to the contract.
In the case of Dunlop v. Selfridge, in the case, the plaintiffs sold tyres to the certain dealer on the understanding that he would not resell below a certain price and that in the event of a sale to customers the dealer would extract the same promise from him. The dealer sold tyres to Selfridge who agreed to observe the restrictions and pay Dunlop 5 pounds for each Tyre. They sold below the restricted price to a customer and Dunlop brought this action to enforce the promise to pay 5pounds per Tyre, for the breach. It was held that while Selfridge had committed a breach of contract and had furnished no consideration for the defendants promise.
The same principle was applied by the court of appeal in Union Bank of Nigeria Place v. Sparkling Breweries Ltd &Ors. The court of appeal held that, the respondent has no Locus Standi to institute the action because the appellant was not involved in the arrangements between the respondent and four other companies and was not a party to it. It could therefore not be sued by the respondent. In other words, there was no privity of contract between the respondent and the appellant.
It should be noted that since a person who was not a party to a contract cannot bring an action to enforce it, only the parties to a contract can enforce it or have it enforced against them.
In Ilesa Local Manning Authority v. Olayode, the action was declared invalid by the court of appeal. Although the respondent was party to the contract of employment, the other party to it was the government of Oyo state and not the appellant authority. A contract cannot be enforced by a person who is not a party even though if the contract is made for his benefit and purports to give him a right to sue upon it.
The two fundamental principle of Privity are:
- a) No one except a party to a contract can acquire rights under it
- b) No one can be subjected to liability under the contract to which he is not privy.
Exceptions to the Privity Rule
1) Trust: If a contract is made between the trustee of a trust and another party, then the beneficiary of the trust can sue by enforcing his right under the trust, even if he is a stranger to the contract. In some circumstances, an agreement between a trustee and another party may affect the owner.
In Tomlinson v. Gill, the defendant promised a will to her late husband’s debts. The court held that the widow was a trustee of the promise for the husband’s creditors who could enforce the promise against the defendant.
The effects of trust in favor of a third party are:
- a) The third party can sue a promisor to enforce the contract. However, he must join the promise as a party to the action.
- b) The third party is beneficially entitled to any money paid or payable under the contract. The promise has no right to such money.
2) Contract through an Agent: An agent may enter a contract with another party on behalf of a principal in this case; the principle may not be able to be released on grounds of the party principle because he was represented in the contract. A legal agency is an individual which the law recognized as being capable of creating a contract which is binding on a principal and the third party with whom the agent his dealt. A true agent must follow his principal’s instructions strictly to avoid conflict of interest.
3) Assignment or transfer of contractual rights and obligations to a third party: If a contract is made for the benefit of a person, then he can she sue upon the contract even though he is not a party to the agreement. It is important to note here that nominees of a life insurance policy do not have this right.
4) Negligence: In the case of personal injury resulting from negligence, the negligent party may generally be sued by third parties who are not parties to any Contract with the negligent party.
5) Restrictive Agreement: In some cases, a restrictive agreement may be enforceable against a third party. This may be the case when the owners of a house sell to another person with understanding that the buyer would not change the design of the house. If the buyer sells the house to a third party and some requirements are met, the third party may be obligated to follow the original owner’s condition.
6) Collateral contracts and sale of defective goods: A third party may sue the seller over defective goods if the third party is affected by the flaws in the goods.
7) Covenant running with the land: When a person purchases a piece of land with the notice that the owner of the land will be bound by all duties and liabilities affecting the land, then he can sue upon a contract between the previous land owner and a settler even if he was not a party to the contract.
In the case of Talk v. Moxhay, the plaintiff owned several plots of land, sold the garden in the centre to one Elms who agreed not to build upon it, but to preserve it in its existing condition. After a member of conveyance, the garden was sold to the defendant, Moxhay, who though knew of the restriction imposed in the use of the land, proposed buildings and it was granted on the ground of defendant’s awareness of the existence of the restrictive consents. The rule in this case has been further developed in restrictive covenant.
In Formby v. Barker, the Court of Appeal held that only a bee ship was prohibited and all the ships for a person to enforce the benefit of covenant was made or the covenant runs with the land.
A contract is an enforceable promise when it is fulfilled, and then the contract terms have been satisfied. This means that the parties are discharged from the contract, because they already fulfilled their legal duties under it, that is, they have satisfactorily performed the obligations under the contract.
Mr. A agrees to sell his cycle to Mr. B for an amount of #2000 to be paid by Mr. B on the delivery of the cycle. As soon as it is delivered, Mr. B pays the promised amount. Since both the parties to the contract fulfill their obligation arising under the contract, then it is discharged by performance.
There are different ways to discharge a contract:
1) Discharge by performance:
Performance simply means undertaking the legal duties imposed on us by the terms of contract when both parties fully perform their obligation under the contract will discharge the contract when a party fails to perform under the terms of the contract without a legally justifiable reason; the party is said to be in breach of the contract. The agreement may also provide that one of the parties can claim only after the work has received certain level of performance. In these cases, performance of the contract by one party is dependent on the performance by the other party.
In Oroyinyon v. Raman, the court said, where a party to a contract undertakes to do an act, the performance of which depends entirely on him and the contract is unclear or silent as to the time of performance, the law implies an obligation to perform the act within a reasonable time having regard to all circumstances of the case.
Discharge by Performance can be divided into 2:
- a) Substantial performance
- b) Partial performance.
In all contractual obligations, the parties envisaged some level of performance before they can be discharged from liability under the contract. The court had established the rule that the entire performance of a contract was a condition precedent to payment. The rule is established with qualifications that if the contract has substantially performed under the terms of the contract. A minor breach is when the party has substantially performed but has not strictly performed.
When the promises in contract have been fulfilled based on an appropriate standard, substantial performance, strict performance, or personal satisfaction; the parties are discharged. However, when a material breach occurs, the injured party may bring a claim for damages. The innocent party will sue for an action for damages for what he has sustained.
Thus, in Darkin & Co Ltd v. Lee, the plaintiffs contracted to execute certain repairs on the defendant’s premises, they carried out a substantial part but failed to perform it exactly in these respect. The referee appointed held that the plaintiffs were not entitled to recover any part of the contract price. On appeal, the court decision was set aside holding that the contract had been substantially performed despite the fact that the work was badly done in a minor respect did not mean that the contract had not been performed. He was entitled to recover the price minus a reduction from a defective work.
In another decision the court held that in a contract for work and labor for a lump sum payable on completion, the employer cannot repudiate liability on the ground that when substantially reformed is in some respect not in accordance with the contract.
In Hoeing v. Isaacs, the court of appeal affirmed the decision of the trial court. The doctrine of substantial performance is merely a qualification and not an exception to the basic rule that where a contractor fails to meet the standard of Substantial performance, he will not be entitled to claim for what he had done.
A party to a contract to a contract can ask for a discharge where he has partially performed his own part of the contract. The basic rule is that where a party contracts to do an entire work for a specific sum of money, unless he has performed the whole of the contract, he is not entitled to claim any remuneration. The performance must be precise and complete before any claim can be made.
In Cutter v. Powell, the defendant agreed to pay 30quries to cutter provided he proceeds and continue and does his duties as a mate in sailing the ship from Jamaica until it arrived at Liverpool. The ship arrived at Liverpool on the 20th September. His wife claimed payment in quantum meruit. The action failed.
In Sumpter v. Hedges, the plaintiff contracted to build two houses and a stable for a lump sum. The plaintiff completed about 35 and then informed the defendant that he had no money to continue. The defendant completed the building himself using certain materials left in the site by the plaintiff. In an action, the court award damages for the value of materials but dismissed the claim for quantum meruit. On appeal, the court dismissed the claim and held that where there is a contract for a long sum, the price of it cannot be recovered until the work is completed.
Acceptance of Partial Performance:
Acceptance of partial performance is a statutory recognized under the sales of goods edicts. It provides where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them but if the buyer accepts the goods so delivered, he must pay for them at the contract rate.
In Omoleye v. Okeowo, the plaintiff agreed to supply 6000yards of textile material to the defendant at the rate of 4 per yard. The defendant deposited £2500 for the purpose; the plaintiff was unable to obtain the stipulated material unilaterally supplied 2910 yards of a different and more expensive material at 50s per yard. The defendant was entitled to reject, but he took delivery of the substituted material and in fact resold it. The court held that the plaintiff was entitled to payment for the material accepted by the defendant at the rate of 4s per yard, the price stipulated in a written contract.
Time of Performance:
In a contractual agreement, time must be fixed for the performance by a party to the contract. The party affected can repudiate the contract and claim damages where the other party failed to perform within a reasonable time. In equity, where a date is fixed, the court will look at the intention of the parties and hold that the contract is not broken if the party concerned performs outside the time stipulated but within a reasonable time.
Mr. A takes a loan from Mr. B and agrees to pay installments every month for the next five years. However, he does not pay even a single installment. Mr. B calls him a few times but then gets busy and takes no action. Three years later, he approaches the court to help him recover his money. However, the court rejects his suit since he has crossed the time-limit of three years to recover his debts.
In Union Eagle Ltd v. Golden Achievement Ltd, the court held that in the absence of conduct amounting to a waiver or estoppels, the court would not intervene to provide equitable remedy such as specific performance in cases of rescission of an ordinary contract of sale of land for failure to comply with an essential condition as to time.
In Dawodu v. Anderson, the defendant contracted to deliver fish which should be shipped August/ September from Norway by a third party, the non-delivery of the fish by December did not constitute a breach of the contract is that time of delivery was not specified in that contract.
Place of Performance:
If the place of performance is specified in an account, it must be strictly complied with unless strict compliance is waivered. In Nasser v. Smith, the defendant agreed to deliver certain goods to the plaintiff CIF Lagos. The court held that the delivery place of performance was to Port of shipment and not Port if delivery. In a contract, where no place of performance is specified either expressly or by implication, and the act is one which requires the presence of both parties for implementation, the general rule is that the promisor must seek out the principle and perform the contract wherever he happens to be found. This rule also implies to Contract for the payment of money.
Tender of Performance:
In a contract between two persons, one party cannot perform his own part without the co-operation of the other party. Where the other party rejects an offer by one party, it will discharge the offer forms liabilities under the contract. This is often the case in a sale of goods where the seller satisfies the requirements as to delivering the purchaser, nevertheless refuses to accept the goods; such tender of performance discharges the seller. The seller can sue the other party for damages for breach of contract.
When the promisor offers to perform his obligation under the contract, but is unable to do so because the promisee did not accept the performance, it is called “attempted performance” or “tender.” Thus “tender” is not actual performance but is only an “offer to perform” the obligation under the contract. A valid tender of performance is equivalent to performance.
Essentials of a valid tender:
A valid tender or offer of performance must fulfill the following conditions.
- It must be unconditional: A conditional tender is no tender. For example, A, who is a debtor of company B, offers to pay if shares are allotted to him at par. It is no tender.
- It must be made at proper time and place: A tender before or after the due date or at a place other than agreed upon is not a valid tender. For example, A is a tenant of B. He offers him rent at a marriage party. B is not bound to accept as the tender is not made at a proper place.
- 3. It must be of the whole obligation contracted for and not only of the part: Thus deciding of his own to pay in installments and offering the first installment was held an invalid tender as it was not of the whole amount due (Behari Lai vs. Ram Gulam).
- If the tender relates to delivery of goods: It must give a reasonable opportunity to the promisee for inspection of goods so that he may be sure that the goods tendered are of contract description.
- It must be made by a person who is in a position and is willing to perform the promise: A tender by a minor or idiot is not a valid tender.
- It must be made to the proper person, i.e., the promisee or his duly authorized agent: Tender made to a stranger is invalid.
In Startup v. MacDonald M&G, the plaintiff agreed to sell and deliver certain quantity of oil to the defendant within 14days of March. The plaintiffs tendered delivery but was refused by defendant on the ground of lateness. The court held that it was a valid tender and the act of the plaintiff was equivalent to performance.
Performance by Payment:
The performance of contract may not relate to goods but to payment of money. It is the duty of the debtor to seek the creditor and pay him the debt when it is due. If the creditor refuses to accept the money, the debtor may make no further tender. The debtor can pay the money to the court since the obligation to pay still remains. In performance by payment, it must be in legal currency or legal tender usually in Naira or Kobo. The debtor must tender the full amount on the payment of lesser sum will be a good tender.
When a contract is formed by agreement, it may also be discharged or terminated through agreement subject to the conditions of the contract. The agreement to extinguish or terminated the contract itself becomes a binding contract if supported by consideration or made by seal.
Mr. A owes # 100,000 to Mr. B and agrees to repay it within one year. They document the debt under a contract. Subsequently, he loses his job and requests Mr. B to accept # 75,000 as a final settlement of the loan. Mr. B agrees and they make a contract to that effect. This discharges the original contract due to mutual consent.
A contract can be discharged in precisely the same way as it was formed for there is nothing whatsoever preventing the parties from calling off the contract by mutual agreement if they so wishes but it could be seen that a consideration is necessary for such an agreement where neither of the parties had performed its obligation, each parties simply agrees to forgo their right under the contract.
A owes money to B under a contract. It is agreed between A, B and C, that B shall henceforth accept C as his debtor, instead of A. The old debt of A to B is at the end, and a new debt from C to B has been contracted. If A is a debtor and the creditor agrees to accept B in his place as the debtor, the original contract between the creditor and A is at the end.
Mr. A enters into a contract with Mr. B to marry his sister Olivia within one year. However, Mr. A meets with an accident and becomes insane. The impossibility of performance leads to a discharge of the contract.
Discharge of a contract can be by:
- a) Rescission
- b) Variation
- c) Waiver
- d) Accord and satisfaction.
Where both parties still have some obligations under the contract to perform and the old Contract is rescinded and is replaced by a new one, the old one will not revolve only for the reason that has been a failure to keep the new promise. The parties may however, by mutual consent, restore the original and then the original will revise and become binding on the parties.
A made a promise to deliver certain goods to B on a certain date. Before the date of performance, A and B mutually agree that the contract will not be performed. The contract stands discharged by rescission.
There may also be an implied rescission of a contract, e.g., where there is non-performance of a contract by both the parties for a long period, without complaint, it amounts to an implied rescission. Notice that in the case of rescission, the existing contract is cancelled by mutual consent without substituting a new contract in its place
The case of Tsokwa Oil Marketing Co v. Boon Ltd, captured the ways of discharging a contract. Recession may be considered under the following:
- i) Executory Contract: Where both parties have not completed their part of the contract or where they have some obligation to perform under the contract, such contract can be rescinded by mutual agreements.
- ii) Contract under seal: In contract under seal such contract can be rescinded under the common law by another contract under seal i.e. The Judicature Act.
However, in equity, a contract under seal can be rescinded by simple oral or written. Thus in Berry v. Berry, it was held that the simple contract validly varied. The obligation of the parties under the original contract is under seal.
iii) Contract evidenced in writing: A contract is required to be evidenced in writing; such contract can be rescinded by oral or written agreement.
The principle was illustrated in UAC v. John Agro, the defendant was employed on a written agreement as to store keeper and undertook not to sell goods on credit and to take personal responsibility for any debit or losses incurred where he is in breach of his undertaking, contrary to the agreement, the defendant sold goods on credit to customers and this resulted in a loss. The plaintiff sued and it was held that the written agreement had been validly rescinded by oral agreement and that the defendant was therefore liable to make good loss.
A contract can be varied at any time before it is completely performed. However a contract in writing, where a contract is by law required to be in writing, where a contract is by law required to be in writing, it cannot be rescinded by an oral agreement. Any variation must be by an agreement in writing. This principle is illustrated with land cases.
Thus, in Goos v. Nugen, the court held that the contract was required to be in writing or evidenced in writing, an oral variation was therefore not permissible. The defendant succeeded on the ground that a good title had not been made.
The difference between recession and variation was clearly distinguished in Morris v. Baron and Co. The court may consider when making a decision whether it is variation from parties or from their words and conduct. In the interest of commercial relationship the court may not be bothered to distinguishing between variation/rescission. The relevant point on variation of contract is that the new terms of the agreement in relation to urgency of the payment of the debt, the amount to be paid and mode of payment amount to variation of contract of the original agreement between the parties. The court stated a variation of contract involves a definite alteration or contractual obligations by the mutual agreement of both parties. A mutual abandonment of the existing rights of the parties under the agreement between them is district from forbearance to sue is a sufficient consideration to support a variation of the original agreement. The new terms in relation to the currency of payment, amount and mode of payment is variation.
Waiver involves a promise not to insist on the mode of performance fixed by the contract, rather than substances of the contract. A waiver occurs when a party to the contract voluntarily accepts to forgo some of his right under the contract on the request of the party. In real fact, waiver involves renunciation, abandonment or surrender of some claim, privileges or of the opportunity to the advantage of some defect irregularity or wrong. Waiver can be by contract or deed and also by decision. Waiver by deed or contract happens where a gathering explicitly consents to surrender their lawful rights. Such understanding will give the original prerequisites of an agreement have been met
Waiver by the decision applies where a rupture of the agreement has happened and the honest party has a decision between two elective rights or cares. Waiver by race, as a rule , happen where the agreement contains an express right or alternative to end or repeat it in specific circumstances, or where one gathering submits a genuine rupture which give the blameless party the privilege to end the agreement right away.
Waiving one’s right need not always be expressed. In the words of Lord Denning:
“The principle of waiver also applies if one party by conduct, leads
another to believe that strict rights arising under the contract will
not be invited upon”.
In Navarro v. Edosomiwe, the judge said a waiver must be and intent and act with knowledge and for it to discharge a contract, it is important that the following condition must be present:
1) A distinct act
2) That act must be intentional
There is little difference between a waiver and promissory estoppels. A waiver may be oral written or waiver inferred from conduct. Waiver may be in form of variation. It is however called a waiver when the court is willing to give effect to the intention of the parties.
To discharge a contract, the nature of waiver must go beyond the level of suspension. It must completely abrogate the right of the promisor.
Thus Navarro v. Edosomiwa, the court held that he did not abandon his legal right. Experts observed that the question of waiver could not have been considered and the plaintiff could revert to the original contractual stipulation when the defendant failed to carry out the work within the extra period, since the plaintiff gave him materials to work on and paid part of his money. My view also is that the question of waiver should not have been entertained by the court. It is a typical Nigeria situation as regarding it as a waiver will give a person in breach of contract and excuse. As it was rightly said by an English judge, that it will be most reasonable, if having been lenient and having waived the initial expressed time, he should be prevented from ever insisting on reasonably quick delivery.
Accord and Satisfaction;
Accord refers to an agreement, where by a person after there has been a breach of the contract agrees to accept some valuable consideration in lieu of the right of action that he has against the other party.
Satisfaction refers to a discharge of the obligation formed under the new agreement after the breach has occurred.
Discharge of contract by accord and satisfaction has the discharge of the original contract by reason of performance of the new substituted obligations.
The liability arising out of breach of contract can be discharged by Accord and Satisfaction.
In Shell Petroleum Dev. Company Ltd v. FBR Ltd, Ogbobine J, described accord and satisfaction as:
“The purchase of a release from the obligation whether arising under
Contract or tort by means of any valuable consideration not being
the actual performance of the obligation itself”.
The accord is the agreement by which the obligation is discharged. The satisfaction is the consideration which the obligation is discharged. The satisfaction is the consideration which makes the agreement operational.
In a contractual obligation, where a party fails to perform his own part of the agreement, he can get a valid release if he furnishes some consideration which must be acceptable by the other party.
The common form of accord and satisfaction is the form of a compromise. Once a compromise is reached, the parties’ abandon their original positions and they can claim within the compromise arrived at as accord and satisfaction. There must be an agreement.
In CBN v. Beckoti Constr. Ltd. It was held that where there is valid compromise agreement, the rights and obligations of the parties are sought to be enforced to the new contractual relationship created by the compromise agreement.
In DC Builders Ltd v. Rees, there can be no true accord and satisfaction strictly so called. Where a party merely accepts the payment of a smaller sum in discharge of a larger liquidated sum, this cannot constitute accord and satisfaction. There is an accord but not satisfaction and such a situation can only give the promisor the right to sue on promissory estoppels.
In Graham V. Gilles Ltd V. West African Automobile &Eng Ltd, The court considered the legal effect of the phrase whether it could be regarded as extinguishing the plaintiff’s right to maintain an action for the because. The court held that the receipt by the plaintiffs of the lesser sum did not operate to extinguish the larger and original debt.
Agoro J, Further stated if accord is a question of agreement, there must be either to minds agreeing or one of the two person acting in such a way as to induce to the other two think that the money taken in satisfaction of the claim and causes him to act upon it.
In Ferguson v. Davis, the court held that acceptance by a plaintiff from a defendant of a lesser sum that the amount claimed did not constitute accord and satisfaction so as to compromise the action between them unless the plaintiff received some additional benefit by the way of consideration.
No matter what were the respective rights of the parties under the original agreement, they are abandoned in consideration of the acceptance of a new agreement. The consequence is that when such an accord and satisfaction takes place, the prior rights of the parties are extinguished. They have in fact been extinguished by the new rights.
If a party to a contract fails to perform his obligation according to the time and place specified, then he is said to have committed a breach of contract.
Also, if a party repudiates a contract before the agreed time of performance of contract, then he is said to have committed an anticipatory breach of contract.
Discharge by breach can take two forms:
- a) Actual breach which is when the promisee retains his right of action for damages and
- b) An anticipatory breach of contract, the promisee cannot file a suit for damages. It also discharges the promisor from performing his part of the contract.
Breach occurs where one party to a contract fails to perform its contractual obligation or the performance is defective. A breach of contract does not perse bring a contract to an end. The breach may give to the aggrieved party the right to terminate the contract but it is for the non-breaching side to decide whether or not to exercise that option. The aggrieved party has the right to terminate the contract but it is for the non-breaching side to decide whether or not to exercise that option. The aggrieved party has a right of election; that is to say, it can either choose to affirm the contract or to terminate it. However, once that decision has been taken, it is in principle, irrevocable.
A breach can be anticipatory or actual.
Anticipatory Breach of repudiation:
This occurs when one party states that before the arrival of the date fixed for performance, without justification that it cannot or will not carry out the material part of the contractual obligations on the agreed date or that it intends to perform in a way that is inconsistent with the terms of the contract. This may also occur where one party by some action makes performance impossible.
(a) A agrees to employ 5 as a clerk, the service to commence from 1st June. On the 20th of May he informs B that his services will not be required. B is exonerated from his obligation under the contract and may at once sue A for damages for breach of contract without waiting until the time fixed for performance (Mersey Steel & Iron Co. vs. Naylor).
(b) A agrees to sell his house to B for Rs 8,50,000 on 1st of March. But on 10th February he changes his mind and writes to B that he will not be selling his house. There is an anticipatory breach of contract.
Two courses are open to B (i) he may treat the contract as rescinded and at once sue A for damages, or (ii) he may wait till 1st of March. B adopts the second course.
On 28th February the house is destroyed by fire. The contract stands discharged by supervening impossibility. A is entitled to take advantage of this supervening impossibility and B cannot recover any damages from him.
If the house did not catch fire, A could have taken back his letter of repudiation and asked B to take possession of the house on payment as per agreement.
In Nepal v. Isieverore (1997), the court stated that an unacceptable repudiation of a contract is of no value to anybody, it confers no legal right of any kind. This is because repudiation by one party standing alone does terminate the contract. It takes two to end it by repudiation of the one side and acceptance of the repudiation on the other. Further, the court stated where there is a unilateral repudiation of a contract; it is treated as an offer by the guilty party to the innocent party which acts as a discharge of contract.
Repudiation may be expressed or implied or it may be words or by conduct. In the Nigeria Supplies Manufacturing Broadcasting Corporation, a company leased certain property to the defendant for a term of 5years at rent of #26,000 with an option to renew for a further of 5 yrs which was to be exercised by notice in writing 2yrs before the determination of the original term. The director general of the corporation wrote that the board had refused to ratify the exercise of the option to renew and purported to withdraw the exercise of the option. The plaintiff issued right claiming a declaration that the option to renew had been validly exercised. On an appeal, the Supreme Court held that the action of the defendants by their letter was an attempted repudiation or renunciation of the contract which could be treated as an anticipatory breach of contract or on the other hand, the plaintiff could have waited till the date of performance was passed and then sued. Repudiation may be as a result of reasonable inference that the defendant no longer intends to perform is part of the contract. The plaintiff is entitled to treat the contract as discharged.
In Federal Commerce Navigation Co Ltd v. Molena Alpha Inc, the court held that the plaintiff was entitled to sue for breach of contract. Anticipatory breach is devised as a whip to be used for the chastisement of deliberate contract breakers, but from which the shiftless, the dilatory of the unfortunate are to be spread. It is not confined to any particular class or breach, deliberate or blame worthy or otherwise it covers all breaches that are bound to open.
In the case of Tweogbade & sons Ltd v. FunsoAdeolu, the court held that the defendant by his words spoken or written and conduct repudiation of the agreement by way of anticipatory breach and the plaintiff was obliged to choose to accept the repudiation and treat the contract as at the end and immediately sue. The plaintiff has therefore accepted to opt for treating the contract as end and is covered by law.
If A rents B’s apartment for two years; One year into the contract, he offers to buy the property from B who agrees. They enter a sale contract and A becomes the owner of the apartment. Here A has two rights; one accorded by the lease agreement making him the renter and second by the sale agreement making him the owner. The former being an inferior right merges with the superior one and discharges the lease contract
Actual breach or fundamental breach:
Another circumstance in which a party to a contract commits a fundamental breach. Actual breach may also discharge a contract. It occurs when a party fails to perform his obligation upon the date fixed for performance by the contract, as for example, where on the appointed day the seller does not deliver the goods or the buyer refuses to accept the delivery.
It is important to note that there can be no actual breach of contract by reason of non-performance so long as the time for performance has not yet arrived. Actual breach entitles the party not in default to elect to treat the contract as discharged and to sue the party at fault for damages for breach of contract
In Lord Diplock in photo productions Ltd v. Securities transported Ltd defined a fundamental breach of contract as an event resulting from the failure by one party to perform a primary obligation which has the effect of depriving the party of substantially the whole benefit of the contract which was the intention of the parties that he should obtain from the contract.
Before 1966, it was the general belief that a party who is guilty of fundamental breach of contract could not avoid liability by reliance on an exemption clause inserted into the contract.
The decision in Sussie’s Case however reversed the general opinion. Fundamental breach is a breach which goes to the root of the contract and has the effect of depriving the innocent party of achieving the main purpose of the contract.
The court is empowered to determine whether the term is major, minor or fundamentally important so as to constitute a breach.
Effect of Breach
Where there is an anticipatory breach, the non-breaching party may either rescind the contract or treat the contract in force and wait for the time of performance.
Frustration in situations where it is established that due to subsequent charge in circumstances, the contract is rendered impossible to perform or it has become deprived of its commercial purpose by an event not due to the act or default of either party.
The Court of Appeal in Nigerian bank for Commerce and Industry v. Standard P Eng. Co. Ltd, defined frustrations as the premature determination of an agreement between parties, an agreement lawfully entered into and in course of operation at the time of its premature determination owing to the occurrence of an intervening even or change of circumstances so fundamental as to be regarded by law both striking at the root of the agreement and entirely beyond what was contemplated by the parties when they entered into the agreement.
Frustration occurs whenever the law recognized that without no fault of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would make it a thing radically different from what undertaken by the contract, to lead to frustration, the intervening circumstances must be one which must be so fundamental as to destroy the basis of the agreement. The principle of frustration assumes that the frustrating event was not caused by the default of either party to the contract.
The doctrine of frustration was related that if the performance of a contract depends on the existence of affairs, then the destruction of or disappearance of that of the state of affairs, without the default of either of the parties, will discharge them from the contract. This must be added that frustration occurs under situations that are totally out of the control of the parties. In such a situation, it is the court that can determine whether an event constitute to frustrating event as to grant an automatic discharge to the parties to the contract.
Theories of Frustration
The two main theory of frustration are
1) Implied term theory
2) Foundation of the contract
Implied term theory
Implied theory is that a contract is discharged where if impliedly provides that in the frustrating events which have happened it shall cease to bind. The implied theory was the legal classic exposition.
In Tamplin S.S Co Ltd v. Anglo Mexican Petroleum Product Co Ltd, the court stated that:
“A court can and ought to examine the contract and the circumstances in
which it was made, not of course to vary, but only to explain it in order to see
whether or not from the nature of it. The parties must have made their bargain
on the footing that a particular thing or state of things would constitute to exist.
And if they must have done so, then a term to that effect will be implied; though
It is not expressed in the contract.”
The point which has been raised against the theory of implied term is that at the time of the contract came into existence, the parties have no common view to the frustrating event and they could not have provided for the consequences in the terms of the contract. It has been established that frustration occurs by law, not by the intentions of the parties. If it is the intention of the parties, the contract will be frustrated, when the frustrating events occurs. It merely gives effect to their intention.
In United Cinema & Film Distribution cool. Shell B.P Petroleum Dev. Company, The court held that what the contract did not make specific provision for that eventually. It is not left to do parties to say that there has been frustration or not, it is the duty of the contract.
Implied term provided for something the parties either expressed or foresaw. This implies that the theory is at variance with the doctrine of frustration. It is therefore, an artificial theory
Foundation of the Contract:
The foundation of the contract theory was based on Lord Haldane statement in the Tamplin case which stated
“When people enter into a contract which is dependent for the possibility
of performance on the continued availability of a specific thing comes to
an end by reason of circumstances beyond the control to the parties, the
contract is prima Facie regarded as dissolved.
This statement was regarded as the surest ground to rest the doctrine of frustration. In Davis Contractors Ltd v. Farehem UDC, Lord Rad Cliff stated the true test as follows: Frustration occurs whenever the law recognizes that without default of either party to a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.
The Supreme Court adopted this approach in Araka v. Monier Construction Co. Ltd; the appellant leased his house of the respondent company for use as a resident by the company employees to be occupied when the Biafra authorities expelled all expectations personnel under their control in June 1967. The Supreme Court considered where the contract became frustrated. Bello JSC held that the contract has been frustrated because its foundation has disappeared. The most important thing is that there must be such a change of circumstances that if the contract was not brought to an end, the parties would be performing obligations different from what they originally had contracted to perform. Frustration can occur in cases of partial destruction or past performance of contract.
Application of the Doctrine Of Frustration.
The application of doctrine of frustration applies in the following ways:
1) Destruction of the subject matter:
The application of the doctrine of frustration has been applied to cases where the subject matter of the contract is destroyed. Such cases include Taylor v. Caldwell, Astar & Co v. Blundell. A contract is brought to an end when the subject matter of the contract is destroyed. The contract is thus terminated by frustration.
(a) A music hall was agreed to be let out for a series of concerts on certain days. The hall was destroyed by fire before the date of the first concert. The plaintiff sued the defendant for damages for the breach of contract. It was held that the contract has become void and the defendant was not liable (Taylor V. Caldwell
(b) Similarly, if a factory premises on which machinery is to be installed are destroyed by fire, or a ship under a charter party is seized by a foreign government, the contract is discharged (Tatem Ltd. V.Gamboa).
In the Nigerian case of Benthworth Finance Ltd v. AlhajisanniBakori, the defendant obtained a lorry under high purchase agreement for the sum of #5428 payable by 18 installments. The plaintiff cleared the sum of #1574 as balance and claimed that the defendant was in default of payment and thereby terminated the agreement. The defendant stated that the vehicle was involved in an accident and the plaintiff took possession. The insurer paid # 2247 to the plaintiff and also sold the vehicle for #500. The defendant pleased that the agreement had been discharged by frustration. The court held that the accident constituted parties from liabilities.
2) Death or incapacity:
A contract may be frustrated where the continued performance involved serious risk of the health of person to the contract, Conder v. The Baron Knight Ltd, for instance a contract to write a book or where a person has booked a course was so seriously injured.
(a) A and B contract to marry each other. Before the time fixed for the marriage, ifA goes mad. The contract becomes void [Illustration (b) to Section 56].
(b) A contracts to act at a theatre for six months in consideration of a sum paid in advance by 5. On several occasions A is too ill to act. The contract to act on those occasions becomes void [Illustration (e) to Section 56].
(c) An artist undertook to paint a picture for a certain price, but before he could do so, he met with an accident and lost his right arm. Held, the artist was discharged due to disablement.
3) Unavailability of subject matter:
A contract maybe frustrated if the person or thing essential for its performance becomes unavailable. The Gulf War case illustrated this point.
In Benthworth Finance Ltd v. BasiruAdeyemi, it involved an alleged seizure of vehicle, which was the subject matter of the contract. The Plaintiff’s Lorry was under hire purchase agreement under monthly installments. 4 months thereafter, the Nigerian Army seizedthe lorry. The defendants stopped payments of the installments and when sued, he pleased that the army requisitioning the lorry had discharged the hire purchase agreement. The judge held that the defendant failed to prove satisfactorily that the vehicle had been requisitioned. Secondly, that if there had been requisition, it appeared to have been intended to be a temporary nature. For this reason, the court held that the contract had not been frustrated.
A contract to sign or to perform in a party on a particular day can be frustrated of the performer is taken Ill that day.
In Bank Line Ltd v. AuthurCapel& Co AC, The House of Lords held that the charter party was frustrated. Other frustrating events are illness or conscription which may interfere temporarily with the performance of the contract. The court will consider the length of interruption, and whether in resumption the event would impose on both parties or one of them obligations substantially different from those originally undertakes. Temporary illness will not of itself frustrate a contract of employment.
4) Subject Matter Unavailable From a Particular Source:
A contract may be discharged where the subject matter was to be imported from a particular country and such import is prevented by reason of war, natural disasters, or prohibition of expert or goods are to be result of general drought of disease. The position depends on 3 things:
1) Express reference. Howell the v. Coupland
2) Source by one party only. Blackburn Bobbins Co. Ltd v. T. W Allen Ltd
3) Partial failure. Howell v. Coupland
Impossibility of Performance: A contract may provide that if a method of performance becomes impossible, the contract will be discharged.
(a) A, sold to B a certain quantity of Finnish birch timber. A, found it impossible to fulfill this contract because the outbreak of war dis-organized the transport and A could not get any supply of timber from Finland.
Held, B was not concerned with the way in which A was going to get timber and, therefore, there was no frustration (Blackburn Bobbin Co. Ltd. V. Allen & Sons. Ltd),
(b) X contracted with Y to send certain goods from Bombay to Delhi in September.
In August transport companies went on strike and transport was available at very high rates. Held, the increase in freight rates did not excuse performance (Karl EtlingervsChagandas& Co).
Thus, in Nicholl& Knight V. Ashton Edridge. The court held that the contract was frustrated.
In Bremer’s Case V. Continental Grant.Co, the stipulated time regarded as exclusive. The seller cannot perform in a different way.
Thus, in Tsakirolou& Co Ltd v. Nobble Throl GMBH, a contract was made for the sale of Sudanese groundnut to cover the cost, insurance and carriage to Hamburg. When the contract was made, both parties contemplated that the shipment would be via suiez canal. The seller ought to have shipped the goods via cape of good hop, although it would have taken two times as long and would have doubled the cost of carriage.
The court stated that the difference between to methods was not sufficiently fundamental to frustrate the contract. The contract may provide also the alternative methods of performance; the contract is not frustrated if one or more of them becomes impossible as long as one method is possible.
Remedies of Breach of Contract
When a contract has been breached, the injured party is entitled to claim its enforcement or to rescind the contract, and in addition to or in lieu of one of the said remedies he is entitled to compensation, all as provided for in the law.
REMEDIES FOR BREACH OF CONTRACT
When a contract is broken, the injured party may have several courses of action open to him, namely:
1) To refuse further performance of the contract, i.e., rescission
2) Mitigation of damages
4) Enforcement of contracts.
Recession of Contract:
The right of rescission is equitable and exits in a number of circumstances. By way of illustration, we mention three of those circumstances.
First, the right is available to a party injured by breach of a fundamental term in a contract e.g. a condition.
Secondly, it is available to a party injured by the misrepresentation of the other party.
Thirdly, it is available where a contract is vitiated by mistake. The effect of recession in the case of misrepresentation and mistake is to terminate the contract and initio as if it never existed. As stated by Lord Atkinson, in Abram Steamship Co v. Westville Steamship Co:
” Such rescission terminates the contract, outs the parties in status quo ante and restores things, as between them, to the position in which they stood before the contract was entered into.’’
On the other hand, rescission in the case of breach of a condition only terminates the contractor from the moment of rescission. Right and obligations that have already matured are therefore not affected. It follows, therefore, that whereas the right of rescission for misrepresentation and mistake is lost if restitution in integrum ( full restoration) is no longer possible between the parties, no question of restoration arises in the case of rescission on grounds of breach.
However, if in the latter case, the rescinding party is able to make restoration, the court will, in the interest of justice require him to do so. For example, where a buyer of goods rightfully rejects the goods for breach of condition as to quality; the ownership of goods vests in the seller.
Furthermore, where the seller of goods rescinds the contract because of the buyer’s default, he must, without prejudice to his right to damages, return any part of the purchase price that has been paid before the recession of the contract.
Mitigation of Damages: the law imposes a duty on the plaintiff to mitigate his damages in the event of the breach of contract. In other words, the injured party must endeavor to minimize the loss flowing from the breach; otherwise he cannot recover any part of the loss which the defendant can prove to have resulted from the plaintiff failure to mitigate.
Thus in Economic Exports Ltd v. Jimoh Odwola, the defendant refused to accept the last of the 3 shipments of goods shipped to him by the plaintiffs in January 1954. The plaintiffs tried in ways to make the defendant accept the shipment and after about 14 month if fruitless negotiation, the plaintiff sold the goods by action. They therefore sued the defendant for breach of contract, claiming, among other things, 2yrs interest on the goods. It was held inter alias that it is the plaintiffs duty to minimize the loss and that as a plaintiff ought to have sold the goods within a year of the defendant refusal to accept them, therefore they were only entitled to one year interest at the agreed rate . But the plaintiff is not under a duty to mitigate damages before there has been a breach of the contract. Furthermore, in an effort to minimize his damages, the plaintiff should avoid necessary loss for he cannot recover any greater sum than would have been recoverable if he had acted reasonably.
The injured party is entitled to compensation for the damages caused by the breach and its consequences and which the breaching party foresaw or should have foreseen, at the time the contract was made. An obligation to supply or receive any property or service has been broken and the contract is rescinded by reason of the breach, the injured party will without proof of damage be entitled to compensation in the amount of the difference between the consideration for the property or service under the contract and its value on the date of the contracts rescission.
The provision under Section 11 will not derogate from the right of the injured party to compensation for damage proved under Section 10; however, if the consideration in respect of the obligation that was breached was unreasonable or if there was no consideration at all, then the court may reduce the compensation to the amount provide in Section 11.
Enforcement of Contracts:
The injured party is entitled to enforcement of contract, unless in any of the following cases:
- a) It is impossible to perform the contract.
- b) Enforcement of the contract consists of compelling the performance or acceptance of personal work or of a personal service.
- c) Implementation of the enforcement order requires an unreasonable level of supervision on behalf of a court or an execution officer.
- d) Under the circumstances of the case, enforcement of the contract is unjust.