CONTENTS OF CONTRACT

TERMS OF A CONTRACT
In the process of negotiating an agreement which leads to the completion of a
contract the parties may have said (parol) or written many things. However, after
the completion of the contract, the need usually arises in interpreting the
construction of the said contract whether some of the things said during
negotiation became a part of the contract or were mere representations. This will
determine what the cause of action will be in case of a breach of the contract.
This is a preliminary issue which deserves to be considered first.

TERM OF THE CONTRACT AND MERE REPRESENTATION

The importance of the distinction between a term of the contract and mere
representation lies in the type of remedy available to an aggrieved party when a
breach of a contract is alleged. If the breach is of a term of contract, then the
aggrieved party can sue for a breach of that term and obtain a remedy in
damages or in both damages and repudiation, depending on the importance of
the term breached.

Note that where the term breached is not a term of the contract, but a mere
representation, not only is the remedy available to the plaintiff less valuable,
there may, in fact, be no real remedies at all. Thus, in a situation where the term
breached is a mere representation, the plaintiff’s action will be based on
misrepresentation.

It is important to note that where the misrepresentation was fraudulent, that is

the defendant deliberately told a falsehood which induced the plaintiff to enter
into the contract, the remedy will be one in damages for misrepresentation.

If the misrepresentation was not fraudulent, it is regarded as an innocent

misrepresentation. There is no remedy for innocent misrepresentation at common
law. However, there are some remedies in equity, but they are so qualified, as to
be almost illusory in most cases.

For instance, the House of Lords in the case of Hedley Byrne & Co. v. Heller &
Partners Ltd. [1964] A. C. 465; [1963] 2 All E.R. 575 held that in certain
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circumstances, damages can be obtained for negligent mis-statements. This has
therefore created a third category of misrepresentation, known as negligent
misrepresentation, for which the remedy of damages is available.

Note carefully that the English Misrepresentation Act, 1967 does not apply
anywhere in Nigeria.

A term of the contract and a mere representation are distinguished as follows-

The following tests were postulated by Cheshire and Fifoot in the 10 th Edition of
their book on Law of contract:

(a) At what stage of the transaction was the crucial statement made? The idea
here is that statements made at the preliminary stages of the negotiations
would not be regarded as terms of the contract, but mere representations.
Thus theoretically, the longer the time lag between the time the statement
was made, and the time the contract was concluded, the more likely would
it be regarded as a mere representation and vice versa. See Bannerman
v. White (1861) 10 C.B. (N.S.) 844.

However, this test is not consistent with some decisions. In Shawel v.

Reade for instance, where the lapse between the statement and the date
of contract was three weeks, it was held that the statement nevertheless
constituted a term of the contract, whereas in Routledge v. McKay
[1954] 1 WLR 615 where the lapse was only one week, it was held that
the statement was a mere representation.

(b) Was the oral statement later followed by a reduction of the terms of
writing? The basic point here is that, if there was an oral agreement, which
was subsequently reduced into writing, any term contained in the oral
agreement, not contained in the later document, will be treated as a mere
representation. This is probably the least useful of the three tests, because
it is much easier to cite cases in which the test has been ignored, than
those in which it has been applied.

(c) One Party’s Superior Knowledge. In this case, if the person who made the
statement had special knowledge or skill as compared to the other party,
then the statement is taken to be a term of contract. See Shawel v.

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 Reade [1913] 2 I.R 81; Esso Petroleum Ltd. V. Mardon [1976] Q.B.
801 Dick Bentley Productions Ltd. V. Harold Smith Motors (1965)2
All E.R. 65.

If however, the statement is made by the person who is less knowledgeable

about the subject-matter of the contract, it is regarded as a mere
representation. See Oscar Chess Ltd. V. Williams [1957] 1 W.L.R 370;

It is noteworthy, that the opinions of legal writers have shown that this test
is by far the most successful of the three and some of the cases that
contradicted the other two tests, can be explained by this third one. Thus,
in Shawel v. Reade (Supra) and Esso Petroleum v. Mardon (Supra)
although the time lag (three weeks) was much in the one case, and there
was a later document not containing the statement in the other, the
statement in each case was made by an “expert” and relied on by a
“layman” and in both cases the statements were held to be terms of the
contract. The case of Oscar Chess Ltd. V. Williams represents the
reverse situation where the “layman” gave wrong information about the
date of manufacture of his car to the “expert” the car dealer. It was held
that the statement was a mere representation.

Treitel in his book on contract, relying on the same set of cases, has
devised two additional tests, namely;

(a) Verification test

(b) Degree of importance attached to the statement by the representee.

See Treitel, op. cit. pp. 259-263.

COLLATERAL CONTRACTS
This doctrine implies that if the representor makes a statement of promise, which
is intended to induce the representee to enter into a contract, then if the
representee enters into that contract in reliance on that promise, the representor
will be held bound by his promise. The promise is treated as part of a preliminary
or collateral contract (usually oral) which takes the following form: “if you agree
to buy my horse, I promise you it will be good for breeding purposes.” This

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collateral contract now induces the representee to enter into the main contract
which is the actual buying of the horse.

See the following cases- City & Westminster properties (1934) Ltd. V. Mudd
[1959] Cl. 129.

Wells (Mersham) Ltd. v. Buckland Sand & Silica Co. Ltd. [1965] 2 Q.B.
170
According to Edmund-Davies J (Quoting Mc Nair. in Shanklin Pier Ltd. V. Detel
Products Ltd.)

If as is elementary, the consideration for the warranty in

the usual case is the entering into of the main contract in
relation to which the warranty between A and B
supported by the consideration that B should cause C to
enter a contract with A or that B should do some act for
the benefit of A

In the words of K.W. Wedderburn, in case of collateral contracts the

consideration furnished by the representee for the promise is “….. no more than
the act of entering into the main contract going ahead with that bargain [the
main contract] is sufficient price for the promise, without which it would not have
gone ahead at all.

THE NATURE & EFFECT OF CONTRACTUAL TERMS

Contractual terms and liabilities are varied as each of these terms attracts
different obligations and liabilities. It should be noted that while a term may be of
major importance and its consequence when breached will give rise to a
discharge of contract, other term(s) may be a relatively minor whose breach
could result in damages.

However, for convenience sake some of these terms are divided into four major
category, namely; (1) Warranties; (2) Innominate or intermediate terms; (3)
Conditions; and (4) Fundamental terms.

1. CONDITIONS & WARRANTIES-

The term could be used in different senses and sometimes interchangeable.
James L.J in Re Lees, exp. Collins (1875) 10 Ch. App. 367: 7QBD 410
stated that-
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 “Conditions may be precedent, subsequent or inherent. A
condition is (precedent when, unless it is complied with,
the estate does not arise. It is subsequent when it is
broken, the estate is defeated. It is inherent when the
estate is qualified restrained or charged by it.
A condition is a vital term which goes to the root of the contract. It is an
obligation which goes directly to the substance of the contract, or is so essential
to its very nature that its non-performance may be considered by the other party
as a substantial failure to perform the contract at all.

A warranty on the other hand, is subsidiary to the main purpose. A warranty has
been variously defined but it may be said to be an obligation which, though it
must be performed, is not so vital that a failure to perform it goes to take the
substance of the contract.

The distinction is important in terms of remedies. A breach of condition is called a

repudiatory breach and the aggrieved party may elect either to repudiate the
contract, i.e. refuse to accept performance, or claim damages and go on with the
contract.

Note that the plaintiff must go on with the contract and sue for damages if he has
affirmed the contract after knowledge of a breach of condition. He may do this
expressly, as where he uses the goods, or by lapse of time as where he simply
fails to take any step(s) to complain about the breach for what in the court’s view
is an unreasonable period of time.

A breach of warranty is not repudiatory and the plaintiff must go on with contract
and sue for damages. Contrast Poussard v. Gye [1876] 1QBD 183.

It should further be noted that whether a term is a condition or a warranty is a

question of the intention of the parties, and this is deduced from the
circumstances of the case.

2. INTERMEDIATE OR INNOMINATE TERM-

There are terms called intermediate terms which the parties may have called
conditions or warranties. The effect of these on the contract depends upon how
serious the breach has turned out to be in fact. If the breach has turned out to be

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serious the court will then treat the term as a condition so that the contract can
be repudiated. If in fact the breach has not had a serious effect on the contract,
the court will treat it as a breach of warranty so that the parties must proceed
with the contract, though the aggrieved party will be entitled to an action for
damages. See Hong Kong Fir Shipping Co. v. Kawasaki Kisen Kaisha
(1962) 2 Q.B. 26 and the focus on this aspect of terms of contract i.e. Cehave
v. Bremer also known as the Hansa Nord. [1976] Q.B. 44.

3. FUNDAMENTAL TERMS.
Devlin J. in Smeaton Hanscomb & Co. Ltd. V. Sasson I. Setty Son & Co.
(No. 1) [1953] 1 N.L.R. 1468 at P. 1470 defined a fundamental term as
something which underlies the whole contract, so that, if not complied with, the
performance becomes totally different from that which the contract
contemplates.

Lord Abinger in Chanter v. Hopkins (1938) 4 M&W 399 at P. 404 illustrates

the concept thus-

“If a man offers to buy peas of another, and he sends him

beans, he does not perform his contract, but that is not a
warranty; there is no warranty that he should sell him
peas; the contract is to sell peas and if he sends him
anything else in their stead, it is a non-performance of it”.

From the aforestated, it becomes apparent that fundamental term is more

fundamental in nature to a subsisting contract than a condition. It is the term
which constitutes the essence of the contract; hence failure to comply with it is
the same as not performing the contract. Note that an aggrieved party could
repudiate the said contract.

See the following cases Pinnock Bros. v. Lewis & Peat Ltd. [1923] 1 K.B.
690; Photo Production v. Securicor Trasport Ltd. [1980] A.C. 827; Geoge
Mitchel [chesterhall Ltd. V. Finney Lock Seeds [1981] 131 New LJ 480.

IMPLIED TERMS
Generally, apart from the express terms inserted by the parties to a contract
earlier referred to, a contract may contain and be subject to implied terms. Such
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terms under reference are derived from custom and statute. Furthermore, a term
may be implied by the court where it is necessary in order to achieve the result
which the parties obviously intended the contract to have. These usages have
been supplemented for reasons of public policy and the promotion of commerce
by statute law, while in most cases, courts have usually found it necessary in
construing the terms of a contract to give same the intended meanings by the
parties to such contract. The foregoing has therefore led to the emergence of
three recognized types of implied terms, namely: (a) terms implied by custom or
trade; (b) terms implied by statute and (c) terms implied by courts.

(a) A contract may be subject to customary terms not specifically mentioned by

the parties. However, customary terms will not be implied if the express
terms of the contract reveal that the parties had contrary intention.

Park B in Hutton v. Warren (1836) 1 M. & W. 466 at P. 476

Explain the Principle thus:

It has long been settled, that in commercial transactions

extrinsic evidence of custom and usage is admissible to
annex incidents to written contracts, in matters with
respect to which they are silent. The same rule has been
applied to contracts in other transactions of life, in which
known usages have been established and prevailed; and
this has been done upon the principle of presumption that
in such transactions they did not mean to express in
writing the whole of the contract by which they intended
to be bound, but to contract with reference to those
known usages.

Note the following:-

(i) An alleged custom can be incorporated into a contract only if there is

nothing in the express or necessarily implied terms of the contract to
prevent such inclusion and, further, a custom will only be imported into a
contract where it can be so imported consistently with the tenor of the
document as a whole.

(ii) An alleged custom, where not sufficiently established, so as to be known or

presumed known to all engaged in the relevant trade, then it cannot be
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 applied to a contract in which notice of it has not been given one of the
parties. See Bank of the North v. Poland (1969) 3. A. LR 217.

(iii) One of the areas of contract in which customs and usages have developed
extensively is employment contracts. These include the rules that a person
who employs has the power to terminate, where there is no express
provision in the letter of appointment to that effect. See AIGORO V.
UNILAG (1979) 10-12 CCHCJ; OWOADE V. NIGERIAN EXPLOSIVES &
PLASTICS CO. LTD. (1978).

(b) Terms implied by statute-

For a long period of time, courts gradually accepted and enforced certain
terms into contracts (mainly for the sale of goods) even though they were
not expressly stipulated. This was done mainly to protect the weaker party
(usually for the buyers or consumers) in contract for sale of goods.

It should be noted that the English Sale of Goods Act which was previously
directly applicable in Nigeria by virtue of the Statute Of General Application
(SOGA) had cease to apply to most of the states of the Federation which have
enacted their own Act on Sale of Goods, even though the legal principles are
impari-material with that of 1893 English Act.

i. Implied Condition as to Title-

By virtue of Section 13 (1) of Sales of Goods Act as applicable in the states of
South-Western Nigeria, in any contract for the sale of goods, there is an implied
condition on the part of the seller that in the case of a sale he has a right to sell
the goods, and that in the case of an agreement to sell, he will have the right to
sell the goods at the time when the property is to pass. The Vendor/Seller is also
deemed to give an implied warranty that the buyer shall enjoy quiet possession of
the goods and another warranty that the goods are free from any charge or
encumbrance in favour of a third party. Thus a seller who has no title will
obviously be in breach of this obligation.

The court in Akoshile v. Ogidan (1950) 19 N.L.R. 87 per Reece J: held that
the defence of caveat emptor will not avail a defendant who sold a stolen car to

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the plaintiff and further held that the plaintiff can repudiate and recover the
consideration he furnished.

ii. Sale by Description-

There is an implied condition that the goods shall correspond with the description.
This is obviously of great importance where the goods are not seen before
purchase as in a mail order sale.

For example, where an order was placed by mail for a car as shown in the
catalogue then the automobile firm would be in breach of contract if it delivered a
tri-cycle in lieu thereof. See the case of Ogwu v. Leventis Motors [1963]
N.R.N.L.R 115. However, the courts have held that even sometimes where the
buyer actually saw the goods before purchase and delivery he could still
repudiate where it (the goods) fails to conform with the description.

iii. Fitness for Purpose-

Section 14 of the Sale of Goods Act contained; expressly the basic common law
principle that there is no implied warranty or condition as to the quality or fitness
for any particular purpose of goods supplied under a contract of sale, that is,
caveat emptor. However, the proviso in sub-section 1 of the main provision states
as follows:
Where the buyer, expressly or by implication, makes
known to the seller the particular purpose for which the
goods are required, so as to show that the buyer relies on
the seller’s skill or judgment, and the goods are of a
description which it is in (whether he be the manufacturer
or not), there is an implied condition that the goods shall
be reasonably fit for purpose.

It has been argued, rightly too that it is important for the buyer to state expressly
the purpose for which he required an article or goods, however where the article
could be used for only one purpose, the question becomes immaterial.

Thus in DIC Industries v. Jimfat (Nig) Ltd (1975) 2 CCHCJ. 175 court held
that the plaintiff’s action failed for its omission to state the purpose for which the
goods are required, since same could be used for various purposes.

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iv. Merchantable Quality-
An article is usually not merchantable because of some manufacturing defect.
The situation is one in which a perfect article would serve the purpose but the one
supplied will not because of an inherent defect. In other words, it is the right
article but a faulty one.

However, it should be noted that the condition of merchantable quality does not
apply to defects drawn to the customer’s attention before the contract is made or
which any previous examination by the customer ought to have revealed, even if
it has not.

The English Supply of Goods (Implied Terms) Act, 1973, defines the term
‘merchantable quality’ as follows:

Goods of any kind are of merchantable quality within the

meaning of this Act if they are as fit for the purpose or
purposes for which goods of that kind are commonly
bought as it is reasonable to expect having regard to any
description applied to them, the price (if relevant) and all
other relevant circumstances. See Khalil and Dibbo v.
Mastronikolis (1949) 12 WACA 462

v. Sale by Sample-
There are three implied conditions in a transaction by sample:
(a) The bulk must correspond with the sample in quality, (b) The buyer shall
have a reasonable opportunity of comparing the bulk with the sample, and
(c) the goods shall be free from any defect rendering them unmerchantable
which would not be apparent on reasonable examination of the sample.
See S. 15 of the 1893 Act & S. 16 Sales of Good Act (applicable in
Western Nigeria).

BREACH OF IMPLIED TERMS AND REDRESS:

In most of the transactions envisaged by the English Sales of Goods Act and
similar laws in Nigeria, breaches of conditions have to be treated as breaches of
warranties. In other words, in most cases of breach of contract, the only remedy
which will be available to the aggrieved party are damages. The right to
repudiation is severally restricted under a provision of the Act.
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Section 12 (3) of Sales of goods Act provides as follows-

Where a contract of sale is not severable and the buyer

has accepted the goods, or part thereof, or where the
contract is for specific goods, the property in which has
passed to the buyer, the breach of any condition to be
fulfilled by the seller can only be treated as a breach of
warranty, and not as a ground for rejecting the goods and
treating the contract as repudiated . . .

Since virtually every contract for the sale of goods is non-severable, this provision
will apply. However, a clearer picture begins to emerge in the 21 st century on the
remedies for implied breach of conditions and warranties. Insofar as the implied
terms are conditions and are broken by the supplier, then the customer can treat
the contract as repudiated, particularly where the contracts are severable. The
customer is discharged from his obligation to pay the agreed price and may
recover damages. The breach of implied warranties gives the customer only the
right to sue for damages.

Terms Implied by Courts

In exercise of their discretionary powers, courts have often found it necessary to
imply certain unexpressed terms in contracts, in order to give them “business
efficacy”, i.e. to make them workable. The courts do not have an unfettered
power to intervene in contracts and impose terms arbitrarily. Their power to imply
terms is only exercisable within certain guidelines or rules.

Mackinnon L.J. in Shirlaw v. Southern Foundaries Ltd. [1939] 2 K.B. 206

at P. 227, C.A. expounded the controlling test as follows:

Prima facie that which in any contract is left to be implied

and need not be expressed is something so obvious that
it goes without saying; so that, if while the parties were
making their bargaining, an officious by stander were to
suggest some express provision for if in their agreement,
they would testily suppress him with a common, ‘Oh, of
course.’

Glanville Williams in his article “Language and the Law” (1945) 61 L.Q.R. 401
identifies three kinds of terms that may be implied by court:

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 (i) Terms that the parties probably had in mind but did not trouble to
express.
(ii) Terms that the parties whether or not they actually had them in mind,
would probably have expressed if the question had been brought to their
attention.
(iii) Terms that the parties, whether or not they had them in mind or would
have expressed them if they had them in mind or would have expressed
them if they had forseen the difficulty, are implied by the court because
of the court’s view of fairness or policy of inconsequence of a rule of law.

In Okotete v. Electricity Corporation of Nigeria (Unreported) High Court

of Mid-West May 29, 1970 the plaintiffs were engaged by the defendants to
carry-out “bush-clearing” along the Warri-Ughelli Road at 9d. per yard, for the
purpose of extending electricity supply to Ughelli. The defendants intended, to
the plaintiff’s knowledge, to install electricity poles and cables along the cleared
path. After carrying out this assignment, the plaintiff claimed extra-payment for
the felling of trees along the route on the ground that “bush-clearing” did not
cover the felling of trees.

According to the plaintiffs, bush clearing meant the removal of grass and weeds
along the route and no more. The court (Atake J.) held that although the contract
did not expressly stipulate that the plaintiffs were to cut down the trees on the
route, there was an implied term to that effect.

His Lordship stated further as follows:

It is clear to my mind that the plaintiff know that he was
to clear bush to extend transmission line to Ughelli
township and that was why he had to clear 10 feet
breadthwise along the route. What is the idea behind
that? It is to prevent obstruction to the transmission lines
to pass only several feet above the ground (at least in this
country). So when the plaintiff was asked to clear the
bush for the line, it was clear that he was to remove
obstruction to the line by felling trees of such height as
would obstruct the line ….. And to refer to Mackinnon L.J,
in Shirlaw v. Southern Foundaries, if while the plaintiff
and the defendant were making this contract, an officious
bystander were to suggest that the expressly stipulated

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 therein that the plaintiff was to cut down the trees along
the line, I am left in no doubt that they would testily
suppress him with a Common ‘Oh, of course’.

It is now generally acceptable principle of law that court can imply into a contract
a term or terms, which had the parties adverted their minds to the situation, they
would have intended to incorporate it into their agreement.

See the following cases: Ghandi v. Pfizer [1920] 1 K.B 868 West African
Automobile & Engineering Co. Ltd. V. Saba Balogun. (Unreported) Suit
No. FCA/C/82/77 delivered March 22, 1979.

EXCLUSION CLAUSES AND LIMITING TERMS

A contract may contain express terms under which one or both parties exclude or
limit liability for breach of contract or negligence. Such express terms are
permissible in law under the Nigerian Legal System, parties to a contract may
agree to expressly exclude or limit the liability of the other notwithstanding the
statutory provisions e.g. in Sales of Goods Act and others.

However, it is noteworthy that unlike in Nigeria, the parties to a contract cannot

by agreement ignore the statutory provisions, particularly Sales of Goods Act in
the United Kingdom.

Specifically, Section 4 of the Supply of Goods (Implied terms) Act 1973 reveals
that a supplier’s freedom to limit or exclude his liability for breach of implied
terms is almost completely abolished as the provision under reference provides
full protection for buyers in “customer” transaction.

Exclusion Clauses give rise to most concern when they are included in standard
form contracts, in which one party, who is in a position of commercial dominance,
imposes their terms on the other party, who has no choice (other than to take it
or leave it )as far as the terms of the contract is concerned.

It should be noted that such standard form contracts are contrary to the ideas of
consensus and negotiation underpinning contract law; for this reason, they have
received particular attention from both the judiciary and the legislature in an
endeavour to counteract their perceived unfairness.

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Such clauses are to be found in contracts for the supply of electricity, laundry and
dry-cleaning services, hotel accommodation. Usually, supplies that enjoy
monopolies insert clauses either limiting or excluding their contractual liabilities
to an extent.

Generally, for an exclusion & limitation clause to be effective in a given contract,

same must have been inserted as a term of contract and in determining the
aforesaid, three ways are laid down, namely: (a) Signature (b) Notice and (c)
Custom

(a) Unsigned documents-

It is a universal and acceptable principle of law that a party who signs a

contractual document is bound by its contents (forms) even where he neglected
to read it.

The rules for determining whether an aggrieved party is bound by an exclusion

term in a document not signed by him, were first propounded comprehensively in
Parker v. South Eastern Railway Co. (1872) 2 C.P>D 416. In that case, the
plaintiff deposited a bag in a cloakroom at the defendant’s railway station, paid
the clerk 2d. and received a paper ticket on which was printed a number and date
and notices as to when the office would be opened, and the words “see back”. On
the other side, several clauses were printed, including, “the company will not be
liable for any package exceeding the value of £10. The court had to construe the
effect of the exemption clause in the ticket. After the case was decided in the
plaintiff’s favour the defendants appealed. The Court of Appeal used the platform
to lay down the guidelines for determining liability in the case of unsigned
documents as follows:

(i) If the person receiving the ticket did not see or know that there was any
writing on the ticket, he is not bound by the conditions

(ii) If he knew that there was writing on the ticket, but did not know or
believe that the writing contained conditions, and then he is bound by
the conditions.

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 (iii) If he knew there was writing on the ticket, but did not nevertheless he
would be bound if the party delivering the ticket to him had done all that
was reasonably sufficient to give him notice that the writing contained
conditions.

It should be noted that a person who knows there is writing on a document but
does not know that it contains conditions will be bound by an exemption clause in
the document depends very much on the type of contract and document. See
Odebiyi v. Zard & Co. (1972) 2 U.I.L.R 34, Chapelton v. Borry U.D.C
[1940]1 K.b 532 C. A. Iwuoha v. Nigerian Railway Corporation [1997] 4
NWLR Pt. 500 at 419.

However, where a party to a contract is an illiterate and the terms and condition
were not interpreted at the time of contract in the language he understands, then
such a party would not be bound. Thus, the court has set higher degree of notice
of existence of an exclusion clause for illiterate persons.

SIGNED DOCUMENTS

The position with regard to documents signed by the aggrieved party, containing
or incorporating excluding or limiting terms is simple and straightforward. In the
absence of fraud, duress or misrepresentation, the person signing is bound by the
excluding or limiting term whether or not he reads it. This was the issue in
L’Estrange v. Groucob [1934] 2 K.B. 394, D.C. where the plaintiff signed a
form printed by the sellers of an automatic slot machine which she was ordering
from them. Apart from the essential terms of the contract contained in ordinary
print, an exclusion clause in very small print contained the following terms: ‘any
express or implied condition, statement, or warranty, statutory or otherwise not
stated herein is hereby excluded.” The machine, when eventually delivered, did
not work satisfactorily and the buyer brought an action for breach of contract
against the sellers. The sellers relied on the exemption clause in their defence,
and the plaintiff pleaded that at the time she signed the order form, she had not
read it and she knew nothing about the contents, and that the exclusion clause
could not easily be read because of the smallness of the print.

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It was held by the Court of Appeal that when a document containing contractual
terms is signed, then in the absence fraud and misrepresentation, the party
signing it is bound, “and, it is wholly immaterial whether he has read the
document or not”. Per Scrutton, L. J. In such cases, the person signing is bound,
not because he has read, understood and consciously assented to the document,
but because by signing he has signified his assent. Any other rule will work great
hardship and inconvenience since it will enable parties to a contract to deny
liability for the contents of a document they have signed in the absence of fraud,
duress or misrepresentation.

The issue of the legal effect of signing a document on the exclusion clauses on
the document came up before the Court of Appeal in DHL International (Nig.)
Ltd. v. Mr. Udechukwu Chidi [1994] 2 NWLR (Pt. 329) 720 the
plaintiff/respondent took two packets containing applications to polytechnics to
the defendant/appellant’s branch in Port Harcourt. The relevant one in this case
was the application o he Federal polytechnic, Nassarawa in Plateau State. The
appellant’s clerk informed the respondent that they operated in Jos, but not in
Nassarawa. The respondent then misrepresented to her that Nassarawa was in
Jos, whereupon, she accepted the package and the N13 charges from the
respondent. The parcel was sent to Jos, and was then retuned for non-delivery
because Nassarawa was not in Jos. As a consequence, the period for application
to the polytechnic Nassarawa expired. The respondent, therefore, lost the
prospect of admission for that year. He sued DHL claiming damages for breach of
contract as follows:

(i) N28.00 special damages;

(ii) N9,972.00 general damages – total = N10,000.

In the receipt for the parcel issued by the appellant’s clerk and signed by the
respondent, was contained the following exclusion clause:

Shipper agrees that DHL shall not be liable for special

incidental or consequential damages, damages arising
from the carriage hereof. DHL disclaims all warranties
express or implied with respect to this shipment. The
liability of DHL for any loss or damage shall be limited to
16
 N100 insurance upon shipper’s request and payment
thereof.

The appellant relied on this clause in its defence to the claim. The claim
succeeded at the high court and DHL appealed. On the question of the effect of
the exemption clause, Onalaja, JCA, upheld the finding of the trial judge that the
receipt containing the clause was regarded by the parties as a mere receipt.
Since the parties regarded the document as a mere receipt. The appellant had
failed to establish the document as a contractual document to the respondent at
the formation of the contract. Relying on Chapleton v. Barry U.D.C & Adigun
v. A.G. Oyo State, [1987] 1 NWLR (Pt. 53) 678. Onalaja, JCA, concluded that
any reasonable Nigerian would see the document as a mere receipt and as
nothing else, and the exemption clause contained in it would not avail the
appellant against the respondent’s claim.

In this respect, the views of Edozie, J.C.A., on this point, and in the same case, are
preferable to that of Onalaja JCA, by applying the rules laid down in L’Estrange
v. Groucob the learned Justice held that since the respondent signed the receipt,
he was bound Also see Chagoury v. Adebayo (1973) 3 UILR 532 by the
exclusion clause contained in it. At p. 742 Edozie, JCA, however, went on to hold
that the exclusion clause became inoperative because the case was not merely
one of loss arising from the carriage of the parcel (which would have been
covered by the exemption clause), but that of non-delivery, which constituted a
fundamental breach of contract against which an exclusion clause was of no avail.

The party signing is equally liable if he signed a document incorporating by

reference another document containing the exemption clause. In Chagoury v.
Adebayo, (1973) 3 U. I. L. R 532 the plaintiff/respondent claimed that he won
500 pounds as a result of the 1 pound he staked with the defendants/appellants,
a football pools company. The company refused to pay him his win and when
sued, relied on the “rules and conditions” of the Ambassador Fixed Odd Pools,
which entitled the defendants to cancel any entry and refuse payment. The
plaintiff had signed a document containing these words: “I have read and agree
to the Rules and Conditions.” The rules and conditions were in fact not in the
signed document, but in a separate one. The question was whether the defendant

17
had done all that was reasonably sufficient to bring the clause to the plaintiff’s
notice.

The court of first instance, a magistrates’ court, applying the rules laid down in
Parker v. South Eastern Ry. Co. for unsigned documents held that the
defendant had not done what was reasonably sufficient. On appeal to the Lagos
High Court (Taylor, C. J.), this decision was reversed. The principle applicable to
signed documents were, according to the court, totally different from those
applicable to unsigned documents. Where the accepting party has signed a
document which forms part of the contract and conditions whether he reads them
or not, unless he has been induced to sign the document by fraud or
misrepresentation. Whereas in this case some of the terms and conditions are
contained in other documents apart from the signed one, the court had this to
say:

It seems to me that it makes little difference that the

agreement is to be spelt out of two or three documents
provided the plaintiff as in this case has signed the
principal agreement and certified as he has done here
that the other documents constituting the agreement
have been brought to his notice. Ibid at P. 535.

In this case, the plaintiff was bound by the rules and conditions, not because he
had read them, but because he had signed the main pools agreement, certifying
that he had in fact read them.

GENERAL RULES
Other rules and principles employed by the courts in restricting the scope and
effect of excluding and limiting terms are generally applicable to both signed and
unsigned documents.

1. The Contra Preforentem Rule

(a) Strict Interpretation
According to the contra preforentem rule the words of written documents are
construed more forcibly against the party using them. In other words, any
ambiguity, or uncertainty, in the meaning and scope of an exclusion clause will be

18
resolved against the person inserting it in the contract. The rule of strict
interpretation can be brought under this rule.

Thus, in Baldry v. Marshall [1925] 1 K.B. 260; [1924] All E.R. Rep. 155. the
plaintiff bought a car from the defendants in a contract containing a term
excluding “any other guarantee or warranty, express or otherwise”. The car
turned out not to be suitable for the purpose for which the buyer needed it. This
constituted a breach of the implied condition in section 14 (1) of the Sale of
Goods Act 1893.

It was held that the exemption clause did not apply since it covered only
breaches of guarantees and warranties. The breach in question was one of
condition. The defendants were, therefore, liable.

Also in Andrews v. Singer,[1934] 1 K.B. 17 the plaintiff entered into a contract to

buy new Singer cars from the defendants. Clause 5 of the contract provided that
all the cars sold by the company were sold subject to the terms of a clause which
excluded conditions, warranties, and liabilities implied by common law, statute or
otherwise. One of the cars supplied was not a new car. And the plaintiff sued for
breach of contract. The defendant relied on the exclusion clause in denying
liability. It was held by the Court of Appeal that the defendant had committed a
breach of an express term (the undertaking to supply new cars), and not an
implied term. The breach was, therefore, not within the ambit of the exclusion
clause which covered implied terms only.

If a vendor desires to protect himself from liability in such

a case he must do so by much clearer language than this,
which in my opinion does not exempt the defendant from
liability where they have failed to comply with the express
term of the contract. Scrutton, L.J.

In Houghton v. Trafalgar Insurance [1954] 1 Q.B. 247; [1953] 2 All E.R. 1409 a
five-seater car which was carrying six people was involved in an accident. The
driver’s insurance policy provided that the insurance company was exempted
from liability for any damage caused whilst he was carrying any load in excess of
that for which it was constructed.

19
It was held, in spite of the excess of one passenger in the car that the exemption
clause only applied to excess load not excess passengers.

(b) Negligence
Where a party’s contractual liability could arise both from negligence and any
other cause of action, unless an exemption clause specifically refers to
negligence, it will not be construed to cover it. This is because the courts regard it
as “inherently improbable that one party to a contract could intend to absolve the
other party from the consequences of the latter’s own negligence” Gillespie Bros.
Ltd. v. Bowles Transport [1973] 1 Q.B. 400 at p. 409; [1973] 1 All E.R. 193.

Thus, in White v. Warrick [1953] 2 All E.R. 1021, C.A. the plaintiff hired a bicycle
from the defendants. It was a term of the agreement that “nothing in this
agreement shall render the owners liable for any personal injuries to the riders of
the machine hired”. The plaintiff was injured when he was thrown off the bicycle,
when the defective saddle suddenly tipped over. He brought an action for
negligence in tort, and alternatively for breach of contract. It was held that the
exemption clause covered only the liability for breach of contract, but not for
negligence. The defendants were, therefore, liable.

(2) Third Parties

By the doctrine of Privity of Contract, a contract cannot confer any rights on one
who is not a party to the contract. Thus, an exclusion clause will not as a rule,
protect someone who is not a party to the contract in which it is contained.

In Adler v. Dickson[1955] 1 Q.B. 158; [1954] 3 All E.R. 397 the plaintiff who was a
passenger in a ship fell from the gangway. Thereupon he sued the captain of the
ship. The latter sought protection in a clause contained in the ticket for the
voyage which provided thus: “… the company will not be responsible for any
injury whatsoever to the person or any passenger arising or occasioned by the
negligence of the company’s servants”.

It was held by the Court of Appeal that the clause only protected the company,
and by the majority, that in any case if it had been extended to include the

20
servants of the company, it would have been invalid since the latter were not
parties to the contract.

Similarly in Cosgrove v. Horsfall,(1945) 62 T.L.R. 140 the plaintiff, an employee of

the London Passenger Transport Board, had a free pass for buses run by the
board. It was a term of the pass that neither the board nor their servants were to
be liable to the holder for injuries however caused. The plaintiff was injured as a
result of the negligence of the defendant, a bus driver and a servant of the board.
Having no remedy against the board, he sued the defendant personally. The
Court of Appeal held that the defendant was liable. He could not claim the benefit
of the exemption clause as he was not a party to the contract.

This principle was confirmed by the House of Lords in Scruttons v. Midland

Silicones Ltd.[1962] A.C. 446; [1962] 1 All E.R. 1. A drum of chemicals was
shipped from New York to London upon the terms of a bill of lading which
exempted the carriers from liability in excess of $500 (179 pounds) per package.
The defendants, a stevedoring company, were engaged by the carrier to
discharge their vessels in London, and to act as agents of the carriers in
delivering the goods to the plaintiffs, consignees of the goods. The defendants
negligently dropped the drum causing damage to the tune of 593 pounds.
Although the defendants were not a party to the bill of lading, nor expressly
mentioned therein, they claimed to be entitled to the protection of the limiting
term.

By a majority, the House of Lords held that the defendants could not claim the
benefit of an exclusion when they were not parties to the contract. According to
Lord Reid:
I find it impossible to deny the existence of the general
rule that a stranger to a contract cannot in a question
with either of the contracting parties take advantage of
the provisions of the contract, even when it was clear
from the contract that some provision in it was meant for
him.

Two points need be noted about these decisions. In the first place, although only
a party to a contract can enforce the contract, a benefit can be conferred on a
third party who can then rely on it as a defence. See, for example, Hirachand

21
Punamchand v. Temple. Secondly, the attempt to bring stevedores and other
agents of the carrier under the protection of the exclusion clause corresponds
with existing commercial practice. Usually, goods being carried by sea are
insured, and any liabilities arising from either loss or damage to such goods are
intended by the parties to be borne by the insurance companies.

As one writer has put it:

It certainly makes no sense to allow their (the parties)

loss to be transferred on to the carrier’s servant, who are
the least likely to be insured or financially equipped to
bear it. (Stevedores are perhaps in a different position
since they are normally persons of substance and/or likely
to carry insurance though even here it is not clear why
loss should be transferred from the cargo owner’s insurer
to the Stevedore’s). See Cheshire and Fifoot, (ed.
Furmston) op. cit. p. 153

FUNDAMENTAL BREACH

In Photo Productions Ltd. v. Securicor Transport Ltd., [1980] A. C. 827. Lord

Diplock 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 other party of substantially the whole benefit which it was the
intention of the parties that he should obtain from the contract.

Until the decision of the House of Lords in the Suisse Atlantique case Suisse
Atlantique Socite d’Armement Maritime S. A. v. Rotterdamsche Kolen Centrale
[1967] 1 A. C. 361 in1966, it was generally believed that a party guilty of a
fundamental breach of contract could not avoid liability by reliance on an
exemption clause inserted into the contract for his benefit. As lord Denning
declared in Karsales (Harrow) Ltd. v. Wallis [1956] 2 All E. R. 866 at p. 868.

It is now settled that exempting clauses, of this kind, no

matter how widely they are expressed, only avail the
party when he is carrying out the contract in its essential
respects. He is not allowed to use them as cover for
misconduct or indifference to enable him to turn a blind
eye to his obligations. They do not avail him when he is
guilty of a breach which goes to the root of the contract. It
22
 is necessary to look at the contract apart from the
exempting clauses and see what are the terms, express
or implied, which impose an obligation on the party. If he
has been guilty of a breach of those obligations in a
respect which goes to the very root of the contract, then
he cannot rely on the exemption clauses.

The ratio was adopted by the Privy Council in Adel Boshalli v. Allied
Commercial Exporters Ltd.[1961] 1 All N.L.R. 917 In a contract for the
supply of cloth between a supplier in London and a buyer in Lagos, the shipping
sample was found very much inferior in quality to the sample which formed the
basis of the agreement. The suppliers tried to reply on an exemption clause in the
following terms:
For goods not of United Kingdom origin we cannot
undertake any guarantees or admit any claims beyond
such as are admitted by and recovered by the
manufacturers.

Reversing the decision of the Nigeria Federal Supreme Court, the Privy Council
held that the clause did not avail the respondents any protection. “An exemption
clause”, added the court, “can only avail a party if he is carrying out the contract
in its essential respects. A breach which goes to the root of contract disentitles a
party from relying on an exemption clause.”

In Shotayo and Arunkegbe v. Nigerian Technical Co., [1970] 2 ALR 159 the
plaintiffs who were transporters, bought a second-hand lorry from the defendants
under a hire-purchase agreement which contained a clause excluding all
warranties and conditions as to fitness or roadworthiness of the lorry. The lorry
turned out to be unfit for its work and unroadworthy. Over period of seven
months, it broke down four times, and was only able to make three business
journeys, spending the rest of the time under repairs. The plaintiffs sued for
breach of the condition as to fitness for purpose and the defendants denied
liability by relying on the exemption clause. Holding that the defendants had
committed a fundamental breach of the contract, Dosumu, J., (as then was) then
adopted the following passage from the judgment of Holroyd Pearce, L.J. in
Yeoman Credid Ltd. v. Apps.[1962] 2 Q.B. 508 at P. 520.

23
 Whether there has been a breach of fundamental
condition of the agreement is a question of degree
depending on the facts. Such a breach is different in
weight and gravity from breaches of condition which
would come within the exemption. There may be, as in
Pollock & Co. v. Mcrae, 1922 S.C. (H.L.) 192 (and in the
present case) an accumulation of defect which, taken
singly, might well have been within the exemption clause,
but taken en masse constitute such a non-performance or
repudiation or breach going to the root of the contract as
disentitles the owner to take refuge behind an exemption
clause intended only to give protection to those breaches
which are not inconsistent with and not destructive of the
whole essence of the contract.

It was, therefore, held that the defendants were not entitled to protection under
the exemption clause.

Although the terms are often used as if their meanings are the same, a
fundamental breach differs, at least conceptually, from a breach of a fundamental
term. Thus, as noted in the earlier case of Smeaton Hanscomb & Co. Ltd. v.
Sasson I. Setty & Son Co. (No. 1) [1953] 2 All E.R. 1471 Delvin, J. defined a
fundamental term as “something which underlies the whole contract so that if it is
not complied with, the performance becomes something totally different from
that which the contract contemplates.

Thus, with regard to a breach of a fundamental term, the emphasis is on the

character of the term itself and not on the consequences of the breach. However,
with regard to a fundamental breach, the emphasis is on the character of the
breach itself and “whether in consequence of it, the performance of the contract
becomes something totally different from that which the contract contemplates”.
See Viscount Dilhorne in the Suisse Atlantique case, [1966] 2 All E.R. 61 at p. 68.
However, the consequences of a breach of a fundamental term, and a
fundamental breach, quite often are the same, namely, the right of the aggrieved
party to repudiate the contract, and claim damages, and the inapplicability of any
exemption clause inserted for the benefit of the party in breach.

The principle that a guilty of a fundamental breach cannot avail himself of an

exemption clause, no matter how comprehensively couched, was so widely

24
adopted and applied to different types of contracts that a substantive rule of law
virtually emerged to the effect that a party who has been guilty of a fundamental
breach, or breach of a fundamental term of a contract, cannot rely on an
exemption clause inserted in the contract for his benefit. The principle has been
applied in the following situations:

(1) Hire-Purchase Agreements

In Karsales (Harrow) Ltd. v. Wallis see p. 137, above, W. agreed to buy a
buick car under a hire-purchase agreement which included the clause: “No
condition or fitness for any purpose is given by the owner or implied therein.” One
night the car was towed to W’s house by the agent of the finance company and
when W. found it the next morning, parts of the car were missing, others were
broken, and it was incapable of self-propulsion.

W. refused to pay the instalments and was sued by the plaintiffs who relied on
the exclusion clause to protect them from their obvious liability. It was held by
the Court of Appeal that an exclusion could not protect them from breach of the
degree and gravity of a fundamental breach.

(2) Bailment
In Alexander v. Railway Executive, [1951] 2 K. B. 882; [1951] 2 All E. R.
442 the plaintiff deposited his trunk boxes at the defendants’ “left luggage”
office. In the plaintiff’s absence, the defendants permitted another person to have
access to the luggage, who unlawfully removed some items from them. In spite of
an exemption clause excluding the defendants from liability for loss, misdelivery
or damage to any articles exceeding 5 pounds, the defendants were held liable
for breach of contract. By deliberately allowing an unauthorized person access to
the luggage, the defendants had committed a fundamental breach of the
contract. Also in Sze Hai Tong Bank v. Ramber Cycle Co. [1959] A. C. 576.
bicycle parts were shipped to Singapore to be delivered to the order of the
plaintiffs. The carriers delivered the consignment to a third party whom they
knew had no authority to receive them. When sued, they denied liability by
relying on an exemption clause which provided that the responsibility of the
carrier was to cease absolutely after the goods had been discharged. It was held

25
that the exemption clause did not protect the carriers against such a deliberate
misperformance.

(3) Sale of Goods

As Lord Abinger stated in Chanter v. Hopkins, if a man supplies beans when he

is supported to supply peas, this is not a breach of condition, but non-
performance (1838) 2 Mt. W. 399. In Ogwu v. Leventis Motors [1963]
N.R.N.L.R 115 the appellant agreed to buy a one-year-old lorry with registration
number BYA 648 from the respondents. The lorry actually delivered was a four-
year-old one. In answer to the appellant’s action for breach of contract, the
respondents pleaded that they were exempted from liability by an exemption
clause which expressly exclude any warranty or otherwise as to description, state
quality, fitness, roadworthiness or otherwise of the lorry. It was held that an
exemption clause in a contract only avails a party when that party is carrying out
the contract in its essential respects.

(4) Deviation Cases.

It has been held in several cases that a ship-owner who departs from the agreed
route without justification would lose the benefit of any exemption clause inserted
into the carriage contract. By deviating from the agreed route, he has “stepped
out” of the contract and cannot rely on any exemption clause in it. And this is so
even if the injury suffered by the consignor or consignee did not arise out of the
deviation.

Thus in Thorley v. Orchis SS. Co. Ltd., [1907] 1 K.B. 660. see also James
Morrison & Co. v. Savill & Albion Co. [1916] 2 K.B. 783. although there was
a deviation from the agreed route, this was not the cause of the damage to the
cargo of beans. The damage was done when the beans got mixed with poisonous
earth. Nevertheless, it was held that the carrier could not rely on an exemption
clause because of the deviation. This was followed by the House of Lords in Hain
SS. Co. Ltd. v. Tate & Lyle [1936] 2 All E.R. 597 where Lord Atkin stated that
a deviation is a breach of such a serious character that no matter how slight it is,

26
the other party to the contract is entitled to treat it as going to the root of the
contract and to declare himself as no longer bound by the terms.

Cases of carriage of goods by road and rail involving deviation, and the
warehouse cases have developed along parallel lines.

Thus, in Gunyon v. South Eastern and Chatham Ry. Co.’s Managing

Committee, [1915] 2 K.B. 370; 84 L.J.K.B. 1212 where fruit was carried by
goods train when the contract stipulated that it should be carried by passenger
train, an exemption clause was held not to apply; and in Lilley v. Doubleday
(1881) 7 Q.B.D. 510 in which the defendant who, having agreed to store goods
in his warehouse stored them in another warehouse where they were destroyed
by fire, it was held that an exemption clause made for his benefit did not apply.

See Turner v. Green (1895) 2 Ch 205. See also Smith v. Hughes (supra). See
Percival v. Wright (1902) 2 Ch 421.

FACTS;- The plaintiff agreed to sell his shares in a company to three directors
of the company. After the sale, he then discovered that at the time he agreed to
sell his shares to the directors, there was a standing offer by a 3 rd party to buy the
company’s shares at a much higher rate than he got it from the directors and that
the latter had intended selling the shares they brought from him to that 3 rd party.
In an action for rescission brought by the plaintiff on the ground of
misrepresentation (i.e. failure on the part of the directors to disclose the
favourable offer made by the 3 rd party), it HELD that there was no fiduciary
relationship between the directors and the plaintiff and there was therefore no
duty to disclose.

EXCEPTIONS TO THE GENERAL RULE

1. If it is a half-truth or party true. See Curtis v. Chemical Cleaning and Dyeing
Company (1951) 1 KB 805 (supra), Nottingham Patent Brick and Tile
Company v. Butter (1886) 16 QBD 778.

FACTS:- In this case, the purchaser of a piece of land asked the Vendor’s
solicitor whether the land was subject to any restrictive covenants. The Solicitor

27
replied that he was not aware of any, but failed to say that he had not read the
relevant documents. It was HELD that the Solicitors reply constituted a
misrepresentation. John Holt & Company Liverpool Ltd. v. S. A. Oladunjoye 13 NLR
1 (Sagay).

FACTS:- The plaintiff described one killa, one of their produce buyers, who had
incurred a loss of £600 as “a good produce buyer” to the defendant, who agreed
to guarantee killa for a new produce buying agreement, after the £600 loss
arising from the 1st agreement had been written off by the plaintiff. They did not
inform the defendant about their earlier transactions with killa. It was HELD that
to represent killa as a good produce buyer to a prospective society without
disclosing the fact of his defaulting to the extent of €600 on his previous dealings
was a definite misrepresentation, of such a material nature as to entitle the
surety to avoid his obligation under the bond, into which he was induced to enter.

2. Where it involves a change of circumstances. Davies v. London &

Provincial Marine Insurance Company (1878) 8 Ch 469. With v.
O’Flangan (1936) Ch 575.

FACTS:- The defendant who was negotiating with the plaintiff to sell his
(defendant’s) medical practice to the plaintiff; informed the latter in January 1934
that the practice was worth £2,000 per annum. By May of the same year when
the contract was signed, the defendant was seriously ill and the receipts had
fallen considerably, and he was now earning only €5 a week. He did not inform
the plaintiff this change in the practice. When, on discovering this, the plaintiff
brought an action for rescission, it was HELD that the defendant ought to have
communicated the change in his circumstances to the plaintiff. The original
representation was made to induce the plaintiff to enter into the contract, and
this continued until the contract was signed.

3. Contract Uberrima Fides i.e. contracts of the Utmost Good faith e.g.
insurance contracts or Trusts. Here there is a duty to disclose all material facts.
Lord Atkin in Bell v. Level Brothers (1932) AC 161 Stated as follows “There
are certain contracts expressed by the law to be contracts of the utmost good
faith where material facts must be disclosed if not the contract is voidable.

28
Apart from special fiduciary relationships, (relationships of Trust) contracts for
partnerships and contracts of Insurance Contracts in respect of MARINE, fire or
life protection etc. which may be avoided on the grounds of non-disclosure of
material facts even Restitution in Integrum is no longer possible i.e. (taking
the parties back to their original position). “In such cases the duty does not arise
out of the contract the duty of the person proposing an insurance arises before
contract, is made so also that of an intending partner”. The reason for Uberrima
Fides Rule is that they are contracts in which one party is in a superior position
to know the fact when compare with the other this means that one of the parties
is presumed to have means of knowledge which are not accessible to the other
and therefore bound to tell him everything which may likely effect his judgment.
See Seaman v. Foreran (1743) 2 Stid 1183. The assured concealed a report
that a ship was last seen in a position of danger. The assured concealed a report
that a ship was last seen in a position of danger. The ship escaped on that
occasion but was later captured by the Spaniards. It was held the policy could be
avoided for non-disclosure. See also Hood v. West End Motor Car Parking
Company. (1917) 2 KB 38. See Locker and Woolf Ltd v. Western
Australian Insurance Company Ltd. (1936) 1 KB 408.

Please Note:- that fiduciary relationships are confidential relationship between

contracting parties which also give rise to a duty to disclose. The applicable rule
here is sometimes known as The Equitable Doctrine of Constructive Fraud
e.g. Parent/Child Relationship; Relationship between Partners.
Please Note;- that misrepresentation may be by conduct. Lord Campbell said in
Walters v. Morgan (1861) 3 D, F & J 718 as follows “A single word or )I may add) a
nod or a wink or a shale of the head or a smile from the purchaser intended to
induce…” may have legal effect. Thus, if a seller conceals a defect in an article
sold, such concealment may be equivalent to a fraudulent misrepresentation that
the defect does not exist. See R.v Barnard *1837) 7 C & P 784 where the
defendant went into a shop in a University town wearing a University Cap & Gown
and thus representing by his conduct that he was an undergraduate. It was held
that he was liable on the contract.

Please Note:- The misstatement must be made by one of the contracting parties
or their appointed agents. The person bringing an action must be the person to
29
whom the statement was made or the person to whom the representation
intended the statement was made or the person to whom the representation
intended the statement to be passed or he must belong to the class at which the
statement was directed. The person must have been induced to enter the
contract if he investigates and discovers the misrepresentation obviously there is
no claim but even if he does not, he still cannot claim unless he was influenced by
the misrepresentation.

See Attwood v. Small (1838) C L & Fin 232. In which a vendor offered to sell
a mine and exaggerated its capacity. The buyers appointed experts agent to
investigation the mine. The agents wrongly reported that the vendor statement
were true. The contract of sale was then completed. In an action for
misrepresentation, it was held that the buyers could not succeed because they
had relied on the judgment of their expert engineers and not that of the sellers.

TYPES OF MISREPRESENTATION
There are 3 types of misrepresentation namely:-
1. Fraudulent misrepresentation
2. Negligent Misrepresentation
3. Innocent Misrepresentation

FRADULENT MISREPRESENTATION
Fraudulent misrepresentation is a false statement falling within the definition of
Lord Herschell in Derry v. Peek (1889) 14 AC 337 “A false statement is fraudulent
at common law if it is made knowingly or without belief in its truth or recklessly,
careless whether it is true or false”. It is necessary to prove the absence of an
honest belief in the truth of the statement.

Please Note:- that fraudulent misrepresentation is known under the Law of Tort
as Deceit. Furthermore, Lord Herschell stated that “To prevent a false statement
being fraudulent there must always be an honest belief in its truth. If fraud is
proved, motive of the person guilty is immaterial. See Derry v. Peek (supra)
where House of Lords held that the directors of a company which had issued a
prospectus falsely stating that it was authorized to use steam power to run trains
and thereby induced the plaintiff by the misrepresentation into as they honestly

30
believed that what they asserted was true. See Akerheilin v. de Marc (1959)
AC 789.
Abba v. Mandilas & Karaberis Ltd. (1964) 2 ALR 241 (sagay)

FACTS:- The plaintiff in this case alleged that she has sold her car the
defendant company on the understanding that it would be in part exchange for a
new car a particular brand known as Volkswagen Karman Glia. Accordingly to her,
the defendants had failed to produce this car after she had sold her car to them.
She, therefore brought this action for deceit on the ground that she was induced
by the defendants fraudulent misrepresentation to part with her own car. It was
HELD on the evidence before the court that there had been no representation at
all, and that an official of the defendant company had on personal basis merely
helped the plaintiff to find a buyer for her car. There was no promise to sell her
another car in place of her own. Sule v. Aromire 20 NLR 20 Udogwu v. Oki
(1990) 5 NWLR 721. Kuforiji v. V.U.B.A (1981) 6-7 SC.R 40.

REMEDIES
1. In Tort, an action for deceit and in addition to an action in contract for
fraudulent misrepresentation.
2. Affirmation of the contract because as we said already, The contract is
voidable
3. Disaffirmation of the contract and refusal of further performance.

Therefore the aggrieved party can either take no legal action and plead fraud as a
defence or he can bring an action for recission of the contract. See Salism
Bamgbale v. Deputy Sheriff Lagos & C.F.A.O (1966) 2 All NLR 102.

INNOCENT MISREPRESENTATION
Originally, before the decision in Hedley Bryne & Company Ltd. v. Hellers &
Partners Ltd. (supra) “Innocent” means Innocent Fraud. This definition is still
retained but sometimes subdivided by legal scholars/writers into:

(a) Negligent
(b) Non-Negligent

31
It may however be generally taken that innocent misrepresentation is one which
is neither fraudulent nor Negligent. An innocent misrepresentation therefore is a
false statement however made with an honest belief in its truth. The test of
honesty is subjective.

REMEDIES
1 At common law a party may affirm the contract and treat it as binding. No
damages are awarder for innocent misrepresentation at common law. In
equity, the party may disaffirm the contract by giving notice to the other
party to that effect.
2. Secondly, by bringing an action or counter-claim for recision and he must
be prepared to return any money or property transferred to him from or by
the other party i.e. Mutual Restoration.
3. Thirdly, burdens or obligations passed to the other part must also be taken
back i.e. indemnification must occur and Restitution in Integrum must
still be possible.

NEGLIGENT MISREPRESENTANTION
A misrepresentation is said to be negligent if it is made carelessly and in breach
of a duty owed by the representor to the representee to take reasonable care that
the representation is accurate usually in cases of fiduciary relationship. Saf Alli
v. Sydney Mitchell & Company (1980) AC 128.

ILLEGALITY
Illegal contracts under the law of contract involve criminal liability as well as other
situations where there may be ordinary Moral Blame Worthiness or wrong on the
part of the contracting parties. Since the 19 th Century the courts have recognized
that illegal contracts are void.

Illegality may be due to express Provision of statute or they may be contrary of

Public Policy. Public Policy (please note) is a vague notion and it has been
described to be an unruly horse which can lead anywhere as Per Burrough J. in
Richardson v. Mellish (1824) 2 Bing 229 at 252.

32
Illegality of contracts and the attitude of the courts to them is hinged on 2 basic
maxims provided at Common Law. (1) Exturpi Causa non oritur action i.e. No
Action arises from a base cause. It is also known as Ex dolo Malo non oritur Actio
In pari delicto portior est condition defendentis i.e. Where there is equal fault the
defendant is in the stronger position. Explaining the Rationale behind these 2
maxims. Lord Mansfield in Holman v. Johnson stated “the objection that a
contract is immoral or illegal as between plaintiff and defendant sounds at all
times very ill in the mouth of the defendant. It is not for his sake however that the
objection is ever allowed. But it is founded on general principles of policy which
the defendant has the advantage of contrary to the real justice as between Him
and the plaintiff by accident if I may so. The principle of Public Policy is this Ex
Dolo Malo non oritur Actio. No court will lend its aid to a man who founds his
course of action upon an immoral or illegal act . . . . it is upon that ground, the
court does not for the sake of the defendant but because they will not lend their
aid to such a plaintiff so, if the plaintiff and he defendant were to change sides
and he defendant was to bring his action against the plaintiff. The latter will then
have the advantage of it. For where both are equally in ffault “Portir est
Conditio defentis”. Thus, if the plaintiff cause of action arises from the breach
of an illegal contract the general rule is that the court will not entertain the
parties and will make no order as to damages or cost. See Archbold v.
Sttanglett (1961) 1 AER 417.

1. EXAMPLE OF ILLEGAL CONTRACT

Contracts illegal by statute:- Such contract are prohibited by statute either
expressly or impliedly. For Express Prohibition. See Re-Mahmoud and
Ispahani (1921) 2 KB 716. See Sodipo v. Lemmikainem (1986) 1
NWLR PT. 15 at 220. Warri Esi v. J. A. Moruku 15 NLR 116. George
v. Dominion Flour Mills Ltd. (1963) 1 All NLR 71. Ibrahim v. Osim
(1987) 4 NWLR PT. 67 AT 165. Nwasike v. Onunamwzw (see Sagay).
See Solanke v. Abed Ogunnowo (1962) NRNLR 92.

2. IMPLIED PROHIBITION

33
 See Cope v. Rowlands (1836) M&W 149. In which a statute
provided that any person who acted as a broker (Insurance) in the city of
London without any person who acted as a broker (Insurance) in the city of
London without a license should forfeit the sum £25 to the city. The plaintiff
who was unlicensed did some for the defendant in buying and selling
stocks. He failed to recover his fee in action instituted by him.

It was held that the clause in the statute imposing a penalty must be taken
to imply that all contracts which such unlicensed persons make for
compensation for work done were also prohibited

See again Archbold v. Stanglett (supra) please note that some

contracts are illegal in themselves e.g. See the Mahoud’s case (supra).
There are also contracts that are illegal in performance, i.e. the manner in
which it is performed Arderson v. Daniel (1924) 1 KB 138.

3. CONTRACTS ILLEGAL AT COMMON LAW

This arises from an interpretation of the Doctrine of Public Policy. They
(such contracts) are said to be ‘INJURIOUS’ to the society and therefore so
objectionable that they are not only void but also illegal. A contract in this
group must be so transparently judged by any standard moral. That it must
be dismissed as illegal. See (Cheshire and Fifoot).

1. CONTRACTS TO COMMIT A CRIME TORT OR FRAUD

See Everet v. William (1899) 1 QB 826. Allen. Rescons (1678) 2 Lev
174. Contract to beat up a 3rd party for the sum of £10 and it was held that
he could not recover the sum Clay v. Yates (1856) 1 H&N 73 which
involved an agreement about a document containing libelous matter should
be published was held to be illegal and the publisher was therefore entitled
to abandon the contract on discovering this fact.

2. CONTRACTS THAT ARE SEXULLY IMMORAL

Therefore a contract tending to promote sexual immorality is illegal at
common law, thus where the consideration is an act sexual immorality for
future illicit cohabitation then the contract is illegal at common law. Where
34
 the prupose of the contract is the continuance of sexual immorality and this
is known to both parties, the contract is illegal. See Upfill v. Wright
(1911) 1 KB 506. Pears v. Brooks (1866) LRI Ex 213.

CONTRACTS AGAINST THE INTEREST OF THE STATE

For example contracts which would benefit any country with which Nigeria is at
war. Such contract will be totally illegal if made during the war. However if made
before the was existing mutual obligations would be suspended until hostilities
have ceases. Forster v. Driscoll (1929) 1 KB 170.

CONTRACTS TO DEFRAUS THE REVENUE

Such contracts may occur at national or local level and are illegal. e.g. contracts
promoting corruption and contracts prejudicial to the administration of justice.
See Pioneer Industrial Trading Company v. Akinyele Unreported decision
of Sowemimo (ACJ) 1969. The defendant a Nigeria Solicitor and the plaintiff a
foreign company contractually agreed to trade in second hand clothing which
were to be shipped to Nigeria. This action was brought upon the failure of the
defendant to pay for the goods. It appeared in the evidence that the parties had
put false lower prices on the invoices for the goods in order to reduce custom
duties. The defendant argued that the contract was thus illegal because it was an
attempt to defraud Nigeria Government from collecting the Correct Revenue of
Custom duties. It was held for the plaintiff on the strength of the principle in
Pellecat v. Angell (1935) 150 ER 135 that the subject of a foreign company is
not bond to pay allegiance or respect to the revenue of another contract.

Therefore because the suggestion to defraud the Nigeria Revenue appeared to

have come from the defendant, the plaintiff had done nothing illegal and could
claim. Sagay has criticized the decision in this case mainly on the ground that the
Learned Judge over look the qualification in Pellecat’s case that “where the
foreigner comes within the act of breaching the Revenue Laws itself, he cannot
recover the fruits of his illegal Act”. Therefore according to Sagay as it was
proved that the plaintiff actively participated in putting false prices in the invoices
for the goods for the purpose of reducing custom duties they both had attempted
to defraud Nigeria Government of Revenue and thus the contract was both illegal

35
and immoral as being contrary to public policy. Although the defendant had
wanted to take advantage of the principle of Exturpi Causa no court will lend his
aid to such a illegal act Ex dolo malo. See Regazzioni v. K.C. Sethia (1958)
AC 301.

CONTRACTS PROMOTING CORRUPTION IN PUBLIC LIFE.

Such contracts involve Bribing Govt. Officials or attempting to buy official
honours. e.g. OFR, MON, SAN e.t.c. See Parkinson v. College of Ambulance
(1925) 2 KB 1. See Golden Okoronkwo v. P.C. Nwoga Unreported Case of
1972 per Okagbue J.
Here, the plaintiff a contractor and defendant a public officer made a contract
agreeing that the defendant should ensure that the plaintiff won certain contracts
in return for £7,500 and a Volkswagen Car. The plaintiff sued for recovery of
money paid when he failed to get the contract. The contract held that the
contract was illegal and it refused to lend its and to the plaintiff who was no fool
by any stretch of imagination in giving £7,500 and car to the defendant. He went
in for a kill that misfired and could not succeed in his action without pleading that
he had offered a bribe to a public officer.

CONTRACTS WHICH INTERFERED WITH THE ADMINSTRATION OF JUSTICE.

A contract which tends to pervert the cause of justice i.e. to compromise or
prevent a prosecution from taking its normal cause is illegal and contrary to
public policy.

See Kearley v. Thompson (1890) 24 QB 743 this involved an agreement

between the plaintiff and defendant firm of Solicitors for the defendant not to
appear at a 3rd party’s public examination for bankruptcy upon the payment to
£40. The defendant did not appear accordingly. Before the 3 rd party could be
discharged the plaintiff brought an action to recover the £40 from the defendant.
It was held that the action failed because the agreement was illegal and the sum
irrecoverable because it tended to pervert the course of justice. See Sagay on
contract Pg. 346-347.

REMEDIES AND CONSEQUENCES OF ILLEGALITY.

36
Where all other requirements are satisfied a contract will still be regarded as
being void and unactionable if its object is illegal e.g. (1) If it violates the laws of
the land expressly or impliedly (2) If it is contrary to public policy, where a
contract is illegal as stated above, the consequences are as follows:-

(1) The contract is void ab Initio – from the onset and no action can lie on it
based upon the rule Ex turpi causa non oritur action (No disgraceful
matter can ground an action or an action does not arise from illegal and
immoral act).
(2) Any money paid or property transferred by one guilty party to another
under the contract is irrecoverable. See Taylor v. Chester (1869 4 QB
309.

In such a case, the position of the guilty party to whom the money or property is
transferred i.e. the defendant is stronger in law and he therefore keeps what he
receives. The maxim which underlies this principles in In Pari delcito rule where
the parties are equally at fault the defendant is in the stronger position. However,
money paid or property transferred may be recovered. Where the plaintiff can
satisfy the court that he and the defendant are not in pari delicto.

In Pari Delicto, Potior Est Conditio Possidentis (Defendants) In case of equal

or mutual faults, between the parties, the condition of the possessor in the
defendant is the better one.

1. If the disclosure of the illegality is not essential to the cause of action. See
“Illegality and Equitable Interest” by A.G.J Berg. In the Journal of
Business Law Nov. 1993 – Pg 513-518.

TInsely v. Milligan (1993) 3 AER 65. In this case, Miss TInsely and Miss
Milligan had jointly contributed to the purchases prince of the house in which they
live together however to enable Miss Milligan to make fraudulent claims on the
dept of social security, they had agreed that the title to the house should be held
I the sole name of Tinsely. They later quarreled and Miss Tinsely moved out. Miss
Tinsely subsequently brought an action claiming possession and asserting
ownership of the whole house. Miss Milligan counter claim for a declaration that
Miss Tinsely held the house on a resulting and Miss Milligan in equal shares. The

37
House of Lords upheld the Country court Judges decision to great the declaration
sought by Miss Milligan. A narrow majority of the House of Lords extended the
common law rule known as Bowmake’s rule to equitable interest in common
law to the effect that a property interest arising from a transaction which the
claimant entered into for an unlawful purpose will be given effect to by the court.
If the claimant can establish his interest without any illegality, the majority held
that provided that the claimant does not have to rely on his illegality. The
principle that he who comes the equity must come with clean hands does not
require the court to refuse to assist the claimant to recover his Equitable Interest.

2. If the transferor is not in pari delicto with the transferee (equally

guilty) e.g. where A statute protects a particular group of person (e.g.
Insane person) i.e. the plaintiff of whom the transferor has been a victim of
fraud duress or oppression at the hands transferee or where the transferee
in a fiduciary position, towards the transferor and abused it.

3. If the contract is still executory and the transferor repents before the
contract is substantially performed. See Bigos v. Bousted (1951) 1 All
ER 92. Therefore where no substantial part of the illegal Act has been
performed. A party who truly repents would be able to recover; the law
therefore allows the party. A locus poenitentiae i.e. An opportunity to
change their minds. Such a party may be able to recover property or
money that has passed but the repentance must be genuine and not just
due to circumstances beyond his control.

4. A subsequent transaction between the parties which is founded on or arises

from the illegal contract is also illegal and void.

See Abcos Ltd. v. KWPT LTD (1987) 4 NWLR Pt. 67 at 894. See also
First Bank Nig Ltd v. Pan Bisbilder (1990) 2 NWLR Pt 134 at 647.
See Agwuneme v. Eze (1990) 3 NWLR Pt. 137 at 242. See Ekwunife
v. Wayne W/African Ltd. (1989) 5 NWLR Pt. 122 at 422. See Amign
v. Nzeribe (1989) 4 NWRL Pt. 118 at 755.

DURESS AND UNDUE INFLUENCE

38
A person who has been forced into a contract which obviously he did not enter
voluntarily may obtain remedy at common law or in equity depending on whether
the coercion amount to duress or undue influence.

If he successfully proves duress. a voidable contract ensue which can be avoided

or cancelled as of right under common law. On the other hands if he proves
undue influence the contract would be set aside at the court’s discretion on
equitable grounds.

Where there is a doubt as to whether the act of coercion of fore amounts to

duress or undue influence. The plaintiff is advises to base his action on duress
and in the alternative on undue influence. Thus if he fails on the 1 st ground the
court can in its equitable jurisdiction consider to set aside the contract on the
second ground.

DURESS
Traditionally duress means Actual Violence or threats of violence inflicted
personally on a contracting party or on those closely related to him e.g. Where he
is threatened with imprisonment or with the dishonor of a member of his family.
Duress is common law doctrine and where it exists. The real consent of the
contracting party cannot be said to have been freely given and the contract is
voidable at the instance of the coerced party. See Nadoze v. Dizengoff
W/African Ltd. (1967) 1 ALR (comm.) 255. Also Cumming v. Ince (1847)
11 QB. An inmate of an Asylum agreed to make certain assignment in respect of
her property in return for the suspension of the order of Lunacy on her. It was
held that the agreement was not binding as consent has not been freely given.
See Barton v. Armstrong (1976) AC 104.

UNDUE INFLUENCE
This is a discretionary equitable remedy. It has no precise definition because its
categories are not close. The courts are careful not to define it so as not to limit
their equitable jurisdiction in this area Lord Justice Lindley in All Card v. Skinner
(1887) 36 Ch 145 explains “As no court has ever attempted to define fraud so,
no court has ever attempted to define undue influence which includes one of

39
many varieties”. Such varieties include:- (1) Those existing under special fiduciary
relationship and (2) Those that do not.

1. Those that exist under Special Fiduciary Relationship such as solicitors and
client. See Williams v. Franklin (1961) 1 All NLR 218. See Wright v.
Carter (1903) 1 Ch 27.
2. Parent/Child as Bainbridge v. Browne (1881) 18 Ch 188.
3. Religion Adviser/Follower. Pastor/Member. See All Card v. Skinner
(supra).
4. Trustee/Beneficiary.

In such situations, one party is in dominant situation over the other. The
presumption under undue influence places the onus of disprove on the dominant
person to disprove undue influence in order to uphold the contract or else the
contract would be set aside. See Re-Craig (1971) Ch 95. See Lloyd Bank v.
Brundy (1975) QB 326.

The presumption of Undue Influence rebuttable by the person benefiting during

the existence of the Special Fiduciary Relationship by proving that the transaction
was fair and was obtained by abuse of confidential trust. And so he must prove:-

1. That consideration given the dominant person was adequate.

2. That the plaintiff had competent independent advise with full disclosure of
all material and relevant facts.
3. That in the case of a gift by way of deed and that it was done
spontaneously.

Firstly, the presumption may fail if there was affirmation by the complainant after
the influence or after the relationship had ceased and then secondly if the
doctrine of laches operates then the complainant would fail. Laches is an
equitable principle measuring that a person has prolonged and
neglected to assert his right. The assumption then is that he has rectified the
contract.

Thirdly if 3rd parties acting in good faith and for value have acquired rights under
the transaction, a claim for recission would fail.

40
ECONOMIC DURESS
The remedy of Equitable Recission may also be granted by the court in
circumstances which are outside the normal scope of Undue Influence situations.
Contracts can be made voidable due to economic duress i.e. Where Audu applied
strong financial pressure on Shehu so much so that Shehu’s consent is said to be
vitiated. See North Ocean Shipping Company Ltd. v. Hyundai Construction
Company Ltd. (1979) QB 705. In that case the Hyundai Construction Ltd.
agreed to build a tanker for North Ocean for about £30,000 payable in 5
instalments.

After North Ocean paid the 1st instalment, the value of the dollar fell and Hyundai
threatened not to complete the tanker unless North Ocean agreed to pay a 10%
price increase knowing that North Ocean had contracted to charter the tanke on
completion to a 3rd party. North Ocean therefore had to agree to the price
increase. Some months after taken delivery of the tanker, North Ocean claimed
that the agreement to pay the increase was not binding and sought to recover
the extra 10% paid. The court HELD that the agreement to pay the price was
supported by sufficient consideration but went on to hold that although that
agreement had originally being voidable for economic duress, North Ocean had
lost the right to rescind because of its affirmation.

DISCHARGE OF CONTRACTS
The discharge of a contract means the extinction of all contractual obligations
and corresponding rights under the contract. A contract may be discharge in
several warp:-

1. By Performance
2. By Agreement
3. By Acceptance of Breach
4. By Frustration

The doctrine of frustration states that parties to a contract are excused during
further performance of their obligations of some unexpected events occurs during
the existence of the contract without the fault f either party which makes further
performance impossible or illegal or which makes it something radically different

41
from what was originally intended. This doctrine has no application where the
parties have expressly for the contingency which has occurred or where the
frustrating event was self induced or was foreseen.

Furthermore a contract does not become frustrated merely because its

performance has become mare onerous (difficult) or less profitable than originally
envisages.

The courts have repeatedly held that the doctrine is not applicable to leases and
so the tenant remains liable on His covenants regardless of any supervening
event affecting the lease property. This is based on the principle that a lease is
more than just a contract because it creates an interest in land which is the
subject matter of the contract and this wives even though the tenant derives no
benefit from the agreement. See Trickle wood Property and Investment
Trust Ltd. v. Leighton’s Investment Trust Ltd. (1945) AC 221. See also
National Carries Ltd. v. Pand Rind Northern Ltd. (1981) 2 WLR 45.

Please Note the plaintiff events which amounts to frustration i.e. where frustration
will occur.

1. Where performance of the contract becomes illegal e.g. Ugoma v. Ugoma

1965 – 66 NMLR 88 where a contract to elect a building on a designated
site was held to be frustrated when the Lagos Executive Dev. Board acting
on its statutory power prohibited the erection of any building in the locality.
Poole & Company Ltd. v. Agbaje (1942) 4 NLR 8.
2. If the subject matter of the contracts is destroyed, As in Taylor v.
Caldwell (1863) 3 B & 5 826. In which the defendant Caldwell agreed to
let Taylor use a certain hall known as Swary Gardens & Music hall on 4
stated day for the purposes of holding concerts. Just before the 1 st of these
days, the hall was burnt down. Te plaintiff sued damages for breach of
agreement. It was held that the contract was frustrated.
3. Death:- If either party to a contract for personal services i.e. a personal
contract dies or becomes ill as in Robinson v. Davidson (1871) 6 LR Ex
269 or he is called up for military service as in Morgan v. Manser (1948)
1 KB 184. Or is in prison as Hare v. Murphy Powthers Ltd. (1971) 1 Cp

42
 603. Each of the circumstances stated above would virtually defeat the
whole contract.
4. Un Availability:- A contract may be frustrated if a thing or person
necessary for its performance seizes to be available as in Morgan v.
Mansel (supra) where a music wall artiste was appointed manager of the
music hall for 10 years under a contract from 1938. The contract was
frustrated when the artiste was called up for military service.
5. Cancellation of An Event or No-Occurrence of in Event:- The whole basis
of contract may e removed or frustrated if scheduled event does not occur
or if it cancelled as in Krell v. Henry (1903) 2 KB 740 where Henry had
acquired a son in Pallmall for certain days in order to be able to watch
Edward the 7th cownation processions. The king fell ill and the processions
were postponed. It was held that contract was frustrated. See also
chandler v. Webster (1904) 1 KB 493

Please Note:- Such contract (frustrated contracts) are terminated as to the future
only unlike a contract that is vitiated by mistake. Thus, a frustrated contract does
not from the time of Frustration. Therefore from the beginning of the contract to
the time of its frustration the contract is valid.
This has 2 effects:-

(1) Only the right which have become vested or money which was become due
and payable at the time of the frustration are enforceable.
(2) Money which under the contract is payable in advance seizes to be so
payable if the frustrated event occurs before if it is due for payment.

Please Note: - that At Common Law the effect of frustration is to Automatically

terminate the contract on the occurrence of the frustrating events and both
parties are excused from further performance.
(3) The right accruing before frustration occurs remain unaffected except that
a person who has paid money in advance and who has received nothing for
his payment may recover it because the consideration has wholly failed.

Please Note: That in the Former Western Region of Nig. Lagos State and the
Former Bendel State, statutory modification has been to the common law position

43
as has been done in England (By the law Reform Frustrated Contract Act
1943).

In these states equivalent laws has been passed such as the contract law Cap 26
pf 1978 of Oyo State part 3 Section 6 – 12 namely that money paid before
a frustrating event is recoverable and money due for payment before the
frustrating event seizes to be so payable but if the party to whom such money
was paid or is payable incurred expenses before the time of he frustrating event
in the performance of the contract. The court may allow him to retain or recover
the money not exceeding the amount of expenses.

Please note:- That if nothing was paid or was payable the frustrating event he will
not be able to get any expenses at all.

If one party has for any reason of anything done by the other party in the
performance of the contract obtain a valuable benefit besides money before the
frustration occurred he can be ordered to pay such as the court deemed fit and
just not exceeding the amount of the benefit.

Please note that it is provided that if a contract contains a provision which is

intended to operate in the event of frustration the contractual provision will apply
to the exhaustion of the statutory provision.

REMEDIES
The granting of remedies for breaches of contract is bases on the maxim Ubi Jus
Ibi Remedium – Where there is a right there is a remedy. A right would be
meaningless without the availability of a remedy in the event of an infringement.
A remedy is thus the legal means for the enforcement of the right or for the
recovery of pecuniary or monetary compensation instead of performance. These
are various types remedies in contract.

1. Damages:- This could be liquidated damages or unliquidated damages.

Liquidated Damages:- This where the parties to a contract fix the amount
which is to be paid in the event of a breach and intend it as a genuine pre
estimate of the damages which probably arise from the breach then in a claim for
damages in respect of that breach, the court will award the agreed sum without

44
proof of the plaintiff’s actual loss whether or not it is more or less than the agreed
sum. The sum agreed in this manner was is called liquidated damages. However,
if the parties fix an amount to be paid in the event of a breach for the purposes of
detecting or preventing a bleach and not just as a genuine pre-estimate that sum
of money will be regarded as PENALTY contained on a Penalty Clause and which
will have no effect because the plaintiff still has to prove the actual loss as if there
had been no agreement.

Unliquidated Damages:- Here the court will seek to put victim of the breath as
far as money can in the same position that he would have been if there had been
no agreement. Where there is no effective agreement fixing damages and the
court awards a sum upon prove of actual loss. The damages are rid to bee
Unliquidated. A contractual loss is in general terms the different between the
plaintiff’s actual position and the position he would have been the contract had
been performed.

Equitable Remedies:- Specific performances and injunction. An Equitable

Remedies is one that was originally available in the court of Chancery. Their main
characteristic is their discretionary native.

Please note that the court will not grant an equitable remedies unless it is just/fair
to do so under all circumstances. The court's discretion as of today is however
fettered by and must be exercised in accordance to well laid down principle e.g.
the court will not grant equitable remedies. If the claimant has appropriate
alternative remedies at common law.

Secondly, the court would also not grant it unless the court is able to secure the
execution of the remedy. Thirdly if the claimant has acted importantly. Fourthly, if
the claimant has delayed in banging his action. Fifthly, if the claimant refuses to
comply with rule of equity (clean hands). Sixthly, If granting the remedy would
cause the defendant undue hardship.

SPECIFIC PERFORMANCE.
Specific performance is a decree issued by the court in the exercise of its
equitable jurisdiction. The decree may be granted instead off or in addition to
damage. But it would not be granted where the court considers that damages

45
alone would suffice. See Fakoya v. St. Paul Church Sagamu (1966) ALR
Comm 959. See Cohen v. Roche (1927) 1 KB 169.

Please Note:- That specific performance is usually decree in a contract for

sale and purchase of land because the law regard damages as being in adequate
in s situation where the Vendor hard disappointed the purchaser by refusing to
transfer the ownership of the property to him.

INJUNCTION.
This is another equitable remedy which has the effect of ordering a person to do
or refrain from doing a particular act; thereby preventing him from acting in a
manner which will necessarily involve a breach of his contractual obligation. The
remedy is useful in contract for he purposes of emergency the performance of the
contract involving personal service. The remedy is only available negative
stipulation to which it can attach. It is reatricitve and prohibitory in nature. See
Warnes Porothers Pictures Inc v. Nelson (1937) 1 KB 209 in which a film
actress Nelson agreed to act for Warner for a fixed period and for no other person
without the plaintiff’s written consent. Nelson contracted to act for a 3 rd party and
Warners sought an injunction which was granted. The court was able to attach
the injunction to the Negative stipulation in the contract.

Finally, specific performance and injunction through equitable remedies must be

obeyed once ordered by the court or the defaulting party would be held to be in
contempt of the court and would be subject to a fine or a term of imprisonment or
both. See Rabansi v. Okeh Udoh. See Okey Achike Pg. 311.

46