5 Notable Innovations of the Arbitration & Mediation Act 2023
This infrographic post highlights 5 notable innovations of the Arbitration and Mediation Act, 2023 (AMA 2023)
FINTECH STARTUPS: WHY YOU NEED A LAWYER FOR THAT STARTUP COMPANY.
This video articles shows why fintech startups need a layer to thrive.
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Procedure For Debt Recovery In Nigeria
This infrographic post is about the procedure for debt recovery in Nigeria.
THE 2023 PRESIDENTIAL ELECTION: A CASE OF GRAMMAR VS. GAVEL
SECTION 134 (1) of the 1999 CONSTITUTION provides that in order to be declared the winner of an election, a candidate running for the office of the President of Nigeria must:
a. Have majority of the votes cast in the election; and
b. He has not less than one-quarter of the votes [25%] cast in each of at least two-third of all States of the Federation [24 States] and the Federal Capital Territory, Abuja.
The 2023 General Federal Elections conducted on the 25th of February 2023, resulted in Asiwaju Bola Ahmed Tinubu, the Presidential Candidate of the All Progressive Congress as the winner of the election. However, the results as released by the Independent Electoral Commission [INEC] shows that he was not able to win up to 25% of the votes cast in the F.C.T. This has led to a debate on whether or not, he should be declared the winner, going by the interpretation of Section 134 (b) of the Constitution. There are 2 schools of thought on this:
1. A candidate needs to score 25% of the total votes in 24 States including the F.C.T.
2. A candidate needs to score 25% of the total votes in 24 States and 25% in the F.C.T too.
Section 6 of the Constitution establishes the Judiciary as the machinery charged with the interpretation of laws. Hence the Supreme Court, being the Apex Court is burdened with this enormous responsibility. In the celebrated decision of Awolowo v. Shagari [1979] Sc 62/1979, the locus classicus which establishes the use of Literal Rule in interpretation of statutes, the Supreme Court held that laws should be given their literal interpretation, especially where there is no ambiguity of any kind.
“When interpreting statutory provisions, it is correct, as submitted by learned counsel for the appellant, that the words used must be given their natural and ordinary meaning except where, to do so would lead to absurdity.”
However, in this instance, the words of the Constitution, though look simple, are quite capable of two different interpretations. As we all know, simple punctuations can render several meanings to a sentence. In the same vein, a statute can be drafted in such a way that it is capable of having different meanings. In such a situation, what should the Courts do? In the same Awolowo v. Shagari, the Court said:
It is also relevant, we think, to point out that anybody called upon to interpret any kind of statute should not, for any reason, attach to its statutory provision, a meaning which the words of the statute cannot reasonably bear. If the words used are capable of more than one meaning, then the person interpreting the statute can choose between these meanings, but beyond that he must not go…. “Judges are not called upon to apply their opinions of sound policy so as to modify the plain meaning of statutory words, but where, in construing general words the meaning of which is not entirely plain there are adequate reasons for doubting whether the legislature could have been intending so wide an interpretation as would disregard fundamental principles, then we may be justified in adopting a narrower construction.“
The Court was basically saying whenever a provision is capable of having two meanings, it would resort to picking one in so far as it is not going beyond both of them.
Furthermore, in a plethora of cases, the Courts have said that the intention of the draftsmen should be considered while interpreting laws, hence, a statutory provision is not given a wrong meaning. The Court of Appeal in P.D.P V. Edevbie [2022] Lpelr-58656 [CA], relying on Saraki V. F.R.N [2016] 3 Nwlr [Part 1500] Page 531, stated that the main object of statutory interpretation is to discover the intention of the lawmaker, which is to be deduced from the language used. But, the question is, how can we truly know and decipher their intentions especially in this particular situation?
The interpretation of Section 134 would have been so much easier if it used the word “including” rather than “and”. In this way, the meaning would be the candidate scoring 25% of the votes in 24 states including the FCT; thereby counting the FCT as the 37th State. But, it does not. Hence, this is subject to an alternative interpretation.
The buck stops at the desk of the Supreme Court. It can elect any of the possible meanings of Section 134 and it would be deemed right. This is because the plain interpretation of the Constitution can result to more than one meaning and in such scenario, the Court is enjoined to make a choice as long as it does not go beyond the possible meanings.
As said earlier, the Supreme Court has a heavy duty to discharge here. English Language is the latest hard nut the Court must crack. A battle of interpretation. Indeed, it is Grammar versus the Gavel.
TEAM VERNIA
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Off Agidingbi Road, Ikeja, Lagos.
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Force Majeure: A Shield and Sword
In preparation for unforeseen or uncontrollable events which may come to light in the course of executing contractual obligations, parties to the contract may insert the Force Majeure clause. The clause entitles parties to a contract to be discharged from carrying out their obligations in the contract as a result of certain specified unforeseen events or events beyond the control of the parties. The consequence of a Force Majeure clause is that any party unable to fulfil its own part of the contract would be excused from performance or the time for execution will be extended to allow the party carry out their obligations.
The Court of Appeal in its decision in Globe Spinning Mills Nigeria Plc. v. Reliance Textile Industries Limited [2017] LPELR – 41433 [CA] reiterated the importance of including a Force Majeure clause in contracts. By virtue of the unexpected global pandemic, the Force Majeure clause has become one of the most essential in Company Contracts. Numerous companies rely on this clause to alleviate the risk of non-performance and take away liability for inevitable and unforeseen occurrences, for example the COVID-19 Pandemic.
Elements of Force Majeure
There are certain indispensable conditions prerequisite to a Force Majeure clause availing the party seeking to leverage on it. These conditions were highlighted by the Court of Appeal in Diamond Bank Ltd V. Ugochukwu (2008) 1 NWLR (Pt. 1067) per Rhodes- Vivour, J.C.A [as he then was]:
“…there must be an event which significantly changes the nature of the contractual rights of the parties that it would be unjust to expect the parties to perform those rights such as: (1) Where the subject matter of the contract has been destroyed, or is no longer available. (2) Death or incapacity of a party to a contract. (3) The contract has become illegal to perform as a result of new legislation. (4) A contract can be frustrated on the outbreak of war. (5) Where the commercial purpose of the contract has failed.”
As rightly stated by Abdu Aboki, J.C.A in Federal Ministry Of Health v. Urashi Pharmaceuticals Ltd [2018)] LPELR 46189 [CA], for an event to be considered as Force Majeure, it has to be unforeseen at the time of entering the contract. The occurrence must be one that could not have been imagined by any reasonable man and inevitable to the parties of the contract. It must also not be as a result of negligence, an act or omission of any of the parties to the contract, the events include both natural and human acts, for example riots, strikes or war.
Essence of Force majeure Clauses
Recently Nigeria Liquefied Natural Gas [NLNG] invoked the Force Majeure clauses in all its Sales and Purchase Agreements (SPA) as a result of its inability to carry out its operations due to the flood in their operational areas, thereby excluding themselves from any liabilities that may arise as a result of the floods causing their inability to operate. Taking into consideration the recent occurrences around the world i.e. the COVID-19 Pandemic, unpredictable weather changes etc., the importance of inserting a Force Majeure clause in contracts cannot be overplayed.
Having a detailed, well-structured and unambiguous Force Majeure clause will save many contractual agreements, while protecting the parties from immense loss and even lawsuits.
Invocation and Limitation
The party relying on Force Majeure has to prove that it is truly incapable of fulfilling its contractual obligations as a result of the occurrence of the event stated in the clause, it must also prove that there was no way it could have foreseen the event.
A Force Majeure claim will not be upheld by the Court simply because the situation is difficult or the circumstances slightly changed; such an event must be one that could possibly not have been envisioned.
These limitations are vital to note because regardless of a Force Majeure clause, the party to a failed contract can still take action against the executor once there is the slightest possibility that such act could have been envisaged. Thus, a Force Majeure Clause can be used as a shield to protect oneself from liability. On the other hand, it can be a sword, to be used against the defaulting party to ensure fulfillment of his obligation.
A Force Majeure is also restricted to the events and the implications of the occurrence of such events covered under the clause.
Conclusion
It is important to note, for parties inserting the clause, it must be couched properly to avoid ambiguity and various interpretations.
Finally, regardless of how well a contract is drafted, the allowance for unforeseeable occurrences should always be created with comprehensive steps to alleviate the effects of such events that could not have been anticipated.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
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AN MOU IS AN IOU: The Enforceability of Memorandums of Understanding
Introduction
A Contract is simply an agreement between two or more parties that is legally binding. Simply put, it is an agreement that the law will enforce.A Memorandum of Understanding on the other hand, is a preliminary to a Contract. It is an agreement that a contract will be entered between parties in future. Perfectly put by the Court of Appeal in Aburime & Anor v. Osunbor [2022] Lpelr-57590 [Ca]:
” Memorandum of Understanding is not the real agreement but a document guiding the future agreement. Its status is something less than a complete contract.……The implication is that its content cannot be enforced. Be that as it may, it remains a document which the parties can refer to for the purpose of reminding them of the content therein.” Per Bola, J.C.A. [PP 11 – 12]
Also, in B.P.S Construction & Engineering Co. Ltd V. Fcda [2017] Lpelr-42516 [Sc], the Supreme Court held per Kekere-Ekun, J.s.c (Pp 20 – 21 Paras B – B):
“…it is clear that a memorandum of understanding or letter of intent, merely sets down in writing what the parties intend will eventually form the basis of a formal contract between them. It speaks to the future happening of a more formal relationship between the parties and the steps each party needs to take to bring that intention to reality.
Therefore, it is clear as crystal that an MOU is not to be enforced. It is a preliminary to a future Agreement to be entered into by contracting parties. An MOU is for the future.
However, for every law, there is an exception. There is a way whereby an MOU can still be deemed an agreement which the Courts would recognize as binding on the parties. Where the parties to an MOU agree to be bound by the terms and conditions, none of them is permitted to later aver that the MOU is not binding. The rules of Estoppel forbid such party. The Court of Appeal in Tower Securities & Investment Co. Ltd. v. Coronation Merchant Bank Ltd (2020) Lpelr -51415 (Ca) per Aliyu, J.c.a (Pp 34 – 36 Paras A – E) explained:
“There is no doubt that an MOU’s status is less than a complete contract. But in the peculiar facts and circumstances of this case under which the MOU was executed, I am confident to hold that the parties intended to be bound by the terms thereof. ……………In the case of B. P. S. Construction Company & Engineering Ltd Vs. FCDA (2017) 10 NWLR (Pt. 1572) 1 or (2017) LPELR-42516 (SC)..………… both this Court and the Supreme Court held in that case, that the parties did not intend to be bound by the MOU, since it only represented a preliminary understanding of the parties’ plan to enter into a contract in the future. But in the case leading to this appeal, the parties did not make the MOU subject to the execution of any further agreement. They intended that it should be binding on them and indeed commenced the execution of the terms therein as noted supra. In this circumstance, the Appellant cannot be allowed to renege from it.”
Also, the Supreme Court held in Adedeji v. Obajimi [2018] 16 Nwlr Part 1644 Page 146 that an MOU was enforceable because the parties intended to be bound, they had intentions to create a legal relationship. The Appellant signed the MOU to pay the sum of N5,000,000 to buy a company [at a particular date] and also a statutory deposit of N500,000 to the Central Bank of Nigeria. It was agreed that in the event of an inconclusive sale, the Appellant would be reimbursed the money incurred for expenses. But the Appellant did not pay the N5,000,000 and he sued for reimbursement. The Apex Court held that he had breached the terms of the MOU as he failed to perform his contractual obligations. There was an intention to be bound and he breached the agreement. Therefore, the MOU was enforceable.
From the above decisions, there is an emphasis to intention to create legal relationships. This element is usually what differentiates contracts from mere agreements. Offer, Acceptance, Consideration and Capacity might all be present but no agreement will receive the force of law if it lacks an intention.
Conclusion
Memorandums of Understanding are generally unenforceable. There are usually preliminaries to future agreements. However, where parties intend to be bound, then they are placed on the same pedestal as Contracts and consequently receive the stamp of enforceability, in which case a Memorandum of Understanding is a binding obligation. Where there is intention, it is no longer a preliminary; it is a debt to be paid. An MOU is thus, an IOU.
TEAM VERNIA
52B, Adeyemo Akapo Street,Omole Phase I Estate,
Off Agidingbi Road, Ikeja, Lagos.
+234 813 830 6975
[email protected]