Extent Of The Applicability Of The Doctrine Of Frustration By Courts

Legalpedia Electronic Citation: {2018} legalpedia CA/YL/42/2016

Areas Of Law: Appeal, Company Law, Court, Jurisdiction, Law Of Contract, Law Of Evidence, Legal Pesonality, Practice And Procedure, Words And Phrases

The Plaintiff/Respondent vide a Writ of Summons and Statement of claim at the Federal High Court, holden at Yola, averred that a contract for the supply of safety equipment was awarded which contract value was N8, 865,000.00 (Eight Million, Eight Hundred and Sixty-Five thousand Naira) only inclusive of 5% VAT and transport and contained in the contract document Ref. No. PHCN/33/2D.030/VOL.1/446/2008 dated 30th September 2008, signed by parties on both sides. Part of the Agreement provided that for 15% down payment of the contract sum to be paid to the Respondent as mobilization fee while the remaining balance was to be paid after certifying delivery of the materials. The Appellants by a letter dated 5th December, 2008 modified some terms of the contract and requested from the Respondent, a bank insurance bond as condition for the release of mobilization fees. The Respondent secured the advanced payment bond from Niger Insurance Plc at the cost of N500, 000.00 (Five Hundred thousand Naira) only, and thereafter more other commitments with the Manufacturers/suppliers of the items enumerated in the contract document. Upon the failure of the Appellant to furnish the mobilization fees, the Respondent wrote through its Solicitors, served letters to the Appellants warning them of their imminent breach of the contract and demanded for specific performance of the contract. The Appellants on receiving the letters invited the representatives of the Respondent and its Solicitors for a meeting and offered to the Respondent, the sum of N250, 000.00 (Two Hundred and Fifty Thousand Naira) only as compensation for its losses but the Respondent rejected the offer of compensation in view of the various financial commitments they had incurred in respect of the contract and insisted that the Appellants should perform their part of the contract. When there was no positive response from the Appellants, the Respondent instituted an action wherein they sought an order of this Court directing the Defendants to specifically perform their obligations to the Plaintiff in terms of the contract agreement in terms of the prevailing market/current prices of the subject matter of the contract among others. The Plaintiff/Respondent alternatively claimed the sum of Eight Million Four Hundred and Thirteen Thousand, Three Hundred and Forty Naira (N8,413, 340.00) only as special and general damages for breach of contract and the cost of the action. The Defendants, now Appellants admitted the fact of contract award were in favour of the Respondent but averred that the said contract had been frustrated by reason of unavailability of funds to execute the contract among other factors due to no fault of theirs and thus were/are not liable to the claim. Further to that the Defendants successfully raised a preliminary objection at the Federal High Court disputing the jurisdiction of the Court to entertain the suit arising from what they described as a simple contract and the court in consequence, in the exercise of the powers conferred on it under Section 22(2) of the Federal High Court Act, Cap F12, LFN 2004, transferred the suit to the High Court of Justice, Adamawa State. At the close of evidence of witnesses and counsel’s final addresses, the court in a considered judgment granted the claim as it relates to special and general damages and also awarded cost in favour of the Respondent in the sum of N50, 000.00. The court refused the grant of reliefs (1) and (2) in the claim. Peeved by this judgment of the High Court of Adamawa State, (hereafter referred to as the trial court) the Defendant have lodged an appeal to this court.

Appeal Allowed

Ø  Whether the trial court was right when it held that the plaintiff is a registered organization which has contractual capacity to sue and be sued.

Ø  Whether the contract of 2008 was discharged by frustration for lack of funds by the Appellants and whether the Respondent having bidded for the 2009 contract has waived its rights under the 2008 contract.

Ø  Whether the learned trial Judge was right when he held that the Respondent has proved special and general damages, hence the award of special and Exemplary general damages.

“It is settled that a Body assumes a corporate personality and thus a juristic person distinct from those individual members or groups that make up that Body once it is registered.  The fact of registration breathe life into the body or organization as a body corporate or ‘juristic person’ even though an artificial person.” PER S. T. HUSAINI, J.C.A.

“When therefore the question arises as to whether that body is a juristic person, the burden is cast on the person alleging it to prove same. That is what the law says. The Evidence Act at Sections 131 and 133 is apt. See: Ugbo V. abud me (1994) 9 SCNJ, 23, 39; Anthony Odunkwe V. Adm/Gen. EC’S (1978) 1 SC 25, 31.” PER S. T. HUSAINI, J.C.A.

“The parties having thus joined issues on material facts, it is for the respondent to prove its status as a corporate body and this duty is discharged by the production of the certificate of incorporation of that body or organization. See Nduka v Egenwaku (2001) 6 NWLR (Pt. 709) 517;

Section 36(6) of the Companies and Allied Matters Act is the enactment to the effect that.

“The certificate of incorporation shall be prima facie evidence that all the requirements of the Act in respect of the registration and of matters precedent and incidental to it have been complied with and that the Association is a company authorized to be registered under this Act.”

So, the production of the certificate of incorporation has been accepted as conclusive Evidence of the registration of that body or organization. PER S. T. HUSAINI, J.C.A.

“Contents of a document can be proved by primary or secondary evidence. See Section 85 of the Evidence Act. However primary evidence takes precedence over secondary evidence hence contents of a document must first be proved by primary evidence by reason of Section 88 of the Evidence Act.  Secondary evidence will only be resorted to in circumstances spelt out under Section 89 of the Evidence Act.  By primary evidence it is meant the document itself produced for the inspection of the court in its natural state.  See Densy Ind. Nig Ltd v Ugokwe (1999) 2 NWLR (Pt. 591) 392; Okafor v Okafor (2014) LPELR – 2356, (CA).” PER S. T. HUSAINI, J.C.A.

“Where however the document in issue is a public document the only admissible secondary evidence aside from the original or primary evidence, is the Certified True Copy of that document.  See Owupe v Ben Osaribi (2009) LPELR – 3054 (CA).” PER S. T. HUSAINI, J.C.A.

“Section 102 of the Evidence Act provides that:

The following documents are public documents –

(a)   Documents forming the official acts or records of the official acts of –

(i)  The sovereign authority

(ii)  Official bodies and tribunals, or

(iii) Public officers, legislative judicial and executive whether of Nigeria or elsewhere; and

(b)     Public records kept in Nigeria of public documents.”

–         PER S. T. HUSAINI, J.C.A.

“It goes without saying that a certificate of incorporation is part of the official act or forms part of record of the official acts of official bodies which makes it a public document within the meaning of Section 102 of the Evidence Act.  See Dana Impex Ltd v Awukan (2006) 3 NWLR (Pt. 968) 544.  In Ekweozor & Ors v The Registered Trustees of Saviours Apostolic Church of Nigeria (2014) LPELR – 2357 (CA) this court held that:-

The law is settled that the only way to prove the identity of juristic personality of company or a registered association is by tendering the original or certified true copy of the certificate of incorporation.”

–         PER S. T. HUSAINI, J.C.A.

“Uncertified photocopy (Secondary evidence) of a public document is not admissible evidence to prove any fact, in this case, proof that the respondent is a body corporate.  The fact that evidence was led to establish that the original was missing or lost does not make Exhibit ‘A’ the photocopy of the certificate of incorporation of the Respondent, admissible evidence, without more to it hence Section 89(C) of Evidence Act relied upon by the Respondent or his counsel is of no consequence in the circumstance in the absence of certification of the said document by the Corporate Affairs Commission, a Body whose duty, under section 7 of the Companies and Allied Matters Act, 2004, among others, is to incorporate companies, and certify documents arising from the incorporation of such companies. See: Goodwill & Trust Investment Ltd V. Witt & Bush Ltd (2011) 3 SCNJ 241.” PER S. T. HUSAINI, J.C.A.

“The absence of proper plaintiff before the trial court rendered the action at the trial court incompetent.  As held in Madukolu v Nkemdilim (1962):

(3)          The case comes before the court initiated by due process of law, and upon fulfillment of any condition precedent to the exercise of jurisdiction….

For a court to be competent to exercise jurisdiction over a matter, proper parties to whom certain rights and obligations can be attached must be before the court without which  the court lack jurisdiction to entertain the matter.  See Plateau State of Nigeria v A-G Federation (2006) 1 SC (Pt. 1) 1, 64; Amodu v Ajobo (1971) NWLR (Pt. 406) 170; Onwunalor v Osademo (1971) 1 All NLR (Pt1) 14; Goodwill & Trust Investment Ltd v Witt & Bush Ltd (2011) 3 SCNJ 241, 258 (supra).” PER S. T. HUSAINI, J.C.A.

“Issue No. 1 is accordingly resolved in favour of the Appellants. Issue No. 1 raised a fundamental question of jurisdiction, and thus, should override all other considerations. Ordinarily therefore this appeal would have been determined on this singular question and there should be no need to consider Issues 2 and 3 identified in the brief of argument. This court however, being the penultimate appellate court, is duty bound to make pronouncements and make its opinion known on those two issues placed before it should the apex court overrule us on the issue of jurisdiction.  That is the law and the apex court and this court have on so many occasions made that point.  See Nipol Ltd v Bioku Investment & Proco Ltd (1992) 23 NSCC (Pt. 1) 606, 618 OR (1992) 3 NWLR (Pt. 232) 727, 747; Frantios  Adesegun Kalto v CBN (1991) 9 NWLR (Pt. 214) 126, 149, Kolade v Akinosi (2014) LPELR 22936 (CA).” PER S. T. HUSAINI, J.C.A.

“The defence of frustration as a doctrine presupposes the premature determination of an agreement between parties, lawfully entered into and which is in the course of operation at the time of its premature determination, owing to the occurrence of an intervening event or change of circumstance so fundamental as to be regarded by law both as striking at the root of the agreement and entirely beyond what was contemplated by the parties when they entered into the agreement. See:  The A-G Cross River State v A-G Federation (2012) LPELR – 9335 (SC); Araka v Momier Construction Company (Nigeria) Ltd (1978) All NLR 219 or (1978) 6 – 7 SC 7 where it was held that the doctrine applies to all categories of contract. See further, Jacob v Afaha (2012) LPELR -7854 (CA)”. PER S. T. HUSAINI, J.C.A.

“This court in Diamond Bank Ltd v Ugochukwu (2008) 1 NWLR (Pt. 1067) has held that the doctrine of frustration has been restricted by the courts to –

(a)  Situation where the supervening event destroys a fundamental assumption; and

(b)  Where force majeure clauses are drafted into the contract.  There must be an event which significantly changes the nature of contractual rights of the parties that it would be unjust to expect the parties to perform those rights. Examples are situations where –

(1)  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 fru strated on the outbreak of war.

(5)  Where the commercial purpose of the contract has failed.”

– PER S. T. HUSAINI, J.C.A.

“The party relying on the doctrine as a defence must plead and lead satisfactory evidence as self-induced frustration is no frustration at all but a breach of contract.  See Jacob v Afaga (supra).” PER S. T. HUSAINI, J.C.A.

“Waiver of right as a concept denote an intentional and voluntary surrender or relinquishment of a known privilege or right by a party entitled to same which he would have insisted upon.  It is an abandonment of a right which the person cannot afterwards be heard to complain that he has not been permitted to exercise those rights or that he has been denied the enjoyment of those interest.  See Ariori v Elemo & Ors (1983) 1 SC 13 48 – 49; Elomo v Oyakhire (1985) 1 NWLR(Pt. 2) 195; Adegoke Motors Ltd v Dr. Adesanye 91989) 3 NWLR (Pt. 109) 250 Nigeria Ports Authority v Duncan Maritime Ventures  (2010) LPELR – 4602 (CA); Auto Import Export v Adebayo (2005) 19 NWLR (Pt. 959) 44.” PER S. T. HUSAINI, J.C.A.

“Special damages” are damages that are alleged to have been sustained in the circumstances of a particular wrong. As held by Brown, L.J in Pat Chiffe v Evans (1892) 2 Q.B 524 C.A at 528, special damage “means, the particular damages (beyond the general damage), which results from the particular circumstances of the case, and of the Plaintiffs claim to be compensated for which he sought to give warning in his pleadings in order that there may be no surprise at the trial.” PER S. T. HUSAINI, J.C.A.

“To be awarded, special damages must specifically be claimed, pleaded and proved strictly as they are exceptional in character.  See Xtoudos Services Nig. Ltd v Taisei (WA) Limited (2006) LPELR -3504 (SC) or (2006) 15 NWLR (Pt.1003) 533; Saidu H. Ahmed v CBN (2012) LPELR – 9341 (SC). Strict proof is such proof as could lend itself to quantification and assessment.” PER S. T. HUSAINI, J.C.A.

“General damages are damages resulting from the loss flowing naturally from the breach of contract and is incurred in due consequence of the breach and its quantum need not be pleaded or proved as it is generally presumed by law. The manner by which general damages is quantified is by relying on what would be the opinion and judgment of a reasonable person in the circumstance of the case.  SeeSeven-Up Bottling Co. Plc v Nkangaudo Nkanga (2008) LPELR – 8462 (CA).” PER S. T. HUSAINI, J.C.A.

“Exemplary damages are damages whose purpose extends beyond compensation to punitive or admonitory functions.  Its object is to punish the defendant for breaching the legal right of the Plaintiff.  See Chief F.R.A. Williams v daily Times of Nigeria Ltd (1990) 1 NWLR (Pt. 124) 11 or (1990) 1 SC 23; Ukachukwu v Uzodinma & Anor (2007) LPELR – 8200 (CA).” PER S. T. HUSAINI, J.C.A.

“In deserving cases, a court of law will award exemplary damages.  See Ukachukwu v Uzodinma (supra).  Exemplary damages are usually awarded where statutes prescribe them.  Apart from that, exemplary damages can be awarded for two categories, namely:-

(1)               Oppressive, arbitrary or unconstitutional action by servants of the government and;

(2)               Where the defendant’s act which has been held to be tortious was done with a guilt by knowledge, the motive being that the chances of economic advantage outweigh the chances of economic or even physical penalty. See F.R.A. Williams v Daily Times of Nigeria Ltd (supra).”

– PER S. T. HUSAINI, J.C.A.

Companies and Allied Matters Act, 2004

Evidence Act, 2011

Federal High Court Act, Cap F12, LFN, 2004

Public procurement Act, No. 14, of 2007