Should a Party be allowed to Benefit from His Own Wrong?

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PREAMBLE

In the words of Justice SIDI DAUDA BAGE, J.S.C. “A fundamental principle of the law of contract is that for a contract to be regarded as legally binding and enforceable, parties must reach a consensus ad idem in respect of terms of same.” See MR. P. T. ADEDEJI v. DR. MOSES OBAJIMI (2018) LPELR-44360(SC).  

The law is therefore settled that parties are bound by the terms of the contract they willingly entered into. The law will therefore not allow a party who contracted willingly with another to breach the contract and then turn around to claim benefits under the same contract.

It is note worthy that where time is of the essence in a contract, that is where passing of time is an intrinsic term of a contract, parties are bound to adhere strictly to such terms as failure to do same without legal justification, reason, or excuse, will amount to a breach of contract.

FACTS

The Respondent (Dr. Obajimi), the Chairman of a business concern known as International Insurance Group Nigeria Limited intended to sell the business and the Appellant (Mr. Adedeji) was willing to buy. To this effect, Mr. Adedeji and Dr. Obajimi executed a Memorandum of Understanding dated 4th February, 1999. By that Memorandum of Understanding, they agreed that the purchase price of the Business shall be N5, 000,000.00 (Five Million Naira only), it was also agreed that Mr. Adedeji shall pay the purchase price on or before 30th April, 1999. It was further agreed by the parties that the Mr. Adedeji shall bear some sundry expenses one of which included 15% statutory deposit with the Central Bank of Nigeria.

Mr. Adedeji, went ahead to pay the sum of N500, 000.00 (Five Hundred Thousand Naira only) as statutory deposit to the Central Bank of Nigeria. However, the purchase price of N5,000,000.00 (Five Million Naira Only), remained unpaid by Mr. Adedeji by 30th April, 1999, the date agreed by parties in the Memorandum of Understanding for fulfillment of same.

Mr. Adedeji however, on 26th October, 1999 wrote to Dr. Obajimi  and his privies demanding from Dr. Obajimi the refund of the sum of N500,000.00 (Five Hundred Thousand Naira only), which had earlier been paid to the Central Bank of Nigeria. Dr. Obajimi, aggrieved  by Mr. Adedeji ‘s demands instituted an action before the High Court of Oyo State, Ibadan Judicial Division wherein he sought amongst other reliefs a declaration that by the terms of the Memorandum of Understanding dated 4/2/99 entered into by himself and Mr. Adedeji, he (Dr. Obajimi) is neither indebted to Mr. Adedeji in the sum of N500,000.00 or indeed any other sum at all, nor liable to refund the sum of N500,000.00 to Mr. Adedeji nor indeed any sum at all. He equally sought the sum of N1,000,000.00 (One Million Naira) being general damages for breach of the aforesaid Memorandum of Understanding by Mr. Adedeji on 30/4/99 and 21% interest on the sum claimed from 1/5/99 till judgment is given and thereafter at 21% till judgment sum is fully recovered.

Mr. Adedeji, on receipt of the writ and endorsed claim, filed a Counter-Claim where he prayed the trial High Court for the sum of N500, 000.00 paid by him to the Central Bank of Nigeria as part of the Statutory Deposit on the agreement with Dr. Obajimi to buy International Insurance Group Limited which purchase was not conclusive. He equally sought interest at the rate of 21% on the said sum of N500, 000.00 from 8th day of March 1999 until judgment is given and thereafter until the entire judgment sum is liquidated.

​Upon consideration of the cases of the parties, the Trial Court, in its judgment delivered on 28th May 2003, found that Mr. Adedeji as Defendant/Counter-Claimant was in breach of a fundamental term of the Memorandum of Understanding, which stipulated that the full purchase price of N5, 000,000.00 (Five Million Naira) only be fully paid on or before 30th April, 1999. The Trial Court, in the interest of justice and on the principle of equity, however, ordered the refund of the sum of N500,000.00 (Five Hundred Thousand Naira Only), that is, the 15% statutory deposit paid by Mr. Adedeji to the Central Bank of Nigeria. Interest on the said sum was not awarded.

Dr. Obajimi, dissatisfied with the judgment of the Trial Court, took out an appeal before the Ibadan Judicial Division of the Court of Appeal, while Mr. Adedeji Cross-Appealed against the part of the judgment touching on non-award of interest on the sum of N500,000.00 (Five Hundred Thousand Naira only), awarded to him by the Trial Court. The Court of Appeal, found for Dr. Obajimi, the judgment of the trial Court was set aside and the Counter-Claim of Mr. Adedeji was dismissed.

​Mr. Adedeji, not happy with the judgment of the Court of Appeal, has taken out this Appeal before the Supreme Court. 

ISSUES FOR DETERMINATION

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The Apex Court determined the appeal on a lone issue viz:

Whether the learned Justices of the Court of Appeal were right to hold that the Appellant who is in breach of contract (Exhibit 7) ought not to be reimbursed for the payment of N500,000.00 (Five Hundred Thousand Naira only) in view of his breach. 

DECISION/HELD

​In the final analysis, the appeal was unanimously dismissed. The judgment of the Court of Appeal which set aside the judgment of the trial High Court and dismissed the Counter-Claim of Mr. Adedeji was affirmed by the Supreme Court.

RATIO DECIDENDI

  •  EQUITY – PRINCIPLES OF EQUITY:  Whether a party can benefit from his own wrong

“I find it pertinent here to ask in the interest of equity and good conscience, howbeit that the Appellant who has willy-nilly refused (and with no lawful excuse) to perform a contract he has willingly signed and deliberately held the Respondent to ransom by refusing to pay up without word of his loss of interest or otherwise to the Respondent, be made to benefit from his breach. It is trite that a party should not benefit from his own wrong and I am of the firm view that the decision of the trial Court amounts to allowing a party reap benefits from his wrong. See: ENEKWE VS I.M.B (NIG) LTD (2007) All FWLR (Pt. 349) page 1053 at 1081. The trial Court’s attempt to bail the Respondent out on the equitable doctrine of part performance shall not be allowed to stand, it is my firm view that equity must be done to both parties and not just the Appellant. I affirm the finding of the Court below as follows:

“It must be stated here that the doctrine on part-performance arose by sheer intervention of equity. Equity intervened to mitigate the losses that may arise by rigid application of contracts that by law ought to be in writing but were made orally. The doctrine is based on estoppel that a defendant who plainly indicated by his conduct the existence of a contract could not be allowed to give himself the lie and take shelter under a statute. It is designed to prevent fraud from being perpetrated on the other side who has altered his position on the faith of the contract…

Exhibit 7 is a written contract between the parties. They did not enter into any oral contract in which the appellant made the respondent alter his position adversely on the faith of the contract. So, the doctrine of part-performance imported into the judgment did not hold any water. The learned trial judge with respect to her, talked about interest of justice to the respondent who was in breach of a fundamental term. I am afraid; interest of justice must be to the appellant as well and I dare say even to the Court itself. The respondent did not pay the purchase price on 30-4-99 as agreed. Within 30-4-99 and 29-10-99, the respondent put the appellant in limbo; to use the language of the trial judge. The respondent failed to pay up on scheduled date. For about six months, the respondent put the appellant in suspense and had the audacity to say that the appellant was negotiating with others for the sale of his concern.”

I absolutely agree with this position and do believe that if anything, that the wand of interest of justice and equity being waved in favour of the Appellant at the trial Court should have been directed at the Respondent too, luckily for the Respondent, posterity has smiled on him through the decision of the Court below and I do not intend to overturn that decision, in fact, I endorse it.” Per BAGE, J.S.C. (Pp. 43-45, Paras. C-E).

  • CONTRACT – BREACH OF CONTRACT: When a breach of contract will be said to have been committed

“From the pleadings and the vital pieces of evidence on both sides what is on the table is that the memorandum of Understanding (M. O.U), Exhibit 7 embodies the terms of the contract and the evidence of even the appellant underscored that point particularly as relating to the time of performance of the contract. Therefore the failure of the appellant to pay to the respondent the contractual sum of N5, 000,000 (Five Million Naira) being net purchase price before 30/4/1999 constituted a breach of contract for which the respondent is entitled to damages. I call in aid at this point the case of Tsokwa Oil Marketing Company v. B.O.N. Ltd (2002) 11 NWLR (pt. 777) 163 at 200 where this Court laid down some ground rules that would guide the Court in making a finding that a valid contract has been discharged. This Court stated thus:

“A valid contract between parties may be discharged in one of four ways known to law, namely:

(a) By performance: or

(b) By express agreement: or

(c) By the doctrine of frustration; or

(d) By breach.” Clearly from what has been established the appellant had the contract discharged by the fourth condition (d) “By breach”. This is because a breach of contract is committed when a party to the contract without lawful excuse fails, neglects or refuses to perform an obligation he undertook in the contract or either performs the obligation defectively or incapacitates himself from performing the contract. In the case in hand the appellant breached the contract between him and the respondent without lawful excuse failed to perform the obligation he undertook within the prescribed date in the MOU which was to be before 30/4/1999 by paying the contractual sum of five million (N5,000,000) net purchase price. I place reliance on Mr. J.A. Adeoti & Anor v. Chief J. A. Ayorinde & Anor (2001) 6 NWLR (Pt. 709) 336 at 345.”Per PETER-ODILI, J.S.C. (Pp. 59-60, Paras. A-D).

  • CONTRACT – TERMS OF CONTRACT: Whether extrinsic evidence can be admissible to vary the terms of a written contract

“It is trite that where parties have embodied the terms of their contract in a written document, extraneous evidence is not required, whether to add, subtract from, vary or contradict the terms of the written document. Please see SOLICITOR GENERAL WESTERN NIG. VS. DR. FESTUS O. ADEBONOJO & ORS (1971) 1 ALL NLR 181; OLATUNDE VS OAU & ANOR (1998) LPELR-2575 (SC).”Per BAGE, J.S.C. (P. 35, Paras. D-F).

  • CONTRACT – DISCHARGE OF CONTRACT: Ways in which a contract can be discharged

“It is now trite law, that a valid contract may be discharged by one of four ways. See TSOKWA OIL MARKETING COMPANY VS B.O.N. LTD (2002) 11 NWLR (Pt.777) page 163 at 200 where this Court held as follows:

“A valid contract between parties may be discharged in one of four ways known to law, namely:

  1. a) by performance
  2. b) by express agreement
  3. c) by the doctrine of frustration; or
  4. d) by breach.”Per BAGE, J.S.C. (P. 40, Paras. A-C).

P. T. ADEDEJI v. DR. MOSES OBAJIMI (2018) LPELR-44360(SC)

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