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Home » Nigerian Cases » Supreme Court » Bps Construction & Engineering Company Limited V. Federal Capital Development Authority (2017) LLJR-SC

Bps Construction & Engineering Company Limited V. Federal Capital Development Authority (2017) LLJR-SC

Bps Construction & Engineering Company Limited V. Federal Capital Development Authority (2017)

LAWGLOBAL HUB Lead Judgment Report

KUDIRAT MOTONMORI OLATOKUNBO KEKERE-EKUN, J.S.C.

This is an appeal against the judgment of the Court of Appeal, Abuja Division delivered on 3rd June 2011 dismissing the appellants appeal and allowing the respondents cross-appeal against the judgment of the High Court of the Federal Capital Territory (hereafter referred to as the FCT) delivered on 29th June 2010.

The facts that gave rise to this appeal are as follows: The appellant, a company registered in Nigeria, carries on the business civil, mechanical and electrical engineering and construction work. The respondent is the statutory body responsible for the orderly development and administration of the FCT. The appellant approached the respondent with a proposal for the provision of infrastructural facilities at Mabushi and Katampe Districts of the FCT. At a meeting held on 6th July 2004 between the parties, the appellants proposal was approved. A memorandum of understanding (MOU) was drawn up and signed by the parties on 13th July 2004 (Exhibit P5). The MOU was subject to the signing of a formal agreement by the parties. By the

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agreement, the appellant, as infrastructural developer, would raise funds for the project. It would recoup its costs from the collection of development levies payable by allottees of plots and from the sale of vacant plots in the two districts. By the terms of the MOU, the respondent was to provide the appellant with the engineering design, drawings and Bill Of Quantities (BOQ) and any other documents that would enable the appellant complete its cost analysis of the project. The MOU also provided that within 14 days of its execution, the parties shall enter into a formal agreement on terms to be mutually agreed between the parties. It was also agreed that all documents, materials, discussions, etc would be treated with the utmost confidentiality and neither party to the MOU shall disclose any information to a third party.

In compliance with the MOU, the respondent submitted the required documents to the appellant. The appellant in return, submitted its Infrastructural Development Agreement to the respondent for execution, as well as evidence of its financial capacity to execute the contract. However, notwithstanding repeated reminders, the respondent

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refused to sign the agreement. Meanwhile, the appellant had proceeded to incur costs in terms of manpower and resources in the execution of the project based on “reliance on the promises, assurances and representations of the respondent that a formal agreement will be executed in line with the MOU. As a result of the respondent’s failure to sign the formal agreement, the appellant instituted an action before the trial High Court vide a writ of summons and statement of claim dated 20/1/2009 and filed on 21/1/2009 seeking the following reliefs:

“(a) A DECLARATION that in compliance with the terms of the said MOU of 13th July, 2004 executed by the parties, the defendant is duty bound to enter into a formal agreement with the Plaintiff for the provision of infrastructural facilities in Mabushi and Katampe Districts of the Federal Capital Territory, Abuja.

(b) AN ORDER for the defendant to execute forthwith or within such a time as may be stipulated by this Honourable Court, a formal agreement with the Plaintiff in respect of the said project.

(c) AN ORDER for the Defendant to deliver and finally assign all that parcel of land lying within

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Mabushi and Katampe Districts of the Federal Capital Territory, Abuja to the plaintiff for the purpose of providing the said infrastructural facilities.

(d) AN ORDER for the defendant to pay the sum of N3,875,284,858.29 being the cumulative monetary value of the efforts, services and work-input which the plaintiff has already committed to the said project pursuant to the MOU, subsequent assurances and representations of the defendant from 2004 – 2008.

IN THE ALTERNATIVE to reliefs (a), (b) and (c)

(e) AN ORDER for the defendant to pay to the plaintiff the sum of N10,000,000,000,00 being loss of anticipated profit by the plaintiff in respect of the said project.”

The appellant also claimed the sum of N105,000,000.00 as legal fees and the cost of prosecuting the case.

The respondent, as defendant, filed a statement of defence dated 17th May, 2009 wherein it denied the appellant’s claims. The appellant called only one witness. The respondent filed the witness statement of one Umar Gambojibrin but he did not attend Court to adopt it nor was he available for cross-examination. At the conclusion of the trial, the learned trial Chief

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Judge held at page 1208 of Vol. 3 of the record as follows:

“On the whole I find that the defendant is in breach of the MOU to enter into a formal agreement with the plaintiff for the provision of infrastructural facilities in Mabushi and Katanpe Districts of the FCT. It is hereby ordered against the defendant as follows:

(1) The sum of N10,000,000 is hereby awarded against the defendant in favour of the plaintiff as damages for a breach of contract.

(2) An additional sum of N2,000,000 is awarded against the defendant as cost and legal expenses in this action.”

The appellant was dissatisfied with the judgment and filed an appeal against it at the Court below. The respondent was also dissatisfied with an aspect of the judgment and accordingly filed a notice of cross appeal.

In a considered judgment delivered on 3rd June, 2011, the Lower Court dismissed the main appeal and allowed the cross appeal in the following terms:

“The issues raised in the cross appeal have been laid to rest in my consideration of the appeal.

I have held that Exhibit P5 [the MOU] does not amount to a contract. The question of whether the use of the word

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shall in the document amount (sic) to a command or directory is irrelevant at this stage. Whichever way the definition of shall is given here will not revive Exhibit P5. The submission in respect of the commanding nature of shall and the award of damages cost and legal expenses are dependent on the validity of Exhibit P5. Since I have held that Exhibit 5 is not a contract capable of being enforced between the parties, all argument on issues connected with the said exhibit goes to nothing.

The two issues are resolved in favour of the respondent/cross appellant. The cross appeal is therefore allowed.

On the whole, the main appeal is dismissed, while the cross appeal is allowed. The decision of the Lower Court in which Exhibit P5 was held to amount to a contract capable of being breached is hereby set aside. I also set aside the award of N10, 000,000 and N2,000,000 respectively. I make no order as to cost.

(See page 1312 of Vol. 4 of the record).

The appellant is still dissatisfied and has further appealed to this Court vide a notice of appeal dated 1/8/2011 and filed on 2/8/11 containing 9 grounds of appeal.<br< p=””

</br<

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The parties duly filed and exchanged briefs of argument in compliance with the rules of this Court. At the hearing of the appeal on 7/11/2016, CHIEF TOCHUKWU ONWUGBUFOR, SAN leading several learned counsel adopted and relied on the appellants brief filed on 10/10/2011 and its reply brief filed on 23/1/2012. By way of adumbration of the arguments contained in his brief, learned senior counsel relied on the additional authority of B.F.I. Group Corporation Vs B.P.E. (2012) 18 NWLR (Pt.1322) 209 @ 240 242 D – F, in support of his submissions under issues 1, 2 and 3 to the effect that the Court is bound to consider all the documents, assurances and promises connected with the contract. He contended that the Court below was wrong in considering only Exhibit P5 in reaching the conclusion that there was no enforceable contract between the parties. He urged the Court to allow the appeal.

M. A. NUNGHE ESQ., also leading a team of learned counsel, adopted and relied on the respondent’s brief filed on 28-11-2011. He referred to paragraphs 4.2.19 and 4.2.20 of his brief and submitted that the Court below did consider all the relevant facts before reaching

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its decision. He submitted that the gravamen of the agreement between the parties was Exhibit P5. He urged the Court to dismiss the appeal.

The appellant identified nine issues for the determination of the appeal thus:

“1. Whether the Court of Appeals definition and application of the import and meaning of “memorandum” simpliciter in determining the contractual relationship between the parties instead of the definition and the application of the import of Memorandum of Understanding, which is the case presented by the appellant is not a misapprehension or misconception of the appellants case which has occasioned a miscarriage of justice against the appellant. (Ground 1)

  1. Whether the Court below was right in holding that there was no valid and enforceable contract between the appellant and the respondent pursuant to Exhibit P5, thus reversing the decision of the learned trial Chief Judge which held that there was a binding contract between the appellant and the respondent having regard to the mandatory provisions contained in Exhibit P5 the use of the words subject to contract notwithstanding.
  2. Whether the

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Court below was right in failing to consider the promissory estoppel and estoppel by conduct arising from the promises, assurances and representations made by the respondent to the appellant which the appellant believed and acted upon to its detriment before the Court below relied solely on Exhibit P5 to come to the conclusion that there was no binding contract between the appellant and the respondent and whether the non consideration thereof has occasioned a miscarriage of justice. (Ground 4)

  1. Whether the Court of Appeal was right in reversing the decision of the learned trial judge which held that there was a binding contract between the appellant and the respondent on the ground that the trial Chief Judge did not verify whether there is in existence a valid contract. (Ground 3)
  2. Whether the Court below was right when it held that the failure of the respondent to lead evidence at the trial is irrelevant and immaterial since the appellant can only succeed on the strength of its own case and not on the weakness of the respondents case.
  3. Whether the Court below was right in failing to consider the appellant’s issue No. 1 and 2

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which border on the relief of specific performance which is the crux of the appellants appeal and issues Nos, 3, 4 and 5 of the appellant’s issues for determination before them, describing them as academic exercise and whether the non consideration of those issues by the Court has not occasioned a miscarriage of justice and a denial of the appellant’s right to fair hearing. (Ground 6)

  1. Whether the Court of Appeal was right in holding that the appellant was not entitled to damages in respect of the expenses it incurred pursuant to the MOU and to the promises, assurances and representations made by the respondent to the appellant on the ground that the expenses incurred were based on a frolic of its own. (Ground 5)
  2. Whether the appellant’s right of fair hearing was not breached when the Court below failed to consider issues raised by the appellant/cross respondent in answer to the respondent/cross appellant’s cross appeal before it came to the conclusion that there was no contract between the parties. (Ground 9)
  3. Whether the Court of Appeal was right in holding that there was no basis for the award of specific performance in favour of

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the appellant.”

The respondent, without specifically saying so, appears to have adopted the issues identified by the appellant. Although the appellants issues are prolix and rather unwieldy, I shall adopt them in the determination of this appeal.

Issue 1

Under this issue, it is contended on behalf of the appellant that the Lower Court misunderstood its case as to the meaning and import of a memorandum of understanding and thereby occasioned a miscarriage of justice. The learned senior counsel, Tochukwu Onwugbufor, SAN, argued that the Court at Pages 1289 1315 of Vol. 4 of the record applied the definition of the word “memorandum” simpliciter in construing Exhibit P5 entered into between the parties, as opposed to applying the definition of the entire expression “memorandum of understanding. Relying on the definition of MOU as found in Black’s Law Dictionary, 8th edition at page 924, he submitted that in certain circumstances an MOU could be held to contain a commitment, which is binding and enforceable between the parties thereto, as opposed to a memorandum simpliciter, which has no element of commitment and cannot

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therefore effectuate a binding and enforceable contract between the parties. He submitted that the Lower Court misapprehended and misconceived the issue before it and thereby evolved a case different from the case presented by the appellant. He submitted that in the circumstances the decision based on such a flawed process is perverse and liable to be set aside. He referred to: Udengwu Vs Uzuegbu (2003) 13 NWLR (Pt.836) 136 @ 151 – 152 G – B & 157 A C. He contended that had the Court adopted the proper definition of memorandum of understanding, it would have reached a result more favourable to the appellant and would have found that Exhibit P5 contained the required commitment having regard to the fact that there was an unequivocal offer, acceptance and consideration vide paragraphs 2 and 3 of the recital thereto. He argued further that the Court would have discovered that the subject matter of the contract was settled vide paragraph 2 of the said recital and that the details and time of the contract were fully set out in the said paragraphs 2 and 3. On what constitutes a miscarriage of justice in the circumstances of this case, he referred to:

See also  Companhia Brasifeira De Infraestrutura (Infaz) V. Cobec Nigeria Limited (2018) LLJR-SC

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Iwok v. University of Uyo (2011) 6 WNLR (Pt.1243) 211 @ 241 D E & 241 242 H B per Ngwuta, JCA (as he then was).

In reply, Chief Karina Tunyan, SAN, who settled the respondent’s brief submitted that the Lower Court rightly construed the meaning of Memorandum of Understanding and that its application to the facts of this case did not occasion a miscarriage of justice. He submitted that an MOU can be called either a memorandum or a memorandum of understanding and that in either case it connotes an informal record. He referred to the definition of Memorandum of Understanding as contained in Blacks Law Dictionary, 8th edition (supra) and noted that the definition includes a Letter of Intent, where it is stated that business people typically mean not to be bound by letter of intent and Courts do not ordinarily enforce one, but occasionally find that commitment has been made. He noted that learned senior counsel for the appellant in his brief emphasized the phrase “…but occasionally find that commitment has been made and submitted that a finding that commitment has been made is the exception and not the

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norm. He submitted that the issue before this Court does not involve one of those exceptional cases. He submitted that the Lower Court was correct when it held at page 1306 lines 18 – 19 and page 1308 lines 24 – 25 of Vol. 4 of the record that the MOU, Exhibit P5 is clear and unambiguous and that there was no contract in existence between the parties. He submitted that the Lower Court was correct when it held that at best what was between the parties was an invitation to treat. He submitted that the case of Udengwu Vs Uzoegbu (supra) relied upon by learned senior counsel for the appellant does not support its case and that it rather supports the respondent’s position on the meaning of an MOU.

Learned senior counsel in his reply brief, merely reiterated the submissions already made in his main brief. The submissions are of no additional assistance to the Court in resolving this issue.

It is clear from the submissions of learned senior counsel for the appellant that it is the appellant’s contention that Exhibit P5, the MOU, represented a binding and enforceable contract between the parties. This Court in a recent decision in: Bilante International Ltd

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NDIC (2011) 15 NWLR (Pt.1270) 407 @ 423 C F, restated the position of the law regarding what constitutes a valid and enforceable contract thus:

“Contract is defined as an agreement between two or more persons which creates an obligation to do or not to do a particular thing. Its essentials are competent parties, subject matter, a legal consideration parties, subject matter, a legal consideration, mutuality of agreement and mutuality of obligation. Lamoureu v. Burrillville Racing Assn 91 R. 194, 161 A.2d 213, 215.

To constitute a binding contract between parties, there must be a meeting of the mind often referred to as consensus ad iden. The mutual consent relates to offer and acceptance. An offer is the expression by a party of readiness to contract on the terms specified by him, which, if accepted by the offeree gives rise to a binding contract. The offer matures to a contract where the offeree signifies a clear and unequivocal intention to accept the offer. See: Okugule & Anor V. Oyagbola & Ors. (1990) 4 NWLR (Pt.147) 723.

It should be reiterated that in order to establish that parties have formed a contract, there

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must be evidence of consensus ad idem between them. Then if there is a stipulated mode for acceptance of the offer, the offeree has a duty to comply with same. See: Afolabi Vs Polymera Industries Ltd. (1967) 1 All NLR 144, (1967) SCNLR 256.”

The basic elements of binding contract are therefore offer, acceptance/consideration, capacity to contract and intention to create a legal relationship. See also; Dangote Gen. ile Products Ltd. & Ors. Vs Hascon Associates Nig Ltd. & Anor. (2013) 12 SCNJ 456; Akinyemi Vs Odua Investment Co. Ltd. (2012) 1 SCNJ 127. See also: Alfotrin Ltd. Vs A.G. Federation & Ors. (1996) 9 NWLR (Pt.475) 634 @ 656 H; (1996) LPELR-414 (SC) @ 29 B – D per Iguh, JSC, to wit:

“To constitute a binding contract, there must be an agreement in that the parties must be in consensus ad idem with regard to the essential terms and conditions thereof; the parties must intend to create legal relations and the promise of each party, in a simple contract, not under seal, must be supported by consideration. There must be a concluded bargain which has settled all essential conditions that are necessary to be settled and leaves no

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vital term or condition unsettled.”

An invitation to treat, on the other hand, is the first step in negotiations between the parties to a contract, which may or may not lead to a definite offer being made by one of the parties to the negotiation. An invitation to treat is not an offer that can be accepted to lead to an agreement or contract. See: BFI Group Corporation Vs B.P.E. (2012) 18 NWLR (Pt.1332) 209 @ 246 G – H; Neka B.B.B. Manufacturing Co. Ltd. Vs A.C.B. Ltd. (2004) 2 NWLR (Pt.858) 521.

Exhibit P5 can be found at pages 904 – 908 of Vol.3 of the record. It provides as follows:

MEMORANDUM OF UNDERSTANDING

THIS MEMORANDUM OF UNDERSTANDING is entered into this 13th day of July 2004 BETWEEN FEDERAL CAPITAL DEVELOPMENT AUTHORITY, Area 11 Garki Abuja, hereinafter referred to as “THE AUTHORITY (which expression shall where the con so admits include the representatives and assigns) of the first part,

AND

BPS ENGINEERING AND CONSTRUCTION COMPANY LIMITED RC.343541, a company incorporated in Nigeria with limited liability whose registered office is situated at Plot 1687 Oyin Jolayemi Street, Victoria Island,

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Lagos, hereinafter referred to as THE COMPANY, (which expression shall where the con so admits include the representatives and assigns) of the other part.

WHEREAS

  1. THE COMPANY is a limited liability company registered in Nigeria and engaged in engineering and construction works.
  2. THE COMPANY at a meeting held on the 6th day of July 2004 at the instance of the Presidency, presented a proposal for the provision of infrastructural facilities to Mabushi and Katanpe Districts of the Federal Capital Territory (hereinafter referred to as “THE PROJECT through Public Private Sector Partnership (PPP) and funding and to recover the cost of the project by the receipts of development levies and sale of plots.
  3. THE AUTHORITY has expressed interest in THE COMPANY’S proposal for the development of infrastructure facilities in Mabushi and Katanpe Districts of the Federal Capital Territory.
  4. THE AUTHORITY recognises that THE COMPANY shall raise funds for THE PROJECT through financial institutions wherefore the parties have entered into these presents.

NOW THIS MEMORANDUM OF UNDERSTANDING WITNESSETH AS FOLLOWS:<br< p=””

</br<

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That THE AUTHORITY shall provide to THE COMPANY Mabushi and Katampe Districts of the Federal Capital Territory for the development of infrastructural facilities.

  1. That the details of the type, method of development and specification materials used for the provision of the said infrastructure shall be in accordance with specific standards of the Federal Capital Development Authority (FCDA) applicable in the Federal Capital City.
  2. That the parties shall:

i. Upon the execution of this memorandum of understanding THE AUTHORITY shall immediately provide THE COMPANY engineering drawing and bill of quantities and any other documents which enable THE COMPANY complete its costs analysis on the project.

ii. Within 14 days of the execution of this memorandum of understanding the parties hereto shall enter into a formal agreement with respect to the PROJECT/Proposal on terms to be mutually agreed.

  1. That all documents, materials, discussions, etc, shall be treated with the utmost confidentiality and neither party to this memorandum of understanding shall disclose any information to a third party.
  2. That this memorandum of

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understanding is subject to the signing of a formal agreement by the parties.

WITNESS WHEREOF THE PARTIES HAVE SET THEIR HANDS AND SEALS THE DAY AND YEAR FIRST ABOVE WRITTEN.

SIGNED.”

(Emphasis supplied)

For the definition of “memorandum of understanding”, in Black’s Law Dictionary, 8th edition at page 1006, the reader is directed to the definition of “Letter of intent, which is found at page 924 thereof and states thus:

“Letter of intent: A written statement detailing the preliminary understanding of parties who plan to enter into a contract or some other agreement.

– A letter of intent is not meant to be binding and does not hinder the parties from bargaining with a third party. Business people typically mean not to be bound by a letter of intent and Courts ordinarily do not enforce one; but Courts occasionally find that a commitment has been made ”

(Underlining mine for emphasis)

From the above definition, 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

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future happening of a more formal relationship between the parties and the steps each party needs to take to bring that intention to reality. From the definition given above, notwithstanding the signing of a memorandum of understanding, the parties thereto are not precluded from entering into negotiations with a third party on the same subject matter.

This probably explains why clause 4 was inserted in Exhibit P5, so that the understanding between the parties thereto remains confidential and does not prejudice possible negotiations with a third party. The Court below at page 1308 of Vol. 4 of the record, relied on the definition of “memorandum” as found at page 984 of Blacks Law Dictionary (supra), which defines it as:

An information, record, note or instrument embodying something that the parties desire to fix in memory by the aid of written evidence, or that is to serve as the basis of a future formal contract or deed.

(Emphasis mine)

Thereafter the Court held as follows:

“By this definition therefore, a memorandum of understanding is an informal document that serves as a reminder that the parties to such a

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document have a date in future to enter into a contract. Since the MOU is not definite, but subject to the signing of contact, it is not an offer. For an offer to be capable of becoming binding on acceptance it must be definitely clear and final. A document which merely provides for signing of agreement in future does not amount to an offer. It is merely a preliminary move in negotiation which may lead or may not lead to a definite offer being made by one of the parties to the negotiation. At this stage when the terms and conditions of the agreement are not known and are not contained in the document so signed, it will be foolhardy for any party to claim that there is an offer and acceptance.

In the instant case, Exhibit P5, the MOU does not qualify as an offer or an acceptance, but an invitation to treat or negotiate.

I am of the view that taking into consideration the elements that constitute a valid and enforceable contract and the legal implications of a memorandum of understanding, the Lower Court, by its finding above has demonstrated a clear understanding of the import of Exhibit P5. Whichever definition is relied upon, the end result

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is the same. Exhibit P5 is a representation of the intention of the parties, subject to the execution of a formal agreement. The finding of the Lower Court in this regard cannot be faulted. The Court below did not misapprehend the appellant’s case and no miscarriage of justice has been shown to have been occasioned by its finding in this regard. This issue is accordingly resolved against the appellant.

Issue 2

This issue is based on the premise that the Lower Court was wrong in its interpretation of the meaning and connotation of Exhibit P5. Learned senior counsel is particularly dissatisfied with the following finding of the Court below at page 1306 of the record:

“The MOU is subject to the signing of a formal agreement by the parties. The term mutually agreed by the parties with respect to the infrastructural provision at Mabushi and Katampe are not set out in the Memorandum of Understanding. So also are the financial implications and what sanctions will follow in case of breach. There is also no evidence on the MOU that certain consideration has passed and that the parties intended to create a legal relationship through the MOU, as the MOU

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was made subject to signing a formal agreement between the parties.

Learned senior counsel submitted that the terms of the agreement between the parties are fully set out in Exhibit P5 and that the sanctions for any breach of the contract need not be spelt out in the MOU, as the implications of any breach is settled in law. He contended that pursuant to paragraph 3(1) of Exhibit P5, the respondent provided the appellant with Engineering Design Drawing (EDD) and other documents that would enable it complete the bill of quantities and cost analysis in respect of the project and that the appellant on its part accepted them and prepared its bill of quantities and cost analysis and forwarded same to the respondent. He submitted that these actions represent evidence of some of the consideration that passed between the parties pursuant to the MOU. He maintained that the parties intended to create a legal relationship through the MOU, as all the elements of a binding and enforceable contract are contained therein. He referred to: Metibaiye v. Naralli International Ltd. (2009) 16 NWLR (Pt.1167) 326 @ 346. He argued the parties having carried out their

See also  Tomtec Nigeria Ltd .v. Federal Housing Authority (2009) LLJR-SC

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obligations as stated in paragraph 3 (1) of Exhibit P5 by exchanging documents and cost analysis relating to the project, they could be said to be in agreement and that the agreement constituted an enforceable and binding contract, notwithstanding the expression subject to the signing of a formal agreement contained in the MOU, which he contended was mere surplussage. He relied on: Michael Richards Properties Ltd. Vs St. Saviour’s (1975) 3 ALL ER 416; Rosslier vs Miller (1947) KB 854: Branca Vs Cobarro (1947) KB 854: U.B.A. Vs Tejumola (1986) 4 NWLR (Pt.38) 816. He submitted that the agreement need not be in any particular form, as the main consideration is that there must be evidence of consensus between the parties. He referred for A.G. Rivers State Vs Akwa Ibom (2011) 8 NWLR (Pt.1248) 31 @ 108 F – G. He submitted that the trial Court was right when it held that the use of the word “shall” throughout the MOU was indicative of the parties’ intention to create a binding obligation. He submitted that the Court below erred in disregarding this finding.

Learned senior counsel for the respondent however contends that the Court below rightly

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interpreted the meaning of memorandum of understanding and considered Exhibit P5 in its entirety. He submitted that the MOU did not contain any mandatory provisions and that the Lower Court was right when it held that there was no enforceable contract between the parties. He submitted that since the MOU was understood by the parties to be subject to the signing of a formal contract, it could not be a binding contract mutually and voluntarily executed by the parties. He reiterated his argument under issue 1 that a document that provides for the signing of an agreement in the future is merely a preliminary move in negotiations, which may or may not lead to a definite offer being made. He referred to the finding of the Lower Court at pages 1306 – 1308 of the record and submitted that the Court carefully considered all relevant issues before concluding that there was no enforceable contract between the parties. He agreed with the Court that Exhibit P5 was merely an invitation to treat.

Learned counsel submitted that the appellant, as observed by the Lower Court, failed to prove at the trial Court that there was a definite offer and acceptance, which

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constituted a valid contract between the parties to entitled it to the reliefs sought. He submitted that having failed to so prove at the trial Court, it was improper for learned senior counsel to attempt to do so before this Court without seeking leave. He relied on: Akpene Vs Barclays Bank of Nig. Ltd. & Anor. (1977) 1 SC (Reprint) 30. He submitted that in the absence of a binding contract between the parties, the issue of consideration does not arise. He submitted that the appellant took an unnecessary risk and went on a frolic of its own by incurring expenses in respect of the project in anticipation of profit in the region of N10 Billion without first ensuring that a formal contract was executed between the parties. He submitted that the appellant must bear the consequences of its action. He referred to: Fasheun vs. Oyerinde (1997) 11 NWLR (Pt.530) 561 A.

He submitted that contrary to the contention of learned counsel for the appellant, none of the meetings held between the parties, could be inferred to constitute an offer, acceptance, consideration or intention to create a legally binding relationship. He submitted that the word “shall” in

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Exhibit P5 was not used in its mandatory sense. On the guiding principle in the interpretation of “shall”, he referred to: Amokeodo Vs I.G.P. (1999) 6 NWLR (Pt.607) 467 @ 481 A B & 485 486; Ugwu v. Ararume (2007) NWLR (Pt.1040) 367 @ 412 F G. He observed that in construing the word shall in Exhibit P5, the learned trial Chief Judge failed to consider the effect of paragraph 5 thereof, which states that the MOU is subject to the signing of a formal agreement by the parties. He argued that had His Lordship correctly construed paragraph 5 he would have arrived at a different conclusion.

On the legal implication of the words subject to he referred to: Okechukwu vs. Onuorah (2000) 15 NWLR (Pt.691) 597 @ 614 615; U.B.A. Ltd v. Tejumola & Sons Ltd. (1988) 2 NWLR (Pt.79) 662 @ 688; Tsokwa Marketing Co. Ltd. vs. B.O.N. Ltd. (2002) 11 NWLR (Pt.777) 163 @ 200; Suleiman & Bros. Vs Mehr (1957) NSCC 49 @ 51 paragraphs 15 40.

He urged the Court to construe all the paragraphs of P5 together and to interpret the word “shall” wherever it appears as being directory and not mandatory and to

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further hold that since the parties expressly agreed that Exhibit P5 was subject to the signing of a formal agreement within 14 days, the contract had not come into effect and was not binding on the parties.

In reaction to the contention of learned counsel for the respondent that the appellant failed to prove at the trial Court that there was a contractual relationship between the parties and that the issue was being raised as a new issue before this Court, learned senior counsel in his reply brief maintained that the appellant pleaded and proved the existence of a valid contract between the parties vide Exhibit P5, which evidence was accepted and believed by the trial Court, particularly as regards the legal effect of the word “shall” contained therein. He submitted that the case of Akpene vs. Barclays Bank Nig. Ltd. (supra) is inapplicable to the circumstances of this case.

On the contention that the appellant failed to prove that it provided consideration for the contract, he submitted that the appellant copiously pleaded and led evidence in this regard such as mobilization to the site, providing guarantees from banks as to its ability to execute

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the contract and preparing and submitting, at the request of the respondent, the design and engineering drawings. He observed that the evidence was unchallenged. He submitted that the submission of counsel, no matter how eloquent, cannot be a substitute for evidence. He submitted that there is no appeal against the finding of the trial Court on the meaning of the word “shall” as contained in Exhibit P5, and that the pronouncement of the Court as to its being mandatory stands. Relying on several cases including Sosan Vs HFP Eng. Ltd. (2004) 3 NWLR (Pt.861) 346, he submitted that even if the expression in paragraph 5 of the MOU were to render the contract unenforceable, a party is not allowed, in equity, to take undue advantage of the other party by his wrongful act and proceed to contend that the transaction was unenforceable or illegal or to use the Court to perpetrate his wrongful act. He submitted that notwithstanding its agreement to execute a formal agreement within 14 days of signing the MOU, the respondent deliberately refused to execute the draft agreement (Exhibit P6) forwarded to it by the appellant within the stipulated time, and turned around to

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contend that the contract is unenforceable. He argued that a Court of equity would not condone such conduct.

From the submissions of learned senior counsel for the appellant, it would appear that what is being contended under this issue is that Exhibit P5 falls within the exceptional circumstance where a Court finds that a commitment has been made between the parties notwithstanding the general nature of a memorandum of understanding. My Lords, it is necessary to reiterate here the elements of a binding and enforceable contract, which are: offer, acceptance, intention to create a legal relationship, consideration and capacity to contract. See: Bilante International Ltd. Vs N.D.I.C. (supra) and Alfotrin Ltd. Vs A.G. Federation & Ors. (supra). For ease of reference I deem it appropriate to restate the dictum of Iguh, JSC in: Alfotrin Ltd. Vs A.G. Federation & Ors. (supra) to the effect that for there to be an enforceable contract “there must be a concluded bargain which has settled all essential conditions that are necessary to be settled and leaves no vital term or condition unsettled.” As noted earlier in this judgment, it was the

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appellant that approached the respondent with proposals for the provision of infrastructure in the Mabushi and Katampe Districts of the Federal Capital Territory through Public Private Partnership. Exhibit P5 was drawn up and executed by the parties after a series of meetings. A careful perusal of paragraphs 1, 2, 3 and 5 in particular of the second part of Exhibit P5 (reproduced earlier), discloses the following intentions: that the respondent shall make the said districts available to the appellant for the development of the infrastructural facilities; that details of the type, method of development and specification of materials used shall be in accordance with the specific standards of the FCDA; upon execution of the MOU the respondent shall provide the appellant with the engineering design drawings and bill of quantities and other documents that would enable it complete its cost analysis of the project; and that a formal agreement would be entered into within 14 days of the signing of the MOU with respect to the project proposal on terms to be mutually agreed. For the avoidance of doubt, paragraph 5 states: “That this memorandum of understanding is

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subject to the signing of a formal agreement by the parties.”

Learned senior counsel for the appellant contends that the exchange of documents between the parties i.e. the engineering drawings and bill of quantities by the respondent and the cost analysis prepared by the appellant amounts to consideration for the contract. With due respect to learned senior counsel, this cannot be correct. The MOU clearly slates that a formal agreement would be entered into after compliance with Paragraph 3 (1) on terms to be mutually agreed. This suggests that compliance with Paragraph 3 (1) does not conclude the agreement between the parties. For instance, the fact that the appellant has submitted a cost analysis of the project does not mean that the respondent is bound to accept it without further ado. The terms of the formal contract are to be mutually agreed, thus implying that some terms and conditions are yet to be settled. The MOU also refers to the ‘project proposal’. In other words, it remains a proposal until a formal agreement is entered into and executed by the parties. The Lower Court, at pages 1306 – 1307 of the record, after reproducing Exhibit P5 and

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examining its provisions carefully, held thus:

“The Memorandum of Understanding is so clear. The parties to the MOU shall enter into a formal agreement with respect to the project/proposal on terms mutually agreed within 14 days of the execution of the MOU and that all documents, materials, discussions etc shall be treated with confidentiality and neither party to the MOU shall disclose any information to a third party. This is not all. The MOU is subject to the signing of a formal agreement by the parties. The term mutually agreed by the parties with respect to the infrastructural provision at Mabushi and Katampe are not set out in the Memorandum of Understanding. So also are the financial implications and what sanctions will follow in case of breach. There is also no evidence on the MOU that certain consideration has passed and that the parties intended to create a legal relationship through the MOU, as the MOU was made subject to signing a formal agreement between the parties.

(Underlining mine for emphasis)

In my view, this analysis by the Court below of the legal implications of the MOU cannot be faulted. It is true that

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generally the word “shall” is interpreted in its mandatory sense. However, whether the word is used in its mandatory or directory sense depends on the con in which it is used. The word shall can also mean may where the con so admits. See: Fidelity Bank Plc. Vs Mony & Ors. (2012) LPELR-7819 (SC) @ 21 – 22 B – D; Amadi Vs N.N.P.C. (2000) 10 NWLR (Pt.674) 76 @ 97 – 98 H – A. Although these authorities are in respect of the applicable principles in the interpretation of statutes, the principles are just as relevant to the interpretation of documents. In the instant case, since the MOU is subject to the signing of a Formal agreement on terms to be mutually agreed by the parties, it would not be correct to say that the terms thereof are to be construed in a mandatory sense. I am of the considered view that contrary to the contention of learned senior counsel for the appellant, the terms stating that the MOU is subject to the signing of a formal agreement by the parties are fundamental and clearly express the intention of the parties. It follows also that the exchange of preliminary documents between the parties as per

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paragraph 3 (1) thereof cannot amount to the acceptance of an offer such as to constitute the MOU as a binding and enforceable contract between them. The Court below was indeed correct when it held that there was no valid and enforceable contract between the parties pursuant to Exhibit P5. The agreement between them was inchoate until the signing of a formal contract embodying all the agreed terms and conditions.

This issue must therefore be answered in the affirmative and it is accordingly resolved against the appellant.

See also  Dr A.O. Falomo v. Lagos State Public Service Commission (1977) LLJR-SC

Issue 3

Under this issue, it is contended that the Lower Court was wrong to rely solely on Exhibit P5 in reaching the conclusion that there was no binding agreement between the parties. It is contended that the Court ought to have considered the principles of promissory estoppel and estoppel by conduct arising from the promises, assurances and representations made by the respondent to the appellant upon which it acted to its detriment.

Learned senior counsel submitted that pursuant to decisions reached with the respondent in several meetings before and after the execution of the MOU and based on further assurances by the

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respondent and the then Minister of the FCT, Mallam El-Rufai, that a formal agreement embodying the terms and conditions of the project would be signed once the appellant fulfilled its obligations under the MOU, the plaintiff committed its staff to the project with the aid of other professionals, its bankers and financial institutions partnering with it on the project and prepared and submitted the Bill of Quantities for the project. He submitted that, at the request of the Minister, it provided evidence of its ability to source and raise funds for the execution of the project through meetings and correspondence with various international financial institutions. He submitted that pursuant to the MOU and the assurances received, the appellant incurred costs in respect of the following:

i. Preparation of bill of quantities.

ii. Cost analysis,

iii, Survey of the two districts.

iv. Mobilisation of personnel to the site.

v. Design and mapping of re-location scheme for the ‘natives’.

vi. Preparation of formal contract by legal firm.

vii. Mobilisation of equipment to the site.

He submitted that documents evidencing the

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above steps taken and the expenses thereby incurred were submitted to the respondent. That the appellant having altered its position based on those assurances, the respondent could not be permitted to revert to the previous legal position as if there were no intervening factors. He submitted that the learned trial Judge correctly evaluated the evidence in this regard and came to the right conclusion that the respondent could not resile from assurances given by the Minister, which modified the legal relations between the parties. He submitted that the Lower Court erred in failing to consider this issue, which has led to a miscarriage of justice. He referred to Section 151 of the Evidence Act and submitted that the respondent is caught by the doctrines of estoppel by conduct and promissory estoppel. He relied on; Olalekan Vs Wema Bank Plc. (2009) 13 NWLR (pt.998) 617 @ 622 – 626 H – G; Lawal Vs Union Bank Ltd. (1995) 2 SCNJ 132 @ 145; Trans Bridge Co. Ltd. Vs Survey International Ltd. (1986) 4 NWLR (pt.37) 576.

In reaction to the above submissions, learned senior counsel for the respondent disagreed with the contention that the principles of promissory

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estoppel and estoppel by conduct are applicable in the circumstances of this case. He also disagreed with the argument that it was representations, assurances and promises allegedly made to it by the respondent that caused the appellant to commit financial and manpower resources to the project without waiting for the execution of a formal agreement. He submitted that the Lower Court was right in holding that the appellant was on a frolic of its own. Learned counsel submitted that the meetings held between the parties referred to by the appellant were held at the negotiation stage. He referred to the various expenses allegedly incurred by the appellant and submitted that it took a risk by investing in the project before the signing of a formal agreement and should be bound by the consequences. He submitted that it would be wrong to say that the Lower Court did not consider the doctrine of estoppel, as the Court had held emphatically that the various meetings and discussions held prior to the signing of the MOU were part of the negotiations and amounted to an invitation to treat. He submitted that Section 151 of the Evidence Act and the authorities cited by

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learned senior counsel on estoppel are not applicable to the facts of this case and argued that there was no miscarriage of justice in this case.

In reply, learned senior counsel submitted that the doctrine of promissory estoppel or estoppel by conduct can arise not only in contract but also in any relationship between parties, including preliminary negotiations, provided that the elements of a contract, particularly consideration, are complete. He referred to: Temco Engineering & Co. Ltd. V. Savannah Bank Ltd. (1995) 5 NWLR (Pt.397) 607.

He submitted that the respondent did not give any evidence before the trial Court to show that the promises, assurances and representations were made in the course of negotiations and urged the Court to discountenance the submissions in that regard. Other submissions in the reply brief are merely a re-argument of the submissions in the main brief.

The general principle of law is that where a contract is made subject to the fulfillment of certain terms and conditions, the contract is inchoate and not binding until those terms and conditions are fulfilled. See: Tsokwa Marketing Co. Vs B.O.N. Ltd. (2002)

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11 NWLR (Pt.777) 153 @ 196 – 197 H – A & 199 200 G A; U.B.A. Ltd. V. Tejumola & Sons Ltd. (1998) 2 NWLR (Pt.79) 652 @ 685 C – D: Okechukwu Vs Onuorah (2000) 15 NWLR (Pt.691) 597 @ 614 – 615 H – A; Best (Nig). Ltd. Vs Blackwood Hodge (Nig.) Ltd. (2011) 5 NWLR (Pt.1239) 95 @ 126 C – D.

This Court expounded the doctrine of promissory estoppel in: Trans Bridge Co. Ltd. Vs Survey International Ltd. (1986) 4 NWLR (Pt.37) 576 @ 617 F – G and held the following to be essential requirements for its operation:

  1. There must be in existence, two contracting parties, who are contractually bound, or who but for the representation could have been contractually bound.
  2. There must be a representation, relied upon resulting in something different from what was agreed between the parties. It is not necessary that there should be detriment in the sense of loss or damage.
  3. The representation is not necessarily supported by valuable consideration. It is sufficient merely if it is a promise which has been relied upon. If these conditions are present, the doctrine of promissory estoppel operates.

At page 618 A – B

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(supra), the dictum of Denning, LJ in Combe Vs Combe (1951) 2 K.B. 215 @ 220 was cited with approval to the effect that the doctrine of promissory estoppel does not create a new cause of action but only prevents a party from insisting on his strict legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings which have taken place between the parties.

Section 151 of the Evidence Act 1990, now Section 169 of the Evidence Act 2011 provides:

When one person has either by virtue of an existing Court judgment, deed or agreement, or by his declaration, act, or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representatives in interest shall be allowed, in any proceeding between himself and such person or such persons representative in interest, to deny the truth of that thing.”

This is what is meant by estoppel by conduct. See also: Olalekan V. Wema Bank Plc. (2006) 13 NWLR (Pt.998) 617 @ 622 – 626 H G; Lawal Vs Union Bank Ltd. (1995) 2 SCNJ 132 @ 145.

The issue in contention here is

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whether there were promises, assurances and representations made by the respondent subsequent to Exhibit P5 that caused the appellant to alter its position to its detriment as found by the learned trial Chief Judge.

Now, in the process of reviewing the evidence adduced by the appellant, the learned trial Chief Judge at page 1194 of Vol. 3 of the record noted that Exhibit P5, the MOU, was entered into on 13th July 2004 after meetings had been held with the appellant, its bankers and financiers on the one hand and the respondent on the other hand, with the Minister of Works in attendance. That the meeting was also attended by the Minister of the Federal Capital Territory. That the appellant’s proposals were discussed and approved before the parties signed the MOU. In paragraphs 1, 2 and 3 of the judgment at page 1194 of the record, the following observations were made:

According to PW1 in paragraph 16 of his witness statement on oath, the total cost for the provision of the said infrastructural facilities for Mabushi is N26.14 Billion while that of Katanpe was put at N23,936 Billion and the anticipated profit from the project was put at

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about N10.5 Billion.

It is further PW1s testimony that in keeping with the terms of the MOU and based on assurances from the then minister that a formal agreement will be signed once the plaintiff fulfilled its obligations under the MOU and provided evidence of financial capacity to execute the project, the plaintiff committed its staff and resources to the project and in fact prepared and presented a Bill of Quantity (B.O.Q) for the project to the defendant. The plaintiff further provided evidence of its financial capacity. This evidence is captured in the annexure to Exhibit P6.

However, PW1 continues that after several meetings with the defendant the Infrastructural Development Agreement capturing the terms and conditions of the said project was agreed on and a final copy prepared by the law firm of Ajumogobia & Okeke but the defendant failed and/or refused to sign the said agreement in compliance with the terms of the MOU and no reasons were given for the refusal.”

The relevant portion of Exhibit P6, a letter dated 4th August 2004 from the appellant to the Minister of the FCT, reproduced in the judgment of the trial Court

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reads:

Hon. Minister, sir, in keeping with the said time line and in furtherance of the decisions reached at the said meeting of the 6th July 2004, we forward herewith, the 3rd and final draft Infrastructural Development Agreement ready for signing which is the result of several meetings and discussions between us and your relevant departments.

(Underlining mine for emphasis)

It is appropriate to reiterate here that it was the result of the decisions reached at the meeting of 6th July 2004 that culminated in Exhibit P5. The trial Court at page 1202 of the record concluded from Exhibit P6 that the parties agreed on the terms of the Infrastructural Development Agreement and that the respondent had no justification in refusing to sign the document in accordance with the terms of the MOU. It was in this con that the learned trial Chief Judge held that the respondent had, by its promises, assurances and representations, caused the appellant to alter its position to its detriment. His Lordship held that the respondent “must accept their legal relations as modified by himself, even though it is not supported in point

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of law by any consideration but only his words.”

The issue to be determined is whether there was evidence of any modification of the agreement between the parties as contained in the MOU. The answer must be in the negative. The MOU clearly states that it is subject to the signing of a formal agreement between the parties. Therefore even if the appellant had fulfilled its obligations under the MOU by, inter alia, preparing a bill of quantities and providing evidence of its financial ability to execute the contract, such acts cannot amount to a license to proceed to mobilize to the site and commit financial and manpower resources to the project without the formal agreement being signed. At best the assurances were to the effect that a formal agreement would be signed. Prudence dictates that for a project of this magnitude the appellant would have been patient enough to ensure that all the I’s were dotted and the t’s crossed before mobilizing to site and incurring expenses in respect thereof. I agree with the Lower Court that in the absence of any agreement authorizing the appellant to mobilize to the site, it was on a frolic of its own and must bear the

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consequences.

Although the Lower Court did not consider the issue of estoppel raised by the appellant, I am of the view that there has been no miscarriage of justice in this case, as it rightly concluded that there was no enforceable contract between the parties. This issue is accordingly resolved against the appellant.

Issue 4

This issue questions whether the Court of Appeal was right in reversing the decision of the learned trial Chief Judge to the effect that there was a binding contract between the parties. Having regard to the resolution of Issues 1, 2 and 3 infra against the appellant, this issue must be answered in the affirmative. It is accordingly resolved against the appellant.

Issues 5, 6, 7, 8 and 9 have become otiose in view of the resolution of issues 1, 2, 3 and 4 against the appellant.

In conclusion, I find no merit in this appeal. It is accordingly dismissed. The parties shall bear their respective costs.


SC.293/2011

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