Non-Enforceability of Inchoate Agreements

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In the Supreme Court of Nigeria Holden at Abuja On Friday, the 19th day of June, 2020 Before Their Lordships Olabode Rhodes-Vivour Mary Ukaego Peter-Odili Olukayode Ariwoola John Inyang Okoro Uwani Musa Abba Aji Justices, Supreme Court SC.453/2015

Between

Young Shall Grow Motors … … … Appellant

And

1. Madam Nimota Onalada

2. Mrs. Doyin Olunowo

3. Nosiru Oduwole

4. M.B. Onalaja

5. Prince Emeka Mamah Respondents

(Substituted by the Order of the

Court of Appeal dated 17/3/2011)

(Lead Judgement delivered by Honourable Uwani Musa Abba Aji, JSC)

“Where an agreement is inchoate and has not gone beyond negotiations, it cannot be enforced as a concluded contract”

Facts

The Appellant, a tenant in the property of the 1st to 4th Respondent at No. 1, Ikorodu Road, Jibowu, Yaba, Lagos, filed an action against the Respondents, seeking an order of specific performance of an agreement for the sale of the property to it. It was the case of the Appellant that the 1st to 4th Respondent agreed to sell the said property to it, but reneged on the said agreement and sold the property to the 5th Respondent.

The defence of the 1st to 4th Respondent was that the transaction with the Appellant was not completed as the Appellant failed to consummate the transaction, and this warranted their decision to sell the property to the 5th Respondent. The 5th Respondent counter-claimed for a declaration that he is the rightful owner of the said property, by virtue of the sale of the same to him by the 1st to 4th Respondent. At the end of the trial, the trial court declared the 5th Respondent to be the rightful owner of the property, by virtue of the sale of the same to him by the 1st to 4th Respondent, and dismissed the Appellant’s claim. Dissatisfied, the Appellant appealed to the Court of Appeal, which court also dismissed the appeal and affirmed the judgement of the trial court. The Appellant further appealed to the Supreme Court.

Issues for Determination

The following issues, as extrapolated from the issues formulated by the Appellant and Respondents respectively, were determined by the Apex Court –

1. Whether there was valid and subsisting contract of sale of the property in dispute between the Appellant and the 1st to 4th Respondent, to transfer title to the Appellant.

2. Whether the failure of the Court of Appeal to consider the Appellant’s issues 2 and 3, did not amount to denial of fair hearing.

Arguments

On the 1st issue, counsel for the Appellant argued that the Court of Appeal was wrong when it held that photocopies of bank draft, could not take the position of consideration sufficient to induce a reasonable party into contract. He urged the Apex Court to hold that the Appellant furnished consideration in form of concrete promise (issuance of a Zenith Bank draft for N18,000,000.00 (Eighteen Million Naira) as requested by the 1st to 4th Respondent as purchase price), and the delivery of the photocopies of the said bank draft to the 1st to 4th Respondent’s solicitor for sighting represents something of value in the eyes of the law. Counsel for the Respondents, on the other hand, argued that there was no valid and enforceable contract between the Appellant and the 1st to 4th Respondents, capable of being enforced by an order of specific performance. He submitted that the Appellant failed to fulfil the requirements of a valid contract, and there was no concluded transaction between it and the 1st to 4th Respondent, entitling the Appellant to the order sought.

On the 2nd issue, counsel for the Appellant argued that the failure of the Court of Appeal to consider the Appellant’s 1st and 2nd issues submitted before it for determination, occasioned a miscarriage of justice on the Appellant and breached its right to fair hearing. He argued that the judgement of the Court of Appeal would have been different and favourable to the Appellant, had those issues been considered. Conversely, counsel for the Respondents argued that the adoption and consideration of the 5th Respondent’s issues for determination by the Court of Appeal, properly determined the crux of the issues between all the parties. He contended that there was nothing contained in the Appellant’s said 1st and 2nd issues that was not substantially embedded in the 5th Respondent’s issues adopted and considered by the Court of Appeal, in its determination of the Appellant’s appeal before it. Counsel submitted that the Appellant failed to show how the alleged non-consideration of the issues formulated by the Appellant, led to a miscarriage of justice and breach of the Appellant’s right to fair hearing.

Court’s Judgement and Rationale

On the 1st issue, the Supreme Court held that, before there can be a valid contract of sale of land, there must be a definite offer by the offeror, an unqualified acceptance by the offeree, and a consideration. Contracts are enforceable when there is consideration, as this is what indicates that the promisor intended to be bound by the contract; therefore, where an agreement is inchoate and has not gone beyond negotiations, it cannot be enforced as a concluded contract. The court relied on its decision in TSOKWA MOTORS LTD v UBN LTD (1996) 9 NWLR (Pt. 471) 129 at 145. Further, the court held that in a contract of sale of land, where the purchase price is not fully paid, there can be no valid sale notwithstanding that the purchaser is in possession. Failure to pay the purchase price constitutes a fundamental breach which goes to the root of the case, upon which a court cannot decree specific performance – ACHONU v OKUWOBI (2017) LPELR-42102(SC) (P. 35, Paras E-G).

In the transaction between the Appellant and the 1st to 4th Respondent for sale of the property, there was no unqualified acceptance or consideration furnished by the Appellant. Although the Appellant issued bank drafts towards payment of the purchase price, it withheld the original bank draft and only gave the 1st – 4th Respondents a photocopy. The Appellant also did not show up, on the date scheduled for conclusion of the transaction. It could therefore, not be said that consideration had been furnished and a valid contract had been established, as the Appellant had by its express conduct, shown that it did not want to conclude the transaction and establish a valid contract. Furthermore, the Appellant itself divulged under cross-examination before the trial court, that the 1st to 4th Respondent rejected the consideration of the sum of N18,000,000.00 (Eighteen Million Naira). Both the Appellant and the 1st to 4th Respondent had been at cross roads and had never come to consensus ad idem concerning the sale of the property, and negotiations between the parties had not crystallised into a binding contract. Therefore, there could not have been a breach of contract requiring an order of specific performance, or enforcement of the contract.

On the 2nd issue, the court held that where issues for resolution in an appeal are formulated by parties, an appellate court can adopt, reframe or reformulate its own issues which are, in its opinion, proper for the determination of the appeal. A court is not obligated to adopt the issues set down for determination by an Appellant, as a court is free to adopt the issues as crafted by either of the parties, so long as the issues so identified and/or adopted flow from the grounds of appeal, as the court has to do that which is convenient within the bounds of law in getting at the answer to the question or questions raised, and in so doing, deliver justice – AUWALU v FRN (2017) LPELR – 43824 (SC) (PP. 32-33, Paras F-E) and UNITY BANK v BOUARI (2008) 7 NWLR (Pt. 1086) 383 at 401.

Their Lordships held further that a party who complains about the formulation of issues by a lower court, must furnish evidence demonstrating what injustice has been done to him by such formulation, and in the absence of such evidence, an appellate court cannot reverse the decision of the lower court – NWANA v FCDA & ORS (2004) LPELR – 2102(SC) (PP. 15-16, paras. G-A). In this case, there was no iota of evidence before the court showing that injustice had been done to the Appellant, or that he had been denied his right to fair hearing as a result of the adoption of the 5th Respondent’s Issues for Determination by the court.

Appeal Dismissed.

Representation

P. O. Jimoh Lasisi, SAN for the Appellant.

Kunle Ayorinde, Esq. for the 1st to 4th Respondent.

Chief Frank Agbedo, Esq. for the 5th Respondent.

Reported by Optimum Publishers Limited, Publishers of the Nigerian Monthly Law Reports (NMLR)(An Affiliate of Babalakin & Co.)

Quote

“Contracts are enforceable when there is consideration, as this is what indicates that the promisor intended to be bound by the contract; therefore, where an agreement is inchoate and has not gone beyond negotiations, it cannot be enforced as a concluded contract”