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How introduction of new terms into an existing agreement can be done

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SAVANNAH SUGAR COMPANY LIMITED v. ZACKSON LIMITED (2019) LPELR-46382 (CA)

IN THE COURT OF APPEAL
(YOLA JUDICIAL DIVISION)
ON THURSDAY, THE 24TH DAY OF JANUARY, 2019
SUIT NO: CA/YL/76/2018

BEFORE THEIR LORDSHIP
OYEBISI FOLAYEMI OMOLEYE J.C.A
JAMES SHEHU ABIRIYI J.C.A
SAIDU TANKO HUSSAINI J.C.A
BETWEEN
SAVANNAH SUGAR COMPANY LIMITED APPELLANT (S)
AND
ZACKSON LIMITED RESPONDENT (S)
LEAD JUDGMENT DELIVERED BY JAMES SHEHU ABIRIYI, J.C.A.
FACTS OF THE CASE

The Appellant advertised for the construction and repairs of its light aircraft runway to meet the standard specifications laid down by Nigeria Aviation Authority. The contract was awarded to the Respondent. But the Respondent failed to construct the runway in accordance with the terms of the contract. Apart from this, the Respondent used the Appellants machineries and equipment and did not pay the Appellant N17, 200, 000.00 for the use of the equipment. When Respondent’s solicitor asked Appellant to pay the Respondent outstanding contract sum of N103, 060,315.10, Appellant’s solicitor replied that the Appellant had engaged a third party to construct and bring the runway to the standard specifications laid down by the Nigerian Aviation Authority. N82, 737,375.00 was paid to the third party.  

According to the Appellant, the failure of the Respondent to execute the contract as specified caused it to spend N50 Million on transportation from Yola Airport to its factory in Numan Adamawa State. The Appellant denied agreeing on the extra work and cost of N121, 148,100.20 with the Respondent. The Appellant’s Consultant issued a certificate of completion of the project to the Respondent without a joint inspection of the runway by all parties. PW2 who attended Court on subpoena stated that the Appellant was not given certification in view of defects they observed on the facility and equipments. 

The salient defence of the Respondent was that it did the some extra works as introduced by the Appellant’s Consultant, which cost N121, 148,100.00. In its efforts to recover the outstanding sum of money on the contract the Respondent engaged the services of a solicitor who charged it N22, 920,841.55 as solicitor’s fee.

The Appellant first took out a writ of summons with Suit No. ADSY/58/2017 against the Respondent before the Respondent in turn took out a writ of summons with Suit No. ADSY/69/2017 against the Appellant. Both suits were consolidated and the Appellant remained the plaintiff. The Respondent became the Defendant/counterclaimant. The claim of the Appellant was for a declaration that the Respondent failed to construct an aircraft runway that meets the standard specification of the Nigerian Aviation Authority and failed to do so on the date agreed to by both parties, an order for the payment of N50 Million being cost on transportation of Respondent’s staff from Yola Airport to Appellant’s factory, N50 million general damages, interest on the sum of N50 Million at the rate of 21% and costs of the action assessed at N20 Million. The claim of the Respondent against the Appellant which became its counterclaim after the consolidation of the two  suits was for the sum of N229, 208, 415.50 being balance due on the contract sum for the reconstruction, rehabilitation of the runway and extra works, damages for trespass and costs of the action. After considering evidence led by both parties, the High Court dismissed the claim of the Appellant and entered judgment in favour of the Respondent/counterclaimant. Dissatisfied with the decision, the Appellant appealed to the Court of Appeal.

ISSUES FOR DETERMINATION
The Court determined the appeal on these issues couched as follows: ISSUE 1: Whether the Court below construed and gave effect to the clear and express provisions of the contract between the parties contained in Exhibits BB1 and C. ISSUE 2: Whether the learned trial judge was right to have granted the respondent’s claim for special damages in the sum of N22, 920,841.55 while refusing the Appellant’s claim for the sum of N17, 200,000. ISSUE 3: Whether, from the totality of evidence and materials adduced at the lower Court, there is any contract/agreement between the parties hereof on the sum of N121, 148, 100 as cost of extra – works claimed by the Respondent and granted by the lower Court.

ARGUMENTS
On issue 1, learned counsel for the Appellant submitted that it is the law that in the absence of fraud or illegality, the Court is bound to give effect to the terms and conditions of the express agreement of parties to a contract. It was submitted that by the agreement between the parties, the Respondent was to construct a standard 1500 metres light aircraft runway based on the standard specifications laid down by the Nigeria Aviation Authority and that the failure of the Respondent to construct the Appellant’s aircraft runway based on the standard specification of the Nigerian Aviation Authority amounts to a breach of the contract between the parties. This breach led the Appellant to incur additional cost of N82, 737,375 to bring the runway to meet the NCAA standard; and also spend N50 million on transportation and other logistics due to its inability to use the aircraft runway.

Respondent on their part submitted that the conditions stipulated in the contract between the parties cannot by any stretch of the imagination be interpreted to mean subject to approval of the NCAA. It was submitted that the argument that the execution of the contract did not meet NCAA standards was only an excuse by the Appellant to deny the Respondent the fruits of its labour.

Respondents further argued that the runway was 100 per cent completed and confirmed through the valuation certificate of the Consultant issued on 22nd August, 2014.On issue 2, learned counsel for the Appellant submitted that the Court below erred when it granted the claim of the Respondent for N22, 920,841.55 legal/professional fee for breach of contract when indeed it was the Respondent that breached the contract between the parties.

In this regard, Respondent submitted that the trial Court was right in granting the N22, 920,841 being solicitor’s fees because payment of the amount would put the Respondent in the position it would have been had the Appellant paid it the outstanding amount on the contract.On issue 3, learned counsel for the Appellant argued that the Respondent’s claim for N121, 148,100.20 for extra works does not form part of the express terms and conditions of the contract between the parties. It was submitted that the Respondent declined the move by the Appellant to agree on the extra works. Therefore the parties consequently did not agree on introduction of any new terms to their original contractual agreement dated 8th December 2013.

The Appellant further contended that the lower Court erred when it found that the contract of the parties was varied by Exhibits J1, J2, QQ1 and X6 which were communications between the Appellant and its Consultant and were not addressed to the Respondent.On her own part, Respondent posited that it was entitled to N121, 148,100.00 for extra works executed by it. It was submitted that the issue of extra works arose as a result of the instruction to the Consultant to direct the Respondent to enlarge the scope of the runway to 1577 metres and the Consultants instructions to the Respondent to undertake fresh soil analysis and to enlarge the scope of the base material.

The Appellant, it was submitted, authorised the Consultant to increase the scope of work in the contract through Exhibits J1 J3. That the Consultant did just that and confirmed it in an internal memo to the Appellant (Exhibit X4).

COURT’S FINDINGS
In respect of issue 1, the Court reiterated that in the construction of the terms of a contract, the meaning to be placed on it is that which is plain, clear and obvious result of the terms used.The Court further stated that a party who has substantially performed his contractual duties in the manner stipulated, even though some small part of the work had been badly done, or not done at all, may recover the agreed price less a deduction to remedy the minor defects or lapses.

The terms of the contract is for the construction and repair of a standard light aircraft runway based on the standard specifications laid down by the Nigeria Civil Aviation Authority (NCAA).It was observed that although the Appellant refused to pay the outstanding sum to the Respondent under the guise that it paid N82, 737,375 to another contractor to reconstruct the runway to meet the standard specifications laid down by the NCAA; he neither named the contractor to whom the money was allegedly paid nor the nature of the defects corrected, nor tendered the receipt of payment to such a contractor.

According to the Court, it was clear that no defects were remedied by the Appellant and that the Respondent was entitled to payment of the outstanding sum on the contract.On issue 2, the honourable Court affirmed that under our laws, expenses incurred on services of counsel are reasonably compensated. That upon Appellant’s failure to pay the Respondent the outstanding sum on the contract, the Respondent was entitled to consult a solicitor to intervene. The Respondent is therefore entitled to the expenses incurred in securing the services of a solicitor. The Court however observed that the evidence does not support the N22, 920,841.55 granted by the trial Court.

On issue 3, while submitting that where parties to an agreement subsequently decide to introduce new terms into the contract, they are to do so by making specific reference to the earlier agreement; the Court stated that in the instant case, Exhibits J1 J2 and Q1 Q2 relied on by the trial Court was not an agreement between the parties.Therefore, that the trial Court erred when it found that the work was increased from 1500 to 1575 metres.

HELD
The appeal succeeds in part.The claim of the Appellant in the Court below is hereby dismissed in its entirety.The counterclaim of the Respondent for the sum of One Hundred and Twenty One Million, One Hundred and Forty Eight Thousand, One Hundred Naira and Twenty Kobo (N121, 148,100.20) only for extra works is also dismissed.

However, Judgment was entered in favour of the Respondent against the Appellant in the following terms: (1) Appellant shall pay the sum of Ninety-seven Million, Three Hundred and Forty Thousand, Seven Hundred and Forty-five Naira (N97, 340,745) only to the Respondent being amount due to the Respondent on the contract between the parties which the Appellant has not paid to the Respondent despite demands. (2) Appellant shall pay 10 percent of the above outstanding debt to the Respondent being solicitors fees for services rendered to the Respondent by its solicitor.
(3) Respondent is awarded N100, 000.00 costs which shall be paid by the Appellant.
Appearances:
E.A. Okorie with him, C.C. Ottih For Appellant(s)
Chief L.D. Nzadon with him, Hassan G. Maidawa For Respondent(s)
Compiled by: LawPavilion

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