Covid-19: A Breach of Contract or an Act of God by Peter Temitope Olajuwon, Esq.


Abstract

The world is undoubtedly a global village with so many activities being carried out on a daily basis, ranging from economic to social to academic and especially in a season such as this, medical activities.

Nigeria although a developing nation yet is not left out of the race, to not just curtail but, to end the sporadic spread of the deadly CORONAVIRUS code name COVID-19. In a bid to achieve this curtailment, so many policies, orders and restrictions have been implemented by the government at both at state and federal levels.

It is however inevitable that some of these policies and orders would amount to a breach somewhere someway in the millions of contracts that are being executed on daily and weekly basis. It is therefore safe to envisage the possibility of some legal actions to emanate as result of these breach as there may be some customers who may want to take advantage of the turbulent sea to do a dirty business before the clean waters of justice. It is therefore of utmost importance to arm oneself prepare for the legal battle in the cloak of “breach of contract”.

What is a Contract?

A contract just like every other legal concept has plethora of definitions, but just a few will be considered 

Prof Itse Sagay in his INTRODUCTION TO NIGERIAN LAW OF CONTRACT: NOTES referred to the definition of the court in the case of OREINT BANK (Nig.) Plc v Bilante Int’l Ltd (1997) 8 NWLR (Pt. 515) 37 as a legally enforceable agreement.

A very common definition to all law students in our Nigerian institutions is ‘a legal agreement between two or more parties with the intention to create a legal obligation that are enforceable or otherwise recognizable by law’ as it was re-echoed in the recent case of ENEMCHUKWU v OKOYE (2017) 6 NWLR (Pt. 1560) 37 at 55 – 56 CA.

It is apparent from the above that when there is a contract, there is a right to be enforced and a breach of which can be redress can be sought in law.

What is a Breach of Contract?

The breach of contract is defined as a failure to perform any term of the contract without a legitimate legal excuse, this may include not completing a job, but paying a sum in full or on  time, failure to deliver goods in an agreed manner, etc. 

Suffice it to say that a breach of contract is any act done or omission made that may amount to the non-performance of any legal obligation by a party to a contract. 

However our laws have recognized the temporal nature of man as he is limited by his inability to control the supernatural. Hence the concept of force majuere has evolved over time to salvage man when he defaults in a contractual agreement owing to circumstances beyond his control.

What is Force Majuere?

The word force majuere is a French etymology which means superior strength or greater force. 

It is an unforeseeable circumstances that prevent someone from fulfilling a contract. 

It is also an irresistible compulsion or superior strength. 

The term force majuere refers to a clause that is usually included in contracts to remove liability for natural and unavoidable catastrophes that interrupt thee expected cause of events and restricts or frustrates participants from fulfilling obligations. 

It is an exemption to the doctrine of pacta sunct servanda which connotes that agreement must be kept.

It is this principle of force majuere that birthed what has been encoded in our legal system as the doctrine of frustration. 

The Doctrine of Frustration and how it Touches on Covid19

It is very pertinent to quickly state at this juncture that the place to institute an action that bothers on a contract is the place of residence of the defaulting party or the place where the contract was created.

Hence the purport of this humble submission is couched around the restrictions that were made by the Lagos state government and how it has affected various transactions and contracts.

The doctrine of frustration is an English contract law doctrine that acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible or radically changes the party’s principal purpose for entering into a contract. 

On the 22nd day of March, 2020; the Lagos state government announced the  restriction of the populace in Lagos and advised that its residents should stay at home and confine themselves as a measure to tackle the deadly Corona disaster.

It further at a later date lock down shops, markets, schools, etc; except for goods and services that are necessary and/or perishable. It is inevitable that this lock down would have affected some contracts and contractual obligations. It is therefore to be anticipated that this breach of contract has caused by this restrictions may open a can of worm that may flood our court rooms as soon as this pandemonium is resolved. 

The question proposed at this point is whether a party can be made to bear the cost of a breach of contract in a time like this.

In answering that question,  it is of utmost importance that we set the records straight at this juncture, without any ambiguity that, this frustration of the contract is not as to outbreak of the Corona Virus, rather it is to conform to the order of the government (the authority of the land).

Nevertheless, where any matter arises, the spirit of the doctrine of frustration can be invoked. See the case of Wema Bank Plc v Alhaji Sola Oloko (CA/1/88/2009) [2014] NGCA 3 (27 February 2014)

In that case the plaintiff/respondent, a customer of the defendant/appellant took a bank overdraft for the supply of petroleum products.  The plaintiff could not however meet up with the condition of the overdraft due to the restriction on movement placed by the Ogun state government. The defendant then repudiated the contract. 

Upon appeal, the Court of Appeal upheld the decision of the trial court.

Part of the submission of the learned counsel to the plaintiff/respondent was that the restriction of movement announced by the state government was expected to be strictly complied with and as such the plaintiff/respondent was not exempted from the restriction. 

See the further the case of Refers Mazim Eng. Ltd v Tower Aluminium (1993) 5 NWLR (Pt. 295) at 352. See also the case of NBCI v Standard (Nig.) Eng. Co. Ltd (2002) 8 NWLR (Pt. 768) at pg 116 where frustration was defined as a premature determination of a legal agreement between two parties.

In the English case of TAYLOR v CALDELL (1861-73) ALL ER (a locus classicos on the doctrine of frustration) BLACKBURN J held 

Where from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless, the specified thing continued to exist, so that when entering into the contract they must have contemplated such continued existence as the foundation of what has to be done, then in the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive contract but as a subject to an implied condition that the parties shall be excused in case before breach, performance becomes impossible from the perishing of the thing without default of the contractor

This goes without saying that the restriction provides for a proviso that only markets for perishable goods and necessaries are allowed to operate.

The question then may be that what is a necessary good and/or service (that is a ground in which the fertility of law can be well tested).

This principle is well rested on the legal maxim of Lex Non Cogit Ad Impossibilia and Et Impotentia Excusat Legem which are the two legal maxims connected with the doctrine of frustration. Both mean that the law does not compel one to do that which is impossible or the law excuses someone from doing the impossible.

Conclusion

From the above submission, suffice it to say that in such a time as this; the sword of litigation as to the breach of contract will that the contract was for a perishable good or a necessary good and/or service. Conversely, the shield of same will be that the contract was frustrated by a government policy.

Counsel are therefore advised to peruse the terms and conditions of the contract as well as the nature of goods and services before them to determine whether to draw their sword or swing their shield. 

The court nonetheless, should be inclined towards the dispensation of justice as to the adjudication of technicalities as justice should not just be done but must also be manifestly seen to be done.

Olajuwon is a lawyer, certified human resource manager and a certified project management professional.


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1 thought on “Covid-19: A Breach of Contract or an Act of God by Peter Temitope Olajuwon, Esq.

  1. Just as you mentioned, the Government needs to draw a clear line of demarcation between what services are essential and non-essential..
    Every legal means of livelihood for an average Nigerian is essential, every honest means through which a man and woman puts food on the table to feed their family is essential.
    It is left for the government to sit down and cancel all official or contractual activity in the country and compensate those affected by this shutdown as a result of the Covid-19..

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