Memorandum of Understanding is merely a Representation of the Intention of the Parties—Supreme Court

Kudirat Kekere-Ekun
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- Justice Kudirat Kekere-Ekun
Commentaries
Kudirat Motonmori Olatokunbo Kekere-Ekun, JSC
“Considering the definition of MOU as contained in the Black’s Law Dictionary, the Court held 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. Thus, taking into consideration the elements of a valid contract, the MOU is merely a representation of the intention of the parties, subject to the execution of a formal agreement”
In the Supreme Court of Nigeria
Holden at Abuja
On Friday the 27th Day of January, 2017
Before Their Lordships
Walter Samuel Nkannu Onnoghen, Acting CJN
Mary Ukaego Peter-Odili
Kumai Bayang Aka’ahs
Kudirat Motonmori Olatokunbo Kekere-Ekun
Amiru Sanusi
Justices, Supreme Court

SC. 293/2011
Between
BPS Construction & Engineering Co. Ltd…………….. Appellant
And
Federal Capital Development Authority………….Respondent

Lead Judgement delivered by Kudirat Motonmori Olatokunbo Kekere-Ekun, JSC

Facts
The Appellant carries on the business of civil, mechanical and electrical engineering and construction work. The Appellant approached the Respondent for the provision of infrastructural facilities at Mabushi and Katampe Districts of the Federal Capital Territory, Abuja. The Appellant’s proposal was approved at a meeting held between the parties on 6th July, 2004. A Memorandum of Understanding (MOU) was entered into by the parties.

The MOU was made subject to signing a formal agreement by the parties. By the agreement, the Appellant, an infrastructure developer, would raise funds for the project and recoup the costs, from the collection of development levies payable by allottees of plots, and from the sale of vacant plots in the two districts. The terms of the MOU were to the effect that the Respondent would provide the Appellant with the engineering designs, drawings and bill of quantities (BOQ), and any other document that would enable the Appellant complete its costs analysis of the project. The MOU also provided that within 14days of its execution, the parties shall enter into a formal agreement on terms to be mutually agreed on by the parties.

 

In compliance with the MOU, the Respondent submitted the required documents to the Appellant.

The Appellant in turn submitted its Infrastructural Development Agreement to the Respondent for execution, along with evidence of its financial capacity to execute the contract. However, despite repeated reminders, the Respondent failed/refused to sign the agreement.

 

In the meantime, the Appellant had incurred 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.”

When the Respondent persisted in its failure to execute the formal agreement, the Appellant instituted an action at the High Court of the Federal Capital Territory, Abuja seeking among others,

(a) A declaration that the Defendant (Respondent) is duty bound to enter into a formal agreement with the Plaintiff (Appellant) in line with the MOU;

(b) An Order compelling the Respondent to execute the formal agreement within a time stipulated by the Court; (c) An Order for the Respondent to pay the sum of N3,877,284,858.29 being cumulative costs for the efforts, services and work input which the Appellant already committed to the said project pursuant to the MOU or in the alternative, An Order for the Respondent to pay to the Appellant the sum of N10,000,000,000.00 being loss of anticipated profit by the Plaintiff in respect of the project.

 

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