⦿ CASE SUMMARY OF:
United Bank For Africa Ltd. v. Tejumola & Sons Ltd. (1988) – SC
– When a contract for lease begins;
– Subject to contract;
– Negotiation for a lease;
United Bank For Africa Ltd.
Tejumola & Sons Ltd.
(1988) NWLR (Pt.79)662;
⦿ LEAD JUDGEMENT DELIVERED BY:
A. G. O. AGBAJE, J.S.C.
⦿ LAWYERS WHO ADVOCATED
* FOR THE APPELLANT
– Chief F.R.A. Williams, S.A.N;
* FOR THE RESPONDENT
– Mrs. P.C. Ajayi-Obe;
The Plaintiff’s claim against the Defendant is for the sum of N2,000,000.00 (Two million Naira) being special and general damages for the breach of contract entered into between the Plaintiff and the Defendant in or about April 1982 in Lagos, the breach having occurred also in Lagos in or about October, 1982.
United Bank for Africa wrote (Exb. E) to the respondent:
“OUR REF: PROP/PM/82
19th April, 1982.
Tejumola & Sons Limited,
15, Okoya Street,
P. O. Box 3253,
SUBJECT TO CONTRACT
3, DOCEMO STREET AND 42 IDUMAGBO AVENUE LAGOS
We refer to your previous correspondence and the discussion of your Mr. E.T. Ajiboye with us concerning the above property. Subject to your showing evidence of good title we hereby offer to take a sub-lease of your above property on the following main terms and conditions:
Portion of the ground floor (i.e. 900 sq. ft.) and all the four upper floors (i.e. 1,108 sq. ft. each) comprising a total floor area of approximately 495.36 sq. metres (5,332 sq. ft.)
15 years from the date physical possession of the property is given to us, subject to the Bank reserving the right to break at the end of the 5th and 10th years of the term.
N215 per sq. metre (or N20 per sq. ft.) per annum payable 5 years in advance from the date physical possession of the property is given to us and upon our being satisfied with the search of the Lands Registry as regards the genuineness of your title to the property.
Every five years of the term subject to the usual arbitration clause.
(Not relevant) …
If the above main terms and conditions are acceptable to you, please confirm.
Yours faithfully, pp:
UNITED BANK FOR AFRICA LIMITED
(Sgd) J. A. Dosunmu Property Manager.”
The respondent letter (reply, Exb. F) to the United Bank for Africa contained thus:
“15 Okoya Street,
P.O. Box 3253,
Tel. 631687, 658075
19th April, 1982
The Property Manager, United Bank for Africa Limited, Broad Street,
Reference to your letter PROP/PM/82 dated 19th April, 1982.
The contents were carefully noticed. Our Company has carefully consent and confirmed the Tenants Covenants and Landlord’s Covenants. We accepted your offer for the premises portion of the ground floor (i.e. 900 sq. ft.) and all the four upper floors (i.e.1,108 sq. ft. each) comprising a total floor area of approximately 495.36 square metres (5,332 sq. ft.), and also to the subject of Terms reserved by the Bank right.
Our Company also agreed the rentage of N215 per square metre (N20.00 per square foot) per annum payable in 5 years advance from the date physical possession at the property.
In view of our 4 (four) months wasted on this property, we request you to take the physical possession on 1st May, 1982, and we expect your cheque for advance payment of 5 years as soon as possible. We shall be looking forward for your immediate comments as soon as possible.
TEJUMOLA & SONS LTD. (Sgd),
Apart from these two correspondences referred above, there were other negotiations between the parties.
“By Exh. G of 18th May, 1982, subsequent no doubt to Exh. F, the Defendant wrote the Plaintiff saying there would be a sight meeting on Friday 21st May, 1982 at 10a.m. to agree the external areas which should be in the exclusive possession of the Defendant. It will appear the sight inspection was carried out as demanded in Exh. G. Then there is Exh. H from the Plaintiff to the Defendant, describing the inspection as one to locate the ground floor for the Defendant’s use and also containing steps taken hy the Plaintiff Company to prepare the floor area for that purpose. Then again there is Exh. J. of 10th June, 1982 from the Defendant to the Plaintiff saying, it would not be possible to progress with the transaction any further until the Structural Engineers confirmed that the property, the subject matter of the proposed lease, was structurally sound for the type of business the Defendant wanted to transact in it. There is equally no doubt that by Exhs. L, M, Q, T and T1 the Plaintiff produced confirmation from the Structural Engineers to the Defendant as to the structural soundness of the property for the banking business of the Defendant. To this end the Plaintiff incurred considerable expenses. The response of the Defendant to all what the Plaintiff Company has done was Exh. V wherein the Defendant called off everything up to that time.”
But, the two letters above are most vital.
1. Whether on the pleadings and the evidence before the court the finding that there was an agreement that the lease shall commence on 1/5/82 can be sustained?
⦿ HOLDING & RATIO DECIDENDI
1. For ISSUE 1, the Supreme Court gave judgement in favour of the Appellant by stating that there was no valid contract.
i. The indications from the analysis I have made of the correspondence which passed between the Defendant and the Plaintiff after Exh. F was written are that the Defendant never at any time expressly agreed to 1/5/82 as the date of the commencement of the proposed lease.
ii. The mere fact that the Defendant asked for some things to be done to the property the subject matter of the proposed lease and those things were carried out would not mean that there is a concluded agreement for a lease in the absence of an agreed commencement date of the term of the proposed lease which is an essential term of a lease. The fact I have just referred to will only be relevant in the instant case if Counsel for the Plaintiff can thereby show that the Defendant has by its conduct which must be evidenced in writing, See Marshall v. Berridge (Supra) agreed to the commencement date of 1/5/82 in the Plaintiff’s letter Exh. F. Unless this can be done it cannot be said that the request by the Defendant for the work carried out by the Plaintiff on the property the subject matter of the proposed lease made 1/5/82 the date of the commencement of the proposed lease agreed to by both sides. I cannot find anything in the requests made by the Defendant for alterations to the property the subject matter of the proposed lease suggesting that the Defendant expressly or by reasonable inference agreed to 1/5/82 as the date of the commencement of the proposed lease. This is all the more so when the requests came after 1/5/82 and at a time when, at least from the point of view of the Defendant, (1) the external area of the property which would be in its exclusive possession had not been agreed upon and (2) the structural soundness of the property for the business of the Defendant was in doubt.
iii. In sum, I must hold that there is no concluded contract in this case and I must uphold the contention of Counsel for the Defendant (Appellant) that the transactions in the matter now before us on appeal were only steps in negotiations between the parties to this appeal.
⦿ SOME PROVISIONS
Section 5 of the Law Reform Contract Law Cap. 66 Laws of Lagos State, which provide as follows namely: “No contract to which this section applies shall be enforceable by action unless the contract or some memorandum or note in respect thereof is in writing and is signed by the party to be charged therewith or by some other person lawfully authorised by him.”
⦿ RELEVANT CASES
The case of Harvey v. Pratt (1965) 1 W.L.R. 1025 relied upon by counsel for the Defendant, Chief F.R.A. Williams, S.A.N. establishes it that for a valid agreement for a lease to exist the parties and the property, the length of the term, the rent and the date of commencement must be defined. The case of Marshall v. Berridge 19 Ch. D. 233 at 238 239 and 244 – 245 again cited to us by counsel for the Defendant decides it that it is essential to the validity of a lease that it shall appear either in express terms or by reference to some writing which would make it certain or by reasonable inference from the language used on what day the term is to commence, and a contract for a lease to satisfy the statute of fraud must contain this element.
Lush J agreed with Jessel MR in Marshall v. Berridge (1881) 19Ch. D.233 and said at p.244-245. “Now it is essential to the validity of a lease that it shall appear either in express terms or by reference to some writing which would make it certain, or from the language used, on what day the term is to commence. There must be a certain beginning and a certain ending, otherwise it is not a perfect lease, and a contract for a lease must, in order to satisfy the statute of Frauds, contain those elements.”
Lord Denning put it in Harvey v. Pratt (1965) 1 W.L.R. 1025 at 1027 “It is settled beyond question that in order for there to be a valid agreement for a lease, the essentials are not only for the parties to be determined, the property to be determined, the length of the term and the rent, but also the date of commencement. This document does not contain it. It is not sufficient to say you can supply it by an implied term as to reasonable time.”
⦿ NOTABLE DICTA
In the instant case, as I have shown above, the alleged agreement for a lease is not in one particular note or memorandum formally signed by the parties to this case. The court has been asked to find a contract in a series of correspondence between the parties. In a situation like this it has been held in Hussey v Horne-Payne 1978-794 APP. CAS 311 that the court must take into consideration the whole of that which has passed between the parties in coming to a decision on the point in question. – AGBAJE, J.S.C. UBA v. Tejumola (1988)
The point must also not be lost sight of that an agreement for a lease is an ordinary contract and in accordance with the general principles of contract law it will not be binding on the parties until their minds are at one both upon matters which are cardinal to every agreement for a lease and also upon matters that are part of the particular bargain. – AGBAJE, J.S.C. UBA v. Tejumola (1988)
It is unfortunate that the Plaintiff in conducting negotiations in a matter involving such a heavy sum of money as indicated by the evidence in this case acted without the assistance of a lawyer. It will appear that the Plaintiff at all stages of the negotiations for the lease with which we are concerned in this appeal acted for it sell (sic). It is doubtful that it ever sought, let alone obtained, the advice of a legal practitioner in the matter. Perhaps if it had done the latter, it would have been warned of the risk of meeting demand after demand from the Defendant in the absence of a concluded agreement for a lease. It turned out that the Plaintiff unwittingly took this risk which eventually materialised, as this judgment has shown, with the Plaintiff incurring losses for which the Defendant cannot be made legally liable. The stage at which the negotiations for an agreement for a lease had reached in this case raised high hopes in the Plaintiff that a concluded agreement would finally be arrived at. That one was not reached is not because of any default on the part of the Plaintiff. In fact it was when all of the objections raised by the Defendant had been disposed of by the Plaintiff at some considerable cost that the Defendant called off the negotiations. The law says the Defendant can do so with impunity. But I do not think it will be too much to expect if the Defendant having regard to all the circumstances of this case decided to absorb ex gratia some of the losses which the Plaintiff had undoubtedly suffered in the transactions. – AGBAJE, J.S.C. UBA v. Tejumola (1988)
Banks which involve landlords in heavy expenses to put their property to the standard requested by the bank must not be allowed to escape liability for damages by clever maneuvering of the law. However, the court is not the legislature. Its duty is to interpret the law and apply it to facts in the administration of justice. It does not over step its bound and trespass upon the sacred province of the legislature. It is the province of the legislature to enact laws and amend or repeal laws. The court can only draw attention to areas of the law where amendment is required or desirable. – Obaseki, J.S.C. UBA v. Tejumola (1988)
It is settled by authorities that where a contract is subject to the happening of a contingency that contract only becomes enforceable provided the event has occurred or the contingency has happened. Where a date for the commencement of a lease is not specified but stated by reference to the happening of a contingency which is uncertain in time until the contingency happens there is no enforceable lease. – Obaseki, J.S.C. UBA v. Tejumola (1988)
What then does “subject to contract” mean? In my view, it means that until a formal contract is drawn up and executed everything is in the negotiation stage. – Obaseki, J.S.C. UBA v. Tejumola (1988)
It is important to remember that an agreement to enter into a lease is governed by the ordinary principles of the law of contract. A contract is only binding on the parties when they are ad idem as to matters which are cardinal to the agreement and part of the bargain as a whole. – Karibi-whyte, J.S.C. UBA v. Tejumola (1988)
There is one aspect of the ultimate suggestion made in the lead judgment on which I feel quite reluctant to go along with my learned brother. He suggested that, in view of the enormous expenses which the Respondents ran at the request of the Appellants, counsel on both sides should put their heads together to see how justice could be done to them. I cannot agree to this without pointing out that the Respondents were the architects of their own misfortune. With all the clear story which the quality and language of their correspondences tell, they still elected to act for themselves, for a transaction which could have been worth several millions of naira. It was only after they had ruined their case that it dawned on them that they should brief an experienced counsel, for the court case. This is a height of indiscretion. Yet, it is said that the quality of mercy is not strained. It is only on this ground that I associate myself with the suggestion that counsel should agree on what compensation should be paid to the Respondents for the expenses they ran at the request of the Appellants, inspite of the fact that there was no binding contract between the parties. – Nnaemeka-Agu, J.S.C. UBA v. Tejumola (1988)