If consideration fails, a contract of sale is unenforceable

NIDOCCO LIMITED v. MRS. I. A. GBAJABIAMILA

SUPREME COURT OF NIGERIA

(MOHAMMED; MUNTAKA-COOMASSIE; NGWUTA; PETER-ODILI; ARIWOOLA, JJ.SC)

The Respondent and her ex-husband were on theAppellant’s board of directors which resolved to dispose of the Appellant’s property located in Ikeja, Lagos State. The Respondent and her ex-husband offered to purchase the property jointly. The parties executed a deed of assignment but did not obtain the Governor’s Consent to the sale.

Much later on, the Respondent and her ex-husband held a meeting at the Sheraton Hotel, Ikeja and agreed that he would transfer his share of the property to her. However, in order to avoid the financial cost involved in registering two deeds of assignment, another deed of assignment (“the Sheraton Deed”) was executed to transfer the property directly from the Appellant to the Respondent.

The Respondent did not furnish any consideration for the second assignment and her ex-husband destroyed the Sheraton Deed.

The Appellant commenced an action at the High Court of Lagos State against the Respondent seeking among other reliefs, a declaration that the Appellant is entitled to be granted a Certificate of Occupancy in respect of the property and damages for trespass. The Respondent counter-claimed and sought a declaration that she is entitled to the grant of a statutory right of occupancy and an order compelling the Appellant to obtain the Governor’s consent in her favour.

The trial court entered judgment in favour of the Appellant and dismissed the Respondent’s counter-claim. Dissatisfied, the Respondent appealed to the Court of Appeal which set aside the judgment of the trial court and allowed the appeal.Dissatisfied with the decision of the Court of Appeal, the Appellant appealed to the Supreme Court and the Respondent cross-appealed.

The Supreme Court was asked to determine a number of issues one of which was:

“Whether the Court of Appeal is entitled to fashion out a new contract for the parties to this action holding that the property subject matter of this action has been bought and sold on the basis of superseded, discredited and contradicted documentary evidence.”

It was submitted on behalf ofthe Appellant that the Sheraton Deed superseded the first deed. Learned counsel arguedthat evidence was led to establish that the purchase price was not paid in respect of the SheratonDeed of assignment and the second contract had therefore been discharged by breach in the failure to pay the purchase price.

Counsel argued that it is contrary to the principle of equity and an unjust enrichment to allow the respondent to own the property without proof of payment of the purchase price.

Inreply, learned counsel for the Respondentsubmitted that the execution of the SheratonDeed meant that parties no longer relied on the earlier deed of assignment. He further submitted that theSheraton Deed bears receipt of the consideration and that no oral evidence can be admitted to deny its contents. He argued further that the evidence of Mr. Gbajabiamila that no consideration was paid for the Sheraton Deed went to no issue as it was not pleaded by the Appellant.

Learned counsel relied on Section 167 (d) of the Evidence Act, 2011 to contend that the Sheraton Deed of Assignment would have been fatal to the Appellant’s case if it had been produced.

He further contended that the Sheraton Deed was executed by the Appellant in favour of the Respondent and contained a clause acknowledging receipt of consideration in the sum of N750,000. He urged the court not to allow Appellant to benefit from the act of destroying the Sheraton Deed.

The Supreme Court noted that the evidence proffered by the parties shows that the first contract was abandoned, and in the matter of the second contract, there was evidence that though there was an agreement, the purchase price was not paid. The Court held that failure to pay the purchase price under a contract for the sale of land is a fundamental breach which goes to the root of the contract of sale.

Allowing the appeal and dismissing the cross-appeal,the Supreme Court held as follows:

“Learned counsel for the respondent, in his marathon submission on issue 1 appeared to have avoided the real issue with respect to exhibit D1 – D5 which appear to me to be “what superseded, discredited and contradicted documentary evidence D1 – D5?” The answer to the poser above lies with the Sheraton Deed of Assignment made subsequent to the execution of exhibit D1 – D5.

…The answer is in the negative for the simple reason that the Sheraton Deed of Assignment by which the PW2 conveyed his interest in the property to the respondent no longer existed. There is uncontradicted evidence from PW2 that the respondent failed to pay the purchase price of his share of the property and he retrieved and destroyed the Deed of Assignment. I agree with the court below that evidence relating to the non-existent document was admitted by the trial court in error.

In my humble view, the Sheraton Deed of Assignment, if it had been in existence at the material time, would have conveyed the property direct from theappellant to the respondent, as the Deed Exhibit D1 – D5 was completely abandoned and discarded when the parties agreed to execute the Sheraton Deed the terms of which were breached by therespondent.

The Sheraton Deed of Assignment was aborted as the respondent breached its term by failure to pay the agreed sum. Exhibit D1 – D5 having been abandoned had no binding effect on the parties.

The Deed, Exhibit D1 – D5, having been abandoned and the Sheraton Deed, having been breached and destroyed by PW2, the parties returned to the status quo before, the execution of exhibit D1 – D5. In effect, there was no sale of the plaintiff company’s property.”

Counsel:

M. Ladan for Appellant

Andrew lgboekwe for Respondent

This summary is fully reported at (2013) 9 CLRN

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