APPLICATION OF THE DOCTRINE OF FRUSTRATION ON A CONTRACT

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CASE TITLE: WECO ENGINEERING AND CONSTRUCTION CO. LTD v. DUFAN (NIG) LTD & ANOR (2019) LPELR-47211(CA)

JUDGMENT DATE: 4^TH APRIL, 2019

PRACTICE AREA: LAW OF CONTRACT

LEAD JUDGMENT: SAMUEL CHUKWUDUMEBI OSEJI, J.C.A.

SUMMARY OF JUDGMENT:

INTRODUCTION

This appeal borders on Contract.

FACTS

This is an appeal against the judgment of the Federal High Court, sitting in Benin Division and delivered on the 23rd day of June 2006. Wherein the plaintiff’s (1st Respondent) claim was granted. The Appellant and the 2nd Respondents were the 1st and 2nd Defendants respectively at the Federal High Court while the 1st Respondent was the plaintiff.

The facts as per the plaintiff’s (1st Respondent) case was that it was the owner of the houseboat known as DUFAN VI which was hired by the Appellant on 26/10/1994. The terms of the hire contract were reduced into writing in a comprehensive agreement signed by the parties. By the said contract, the Appellant was to return the Houseboat (DUFAN VI) to the 1st Respondent at the expiration of the hire contract which was for a period of two months from the date of commencement.  ​The said houseboat was stationed in Warri Delta State where the Appellant took possession of same and moved it to Port-Harcourt, Rivers State where unfortunately it got submerged. The Houseboat upon eventual recovery from the water had remained in the custody of the Appellant.

The 1st Respondent complaint was that the said Appellant has refused or failed to return the houseboat or pay the rents accruing from it, hence an action was instituted in the Federal High Court whereby in paragraph 39 of the 2nd Amended Statement of claim the 1st Respondent as claimed against the Appellant as follows:

“WHEREFORE, the plaintiff’s claim against the 1st Defendant as follows:

(a) The sum of N20,000,000.00 (Twenty Million Naira) being the cost of the 32 rooms House-Boat DUFAN VI and Generator Barge hired out by the plaintiff to the 1st Defendant at Warri within the Jurisdiction of this Honourable Court vide an agreement dated 26th day of October, 1994 executed between the Plaintiff and the 1st Defendant or in the Alternative a return of the said House-Boat and Generator/Barge in perfect condition as stipulated in clause 5 of the agreement dated 26th day of October, 1994.

(b) The sum of N1,800,000.00 (One Million Eight Hundred Thousand Naira) being the hire fee due and payable on the said 32 rooms House-Boat DUFAN VI and Generator/Barge but which said sum has not been paid by the 1st Defendant to the Plaintiff till date from the 16th day of November, 1994 to the 15th day of March, 1995.

(c) The sum of N20,000.00 (Twenty Thousand Naira) per day on the 32 room House-Boat DUFAN VI commencing from the 14th day of February 1995 till the date or return of the said generator House and canopy or judgment.”

Based on an application by the Appellant the 2nd Respondent was joined as 2nd Defendant by the Court on 22/4/1997.

The 1st Defendant also claimed against the Plaintiff as follows:

(a) The sum of N6,672,810.00 (Six Million Six Hundred and Seventy-two Thousand, Eight Hundred and Ten Naira) as special damages for breach of contract and loss suffered by the 1st Defendant as a result of the sinking of the House Boat/vessel, the particulars of which are set out in paragraph 45 above.

(b) The sum N5,000,000.00(Five Million Naira) as General damages for breach of contract.

(c) Interest on the said claimed at the rate of 21% per annum from the date hereof unto JUDGMENT and hereafter until final payment.”

In proof of its case, the 1st Respondent called three witnesses while the Appellant and the 2nd Respondent called three witnesses and one witness respectively.  At the conclusion of the hearing, the parties were ordered to file their respective written addresses which they also adopted and relied on at the proceeding of the Court on 30/3/2006. In a judgment delivered on the 23rd day of June 2006, the trial Court granted the reliefs sought by the 1st Respondent and struck out the Appellant’s counterclaim.

The Appellant was not satisfied with the said judgment and consequently appealed to the Court of Appeal.

ISSUES FOR DETERMINATION

The Court determined the appeal on these issues couched as follows:

1. Whether the Learned Trial Judge was right when he failed to find that the submerging of DUFAN VI (the subject matter of the contract – Exhibit “B”), an event not contemplated by the parties, frustrated the contract between the Appellant and the 1st Respondent and consequently held that the Appellant was in breach of Exhibit “B”.
2. Whether the Learned Trial Judge was right when he failed to consider the question as to whether the 1st Respondent had discharged the onus on it to establish that the submerging of DUFAN VI was due to overloading by the Appellant and held that the 1st Respondent need not plead and prove negligence and/or particulars of negligence.

iii. Whether the 1st Respondent was still entitled to rental hire and not mitigate its losses having become aware that the House Boat DUFAN VI submerged on its own even before it was put to use by the Appellant.

OR

Whether the Learned Trial Judge was right when he held that the 1st Respondent is entitled to N18,000,000.00 as cost of DUFAN VI and total sum of N66,340,000.00 as hire rentals at the rate of N20,000 per day from 17/10/03 till judgment and until judgment sum is finally liquidated as well as cost of N70,000 against the Appellant which award is excessive, ridiculous high, amounts to double compensation and is based on wrong principles of law.

1. Whether the Learned Trial Judge failed to evaluate properly the evidence before him before entering judgment against the Appellant and merely glossed over the Appellant’s evidence while completely accepting the evidence of the 1st Respondent (as Plaintiff).

1. Whether the Trial Court’s assumption of jurisdiction in the suit was proper having regard to the contract and alleged hire rental sum flowing therefrom.

1. Whether the Learned Trial Judge was right when he relied solely on Exhibit “B” in determining the dispute between the parties without recourse to Exhibit P1 (Marine Hull Insurance Policy) and held that the Appellant did not make out any claim against the 2nd Respondent thereby striking out the 2nd Respondent from the suit.

DECISION/HELD

On the whole, the Court found no merit in the appeal and accordingly dismissed same.

RATIOS:

• CONTRACT – TERMS OF CONTRACT: Whether court and parties are bound by the terms of a contract
• CONTRACT – PRIVITY OF CONTRACT: Whether a third party can enforce terms of a contract between two parties
• CONTRACT – FRUSTRATION: Events that constitute frustration
• CONTRACT – FRUSTRATION: What the doctrine of frustration means
• CONTRACT – FRUSTRATION: Duty of a party who pleads frustration of contract