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OROMA AZEEZ
1.0 PREFACE
1.1 The topic- Covid-19 and Commercial Transactions: Some Emerging Issues is most apt as it highlights and clearly underscores a crucial point and budding issue of national discourse affecting all irrespective of social class, religion or race. This paper is not intended to provide a detailed analysis of the emerging issues discernible from the above stated topic. Rather, I shall, in the course of this Paper, highlight key issues that may arise and give some guidance and/or make recommendations on possible ways forward.
Disclaimer: The submissions and recommendations in this paper do not constitute legal advice and/or a Legal Opinion on this issue. The circumstances of each case differ. Thus, please engage proper legal counsel tailored to your specific need.
2.0 BACKGROUND
2.1 The World Health Organization (WHO) on March 11, 2020, declared the novel coronavirus (COVID-19) outbreak a global pandemic. This development was preceded by an earlier declaration sometime in January, 2020 describing the COVID-19 situation as a “Public Health Emergency of International Concern”. The above description and/or phrase is defined under the International Health Regulations, 2005 as an “…….extraordinary event which is determined to constitute a public health risk to other states through the international spread of disease; and to potentially require a coordinated international response”. This Declaration by the WHO on COVID-19 is the 6th such declaration since the formulation of the International Health Regulations, 2005.
2.2 According to the latest figures published by Johns Hopkins University on 29th May,2020, 5,962,407 cases have been detected worldwide, with
363,899 deaths and 2,628,359 recoveries and the figures keep rising by the day.
2.3 For the purpose of this paper I will limit the issues raised as it pertains to
Nigeria.
2.4 The first confirmed case of Covid – 19 in Nigeria was announced on 27th February, 2020. By the 30th of March, 2020, the Federal Government in response to the influx of infected returning travellers and in a bid to curb the spread of Covid -19, implemented lockdown measures in three major states/cities namely; Abuja, Lagos and Ogun state. Rivers state and Kaduna state amongst others had earlier imposed similar restrictions.
2.5 The restrictions announced did not apply to businesses designated as essential service providers such as hospitals and stores selling essential items, groceries and medicine. The quarantine period was said to be; “a period to identify, trace and isolate all individuals that have come into contact with confirmed cases.”
2.6 However, for most Nigerians, the reality meant additional financial pain and untold hardship especially for informal labourers who rely heavily on their daily earnings to survive.ie. Mr. Ben a father of three who hawks bottled water every morning and agege bread in the evenings or Ms. Kofo who depends on daily sales from her food kiosk to provide for her young family.
3.0 EMERGING ISSUES
3.1.0 INFLATION?
3.1.1 The quarantine and lockdown measures introduced by the Federal Government triggered panic buying. Thus, in addition to the lack of funds,
essential commodities became more expensive and in some cases unavailable due to hoarding etc.
3.1.2 The President of the Federal Republic of Nigeria, Muhammadu Buhari GCFR in his speech on Covid-19 pandemic delivered on 29th March, 2020,announced series of measures aimed at relieving some of the economic hardship including a three-month moratorium on government loan repayments and two months’ worth of food rations for internally displaced persons amongst others. However, the impact of these measures is yet to be seen and felt by the intended beneficiaries.
3.1.3 Nigeria is the world’s 9
th largest exporter of crude oil and about 90 percent of its export earnings is from oil.[1] With oil prices plunging and the uncertainties of the global markets, the impact of the pandemic on the Nigerian economy cannot be quantified.
3.2.0 TRANSACTIONS
3.2.1 The Black’s Law Dictionary 8th Edition defines transaction as “the act or an instance of conducting business or other dealings; esp., the formation, performance, or discharge of a contract.”
3.2.2 As a nation we are prone to changes and adapt relatively on a daily basis to the many changes and struggles that come our way such as lack of social amenities, infrastructure etc. However, as a result of the
lockdown/quarantine measures, schools, offices and a considerable number of business operations have been stalled and in some cases completely shutdown. Undoubtedly, businesses have suffered a huge set back and are unable to fulfil their respective contractual obligations.
3.2.3 Covid- 19 has made the performance of contractual obligations impossible. Some contractual agreements may have already been breached or are about to be breached thereby triggering liability on parties and their guarantors.
3.3.0 CONTRACTS
3.3.1 The Black’s Law dictionary 8th Edition defines a contract as “ an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at Law”.
3.3.2 In BPS CONSTRUCTION & ENGINEERING CO. LTD v. FCDA (2017) LPELR-42516(SC) the Supreme Court per Sanusi, J.S.C held that ;
“a ‘CONTRACT’ is a formal agreement between two or more parties who by so entering into such agreement, they resolve to create obligation or commitment between them to do or not to do a particular thing”. In a contract, the basic elements that forms it or makes it binding, is that there is offer, “acceptance” and consideration and these three elements of which must coexist and be properly defined in no uncertain terms.
https://www.investopedia.com/articles/company-insights/082316/worlds-top-10-oil-exporters.asp
In such agreement, if parties sign it they make themselves bound by it and thereby becoming enforceable on them depending on the terms agreed upon”. See also Alfotrin Ltd v. A-G Federation & Ors (1996) 9 NWLR (Pt. 475) 634
3.3.3 Generally, Contracts may be discharged through the following:
a. By performance : if both parties have done all that is required of them,
b. By agreement : if both parties have mutually agreed to put an end to
their contractual relationship,
c. By frustration : if some event outside the control of the parties takes place, making performance impossible,
d. By breach : where the innocent party is relieved and the party in default may be liable for damages
See; SBN PLC V. OPAWUBI (2004) 15 NWLR (PT.896) PG.437
AHMED & ORS V. CBN (2012) LPELR-9341(SC)
3.3.4 The intention of the parties, in a written contract, can always be gleaned and/or distilled from the agreement itself. The terms of any agreement are to be determined by the parties and not the Court.
3.3.5 In Olanrewaju Commercial Services Limited v. Mrs Jumoke Sogaolu & Anor (2014) LPELR-24086, the Court of appeal per NDUKWE-ANYANWU,J.C.A. held thus:
“The duty of the court is to construe the words used by the parties in the agreement. The courts do not have powers to interfere in contracts and impose terms arbitrarily, However, courts may imply a term in order to fill a gap left by the parties in the terms expressly agreed upon which fail to regulate their respective rights and inabilities in the situation that had arisen”.
See;
1. Dantata vs. Dantata (2002) 4 NWLR pt.756 pg, 144
2. Mazin Eng. Ltd vs. Tower Aluminium (1993) 5 NWLR pt. 295 pg. 526.
3.3.6 With a steady decline in consumption, expenditure and investments all attributed to the global economic uncertainties, frustration of contractual agreements with respect to Commercial transactions are inevitable.
3.4.0 ENFORCEABILITY OF CONTRACTS
3.4.1 Undoubtedly, the Covid -19 pandemic is disrupting a cycle which includes demand and supply chains, production and in some cases the Law as new regulations would have to be put in place to protect individuals as well as business interests.
3.4.2 Most businesses would have to carefully scrutinize their contracts for force majeure clauses to weigh the options available to them in order to avoid damages from any liablity incurred.
3.4.3 In most cases the option will be to suspend their performance under that contract, seek extension of time to perform or outright cancelation of the contract. However, if the contract is silent on force majeure, the aforestated options cannot be implied despite the exceptional circumstances of covid-19.
3.4.4 Further to the aforestated paragraph, It will be intriguing to see how the Courts will decide in respect of contracts that have been duly signed but do not contain force majeure clauses. Ie. A wedding planner who is in receipt of various purchased items for a wedding including a thousand fresh white roses from South Africa and just before the wedding ceremony, the lockdown was enforced and the couple decided to have an intimate wedding without the purchased items. Who will bear the cost?
3.5.0 FORCE MAJEURE
3.5.1 Force majeure, according to Black’s Law Dictionary 8th Edition, is an event or effect that can neither be anticipated nor controlled. It includes both natural and human acts.
3.5.2 In C.G.G. (NIG) LIMITED v. AUGUSTINE & ORS (2010) LPELR-8592(CA) the Court of appeal Per EKO, J.C.A as he then was whilst examining the nature 6 of human acts that may trigger Force Majeure under a contract, stated thus; “The human acts may be of political in nature including riots, strikes or war.”
3.5.3 The concept of force majeure cannot be implied into a contract. It MUST be expressly stated or the parties may have wordings to the same effect of a force majeure clause. Force majeure clauses are mostly reciprocal and excuse both parties from performing their obligations under a contract though there are some instances where the clause is drafted to only excuse performance by one party. In instances where the obligations are not impeded by the force majeure event, performance of those obligations is mandatory and must continue unhindered.
3.5.4 Most force majeure clauses require an unexpected event or an event which is beyond the reasonable control of the party. In most cases, the force majeure clause may require that a written notice is given. In other words, a force majeure clause doesn’t automatically mean the contract is terminated except where indicated in the contract.
3.5.5 It is noteworthy that a party seeking to rely on a force majeure clause needs to show that it is ready and willing to perform the contract, but for the unexpected event. That goes to say that where a relevant party would not have performed its obligation in any event, then that party’s failure to perform cannot be said to have resulted from the unexpected event.
3.5.6 The courts in interpreting a force majeure clause will give reference to the actual words used in the contract, not the intention. Thus, the courts may review the drafting of specific clauses to analyse whether or not there is a basis for construing the clause as including a pandemic such as covid-19.
3.5.7 In the absence of a force Majeure clause, the common law doctrine of frustration may be applied.
3.6.0 FRUSTRATION OF CONTRACT
3.6.1 It is a settled principle of Law that where impossibility of performance of a contract arises after the formation of the contract then there is, in Law, a case of frustration. The Court determines the existence of frustration from the facts pleaded and evidence led by the parties.
3.6.2 In A.G CROSS RIVER STATE V. A.G FEDERATION & ANOR. (2012) LPELR-9335 the Supreme Court Per ADEKEYE, J.S.C held that:
“It is the duty of the court to state whether and when frustration has occurred; in other words, to determine the existence of frustration. Frustration occurs whenever the court recognizes that without default of either party a contractual obligation has become incapable of being performed”.
3.6.3 Furthermore, in Nwaolisah V. Nwabufoh (2011) LPELR-2115(SC) the Supreme Court held that:
“Frustration occurs wherever the law recognizes that without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it radically different from what was undertaken by the contract”
See also; S.E. Co. Ltd. v. N.B.C.I (2006) 7 NWLR (Pt.978) 198
3.6.4 The events which have been listed by the Court to constitute frustration are:
(1) Subsequent legal changes or statutory impossibility
(2) Outbreak of war
(3)Destruction of the subject matter of the contract or literal impossibility
(4)Government acquisition of the subject matter of the contract.
(5)Cancellation by an unexpected event like where other party to a contract for personal service, dies or where either party is permanently incapacitated by ill-health, imprisonment etc., from rendering the service he has undertaken.
See;
1. Davies Contractors Vs Fareham NDC (1956) AC 696
2. Akanmu Vs Olugbode (2001) 13 WRN 132,
3. Diamond Bank Ltd Vs Ugochukwu (2008) 1 NWLR (Pt 1067) 1
4. Malik v. Kadura Furniture & Carpets Co. Ltd. (2016) LPELR-41308(CA)
3.6.5 Consequently, for a contract to be frustrated there must be a direct effect of the covid-19 pandemic which has rendered further performance of the contract illegal, impossible, or made it completely different from that agreed by parties. The above development may arise where the perfomance of obligations under the Contract having been rendered impracticable and impossible as a result of the lockdown restrictions implemented by the Government. However, a contract is not frustrated where the contract becomes more expensive or more burdensome to perform as a result of economic hardship. see LEWIS v. UBA (2016)LPELR-40661(SC).
3.7.0 CONTRACTUAL BREACH
3.7.1 Leases
3.7.2 In Araka v. Monier Construction Co. Nig. (1978) 6-7 S.C. 7, the tenancy arrangement between the Claimant and the Defendants was on the understanding that the house would at all material times be occupied by an expatriate employee of the Defendants but the tenancy for the year was frustrated by the facts and declarations of a hostile (Biafran) Government which prevailed on all expatriates to vacate the Biafra regions.
3.7.3 The tenant, an expatriate was compelled by the civil war to suspend its business in Port Harcourt and vacate the property. After the war, the lease property was taken over by the Abandoned Property Authority and consequently, neither the landlord nor the tenant had a right of access to the house after the secession of hostility in January 1970.
3.7.4 Under these circumstances the Supreme Court held that it would be unjust and oppressive to cause the tenant to pay the rent for the period in question. The Supreme court in considering the CRICKLEWOOD PROPERTY v. LEIGHTON’S INVESTMENT (1945) A.C. 221 case held thus;
“We are inclined to accept the views of Viscount Simon and LordWright as being the correct statement of the law that the doctrine of frustration may in certain circumstances apply to a lease. We think that it may tantamount to injustice to deny a tenant the benefit of frustration in cases where, owing to circumstance of an intervening event or change of circumstances so fundamental as to be regarded by the law as striking at the root of the agreement, it has become impossible for the tenant to enjoy the fruits of his lease and at the same time to expect him on account of the abstract estate concept to honour his obligations under the lease. Such denial may also suffer injustice to a landlord who finds himself in the same situation as the landlord. ” Per BELLO, J.S.C. (Pp. 17-18,paras. G-C)
3.7.5 See also Krell v. Henry (1903) 2 K.B. 740 where the plaintiff had agreed to let a room to the defendant for the purpose of viewing the coronation procession of King Edward VII, it was held that the cancellation of the procession owing to the illness of the King discharged the parties. However, where parties have made adequate provisions in their contract,the parties are bound by those terms.
4.8.0 THE CHAIN
4.8.1 Closed borders [locally and internationally] suspension of production lines suspension of Air travel lost business opportunities reduced spending global economic recession loss of projected revenue jobcuts default in paying tuition, financing loan facilities etc Loss of health insurance etc mental health challenges etc.
4.9.0 ALLEVIATING THE CHAIN
4.9.1 The Covid -19 pandemic continues to evolve rapidly causing economic hardship and uncertainties. Thus, there is an imminent need to ensure adequate/applicable regulations to avoid an abuse of power/privilege as the vast population of Nigeria survive within the means available on a single day at a time. Guidelines and regulations must be put in place by the Government, as this cannot be left to parties because there would be unfair concessions.
4.9.2 Our Legislators must embark on a general overview of our laws to identify areas where our laws are silent and ensure adequate protection for all including making interventions in respect of consumer protection and refund policies. Failure to put proper regulations in place could mean arbitrary increments of rents, wrongful evictions, unfair cancelation fees and refund policies, unfair dismissal, loss of revenue, a rise in unemployment rate which will adversely affect the crime rate and cause social menace.
5.0 RECOMMENDATIONS
5.1 Infrastructure- the role of infrastructure in overcoming /cushioning the effects of covid-19 pandemic in Nigeria cannot be overemphasized. Undoubtedly, for any record of economic growth and alleviation of poverty, infrastructure has played and will continue to play a major role.
5.2 Power, efficient transport systems including sea ports, airports and effective road networks, health care, telecommunication, access to clean water, sanitation, irrigation and technology should be at the front burner of any recovery plan by the Government.
5.3 Micro, medium and large scale enterprises abound in Nigeria and crisscross all sectors of our economy. Thus, their daily operations, production and growth require access to quality and reliable infrastructure. More so, the availability of adequate infrastructure promotes foreign trade and goods can be produced at relatively fair prices.
6.0 OPPORTUNITIES
1. Growth [wider audience]
Invest locally- health, tourism
Education-e- learning[ broader courses and curriculums]
Farm to door.; Cutting the supply chain improving customer loyalty,
delivery service, reduced overhead cost, reduced travel expenses.
2. Contingency plans
In house technology team to aid remote working and re focusing on power generation and sustainable growth.
Insurance policy; perhaps more businesses would make conscious decisions to get proper cover for the future such as insurance packages for pandemics/ economic recessions etc.
Mergers and acquisitions. This could be an opportunity to access skilled labour, diversification of portfolios and better access to larger markets.
3. Consumer protection
There currently isn’t much protection under The Federal Competition and Consumer Protection Act 2019 to protect the consumers’ rights against unfair practices. This would be a time to examine the Act and discuss key provisions in view of the fact that most daily transactions are now done online leaving the buyers at the mercy of the sellers.
4. The Legal sphere
Over the past few weeks, certain jurisdictions have introduced virtual court proceedings with Lagos, Ogun and Borno at the epicentre of this radical change and paradigm innovation. This would not have been the case but for the unprecedented disruption of the pandemic. However, there are adequate measures that must be put in place in order for the progress made thus far to be far reaching.
Power –uninterrupted power supply for seamless virtual hearing.
This would play a vital role in the administration of Justice as there must be equal access/ opportunities for all.
Cyber Security & Data protection – Cyber security or information technology security is the protection of computer systems and networks from the theft or damage to their hardware, software, or electronic data as well as disruption or misdirection of the services they provide [2]
With cyber security breaches on the rise, our Justice system must invest in the skills necessary to thwart threats such as attacks aimed at accessing, changing or destroying sensitive information, extortion or interrupting virtual proceedings.
2 Wikipedia
Training – productivity level will ultimately decide the effectiveness of the virtual hearings. More so, a vast percentage of all data breaches involve human error. Thus, the importance of training and re-tooling for every stakeholder cannot be overemphasized.
Public Trust – Our Judicial system has been inundated with negative publicity in recent times and there is a general perception that very few persons have access to justice. With virtual hearings, it is arguable that some form of accountability can be restored.
7.0 CONCLUSION
7.1 The COVID-19 pandemic continues to evolve rapidly. The Government’s advice and measures to protect the public and manage the impact on the economy changes frequently, as is legal opinion. Therefore, adaptation is key and how we as a people respond to the situation is paramount to sustaining the economy
7.2 With respect to remedies for breached contractual obligations, instituting Law suits should not be the first option as this would add to an already overburdened Judicial system. Therefore, parties should liaise with counter parties at the earliest opportunity to remedy whatever disruptions may have occurred as a result of Covid-19.
7.3 When entering into these discussions, the following must be considered:
1. An outline of each parties rights and how same has been affected.
2. Evaluate the available reliefs for performance. ie. With regards to tenancy agreements, the option of weekly or monthly tenancy could be explored in the interim, reduced interest rate and/or zero interest rate for micro loans etc.
3. Document the newly agreed terms. (Addendum)
7.4 As well-meaning Nigerians, we must work together to rebuild and develop our nation. Our present reality as a result of the pandemic has buttressed the inevitable which is that we must increase our productivity, buy locally thereby investing in our local markets and in other to achieve this, we must invest in skill acquisition, self- development and innovation to improve the standard of living, thus mitigating the effect of the pandemic.
ABOUT THE AUTHOR
Oroma Azeez is a partner at Alegeh & Co. Legal practitioners and Notaries Public. She has been in legal practice for a decade and is a member of the Nigerian Bar Association. Her core areas of interest are General litigation, child’s law and Environmental law.
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For knowledge and Justice
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