Lanase Usman A[1].
1.0: INTRODUCTION
“Let me end my consideration of issue 1 with this foot note. I have found myself wondering why the parties, being Nigerian companies doing business in Nigeria, chose to have South African laws govern their agreement and South Africa courts have jurisdiction in disputes that may arise between them. It seems to me that, to the parties, charity begins abroad. They did not take heed of the wisdom in the Nigerian proverb or aphorism that says: “what you are looking for in Sokoto is in your Shokoto” roughly meaning: “what you are looking for in a distant place is right with you.” The parties will be held to their bargain in this case.”
The above is the dictum of Daniel-Kalio, JCA in the case ofSqimnga (Nig.) Ltd. v. S.A.P.(Nig.) Ltd. 2025 2 NWLR. Pt. 1977, 423. It is not uncommon among contracting parties to enter into oral, written or implied agreement among themselves. This is necessary for the purpose of ensuring clarity of the terms and conditions that will regulate their agreement.
Often time, individuals, corporations and business entities hire legal practitioners who help with legal drafting, however, some people, for reasons best to known them, may opt to draft the agreement without the input of a legal practitioner. While the purpose of this short article is not to investigate whether or not the parties in the above cited case sought the assistance of a legal practitioner at the negotiating stage, it is important to mention that the role of legal practitioners at the earliest stage of a contract is highly essential. This will ensure clarity of terms, compliance with extant laws and prevention of conflict.
This article seeks to discuss the legal implication of clauses included in any given agreement with the consent of the contracting parties, its legality and the implication of breaching such clauses. This will be done with specific reference to the case of Sqimnga (Nig.) Ltd.v. S.A.P.(Nig.) Ltd. It shall be concluded that individuals, companies, startups, corporations, private or public be meticulous at the negotiating stage of a contract to avoid conflict which may cost contracting parties their time, money, energy and resources. It is therefore recommended that legal practitioners be retained at every stage of a contract to ensure professional guidance.
2.0: BRIEF SUMMARY OF FACTS
The appellant and respondent are Nigerian companies registered in Nigeria and doing business in Nigeria. They entered into the instant contract and executed the same in Nigeria. They had an agreement, the Master Service Agreement for services that relate to software solution system. The said Master Service Agreement has an important clause in clause 14 and it reads:
“Governing law and jurisdiction. The agreement shall be governed by and construed in accordance with the laws of the Republic of South Africa and the parties hereby submit to the exclusive jurisdiction of the South African courts.”
In the course of their relationship, a disagreement arose and the appellant instituted an action at the High court of Lagos State.
By way of a notice of preliminary objection, the respondent, Systems Applications Products Nig. Ltd (the defendant at the trial court) applied, pursuant to Order 43 rule 1(1) & of the High Court of Lagos, State (Civil Procedure) Rules, 2019, and under the inherent jurisdiction of that court, to have the matter struck out on the principal ground that the Master Service Agreement that gave rise to the claims of the appellant was governed by South African law and subject to the exclusive jurisdiction of South African courts. Thus, the trial court had no jurisdiction to entertain the matter.
The respondent’s notice of preliminary objection was not supported by any affidavit. The appellant did not file any counter-affidavit or affidavit of facts in support of the appellant’s quest to have the matter heard by a Nigerian court and not by a South African court as agreed in the Master Service Agreement. The appellant only filed a written address.
After considering the preliminary objection, the trial court found that the claimant/respondent did not place any affidavit or facts before the court in support of the appellant’s quest to have the matter heard by a Nigerian court and not by a South African court as agreed in the Master Service Agreement and pursuant to the above finding, it declined jurisdiction to entertain the matter.
Dissatisfied, the appellant appealed to the Court of Appeal. The court of Appeal subsequently dismissed the appeal unanimously.
3.0: LEGAL ISSUES
It is important to define the term contract before proceeding. This is to ensure proper comprehension of the perspective of the law with respect to contracts.
Legally, a contract[2] is an agreement between two or more parties which creates reciprocal legal obligation or obligations to do or not to do a particular thing. For a valid contract to be formed, there must be mutuality of purpose and intention. The two or more minds must meet at the same point, event or incident. They must not meet at different points, events or incidents. They must be saying the same thing at the same time. They must not be saying different things at different times. Where or when they say different things at different times, they are not ad idem (meeting of minds) and therefore no valid contract is formed. The meeting of minds of the contracting parties is the most crucial and overriding factor or determinant in the law of contract.
Thus, for a contract to exist[3], there must be an offer, unqualified acceptance of that offer and a legal consideration. There must be a mutuality of purpose and an intention; the two contracting parties must agree[4].
It therefore flows from the above that parties to a contract are legally bound to do what they have agreed to. This is in line with the Maxim pacta con yenta quae, neque contra legesneque dolo malo inita sunt omni modo observanda sunt,meaning, agreements which are neither contrary to the law, nor fraudulently entered into, should be adhered to in every manner and in every detail. Except a party can sufficiently and convincingly show before the court that there are vitiating elements in a contract, the general position of the law is that parties are bound their agreement.
Thus, in the instant case, the Master Service Agreement entered into by the parties was not made contrary to the law, was not fraudulently entered into, neither was it entered into under duress or due to misrepresentation as to make the agreement not to be adhered to in every manner and in every detail.
The court held further that:
Usually, foreign jurisdiction clauses are agreed on and inserted in cross border commercial transactions or contracts involving foreign and local companies or entities. However, in the instant case, both parties are Nigerian companies registered in Nigeria and doing business in Nigeria. The contract was entered into and executed in Nigeria. By their own free will, the parties agreed that the agreement shall be governed by and construed in accordance with the laws of the Federal Republic of South Africa and the parties thereby submit to the exclusive jurisdiction of the South African courts.
The implication of the above is that where a party in breach of jurisdictional agreement instituted an action in Nigeria and the jurisdiction over the court is challenged, the court will not assume jurisdiction over the matter unless the party that instituted the action in breach of the jurisdictional agreement can show a strong and compelling reason(s) to do so.
In the instant case however, the appellant’s counsel failed to convince the court as to why the clause should not be enforced against it, after having signed the agreement willfully, thereby making the clause binding on them.
4.0: THE BRANDON TEST
Interestingly, the court appraised the Brandon test. Brandon test stipulates that a foreign choice of court agreement should not be enforced where strong cause can be shown. The court further held that the burden of proving a “strong cause” as to why parties should not be held to their agreement as to the venue for the trial of disputes is to be firmly placed on the plaintiff[5].
Thus, in compliance with Brandan test, the court is bound to exercise its discretion in favour of giving effect to the foreign jurisdiction clause in the light of the fact that the appellant did not place before the court below any material evidence to enable that court to exercise its discretion against the respondent.
Brandon tests as enunciated by Brandon, J, in “The Eleftheria” (1969) 1 Lloyds L. R. 237 and as adopted by Nigerian court is applicable in the instant case. The court held that:
Of particular relevance here are tests 4 and 5 of the Brandon tests. They read:
4. In exercising its discretion, the court should take into account all the circumstances of the particular case.
5. In particular, but without prejudice to (4), the following matters, where they arise, may be properly regarded:
(a) In what country the evidence on the issues of fact is situated or more readily available, and the effect of that on the relative convenience and expense of(a)trial as between the English and foreign courts.
(b) Whether the law of the foreign court applies and, if so, whether it differs from English law in any(b)material aspects.
(c) With what country either party is connected and(c)how closely.
(d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural(d)advantages.
(e) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they(e)would:
(i)be deprived of security for that claim;
(ii) be unable to enforce any judgment(ii)obtained;
(iii) be faced with a time-bar not applicable in(iii)England; or’
(iv) for political, racial, religious or other(iv)reasons be unlikely to get a fair trial.”
It is the considered view of the court that the above conditions have not been satisfied if at all the appellant seeks to urge the court to make the Brandon test applicable in this instance. There is no evidence on record to convince the court on the applicability of the Brandon test. A statement of claim is not evidence and cannot be enough to convince the court to apply the Brandon test. A statement of claim merely contains averments which must be proved by evidence. A witness Statement on Oath does not become evidence unless it is adopted in court by the deponent of such a statement as his evidence in the case to which the statement on oath relates[6].
5.0: CONCLUSION AND RECOMMENDATIONS
The world has evolved and contracts has gone beyond parties based in the same jurisdiction. It is possible that there is cross-border transaction where both parties reside and carry on business in different countries. In this instance, it is reasonable for parties to agree on the applicable laws to guide and regulate their contract.
Preferably, it is advised that contracting parties’ resort to a jurisdiction and governing law that will be convenient for both parties in case of future conflict. However, as advised by the court in the instant case, where both parties reside in Nigeria and carry on business in Nigeria, it is best to adopt the laws of the country to regulate the agreement between the parties. This will save time and resources. It will also ensure quick dispensation of justice. As it can be deduced from the case of Sqimnga (Nig.) Ltd. v. S.A.P.(Nig.) Ltd, parties are bound by their agreement and a party will not be allowed to resile after having voluntarily entered into such agreement.
Thus, it is advised that contracting parties engage the service of legal practitioner who will draft agreements in line with the specific circumstances of each case and will also offer necccesary legal advice on the implication of each clause in such agreement.
It is indeed true that some individuals, perhaps to avoid paying the necessary fee often use Artificial Intelligence machines to draft agreement. This act will only complicate issues more. Artificial Intelligence cannot assume the role of a lawyer. Artificial Intelligence is not capable of drafting a detailed agreement that will take cognisance of the circumstances of the case and the applicable laws in that jurisdiction. Artificial Intelligence cannot offer sound legal advice. It is best to engages a competent lawyer to ensure smooth transaction. It is also advisable to engage a lawyer at the earliest stage of a contract instead of spending huge amount of money on litigation or any other alternative method of dispute resolution. Prevention is better than cure.
Finally, it is important to note that circumstances may warrant a situation whereby a party may not be outrightly involved in the preparation of the agreement and he only needs to sign before the contract can be binding and effective, in this instance, it is advised that such party engages the service of a legal practitioner to help review the contract before the final execution. The rationale behind this is that except any vitiating element is sufficiently proved, a party is bound by such agreement wilfully entered into.
[1] Lanase Usman, AICMC. LL.B Hons (UNILORIN). He currently works as at the law firm of L.O Fagbemi, SAN (Rahma Chambers). He can be contacted via: 08106646768, Email: lanaseabidemi@gmail.com.
[2] Orient Bank (Nig.) Plc v. Bilante Intl. Ltd. (1997) 8 NWLR (Pt. 515) 37.
[3] Dahiru v. Kamale (2005) 9 NWLR (Pt. 929) 8.
[4] [Ajayi-Obe v. Executive Secretary (1975) 3 SC 1; Alfotrin Ltd. (the Owners of Miv Fotini) v. The Attorney General of the Federation (1996) 9 NWLR (Pt.475) 634; Tsokwa Motors (Nig.) Ltd. v. Union Bank of Nigeria Ltd. (1996) 9 NWLR (Pt.471) 129; Neka B.B.B. Manufacturing Co. Ltd. v. A.C.B. Ltd. (2004) 2 NWLR (Pt. 858) 521 referred to.] (P.50, paras. C-E).
[5] Nika Fishing Co. Ltd v.Lavina Corporation (2008) 16 NWLR (Pt. 1114) 509.
[6] Keystone Bank Ltd v. Abdul-Gafaru Yusuf &. Co. Ltd (2021) LPELR-55646 (CA).
