EQUITY IN BUILDING CONTRACT IN NIGERIA
A term paper on
EQUITY IN BUILDING CONTRACT IN NIGERIA
Submitted by:
OBOGUN P.O ARC/03/1927
OKE E.O ARC/04/3211
In partial fulfillment for the award of a Bachelor degree in Architecture
COURSE: BUILDING LAW (ARC 510)
LECTURER: Prof. O. O. Ogunsote
November, 2009
TABLE OF CONTENT
ABSTRACT
1.0 INTRODUCTION
1.1 AIMS AND OBJECTIVES
1.2 JUSTIFICATION
1.3 SCOPE AND LIMITATION
1.4 DEFINITION OF TERMS
2.0 EQUITY IN BUILDING CONTRACT
2.1 FORMS OF EQUITY RELIEF.
2.1.1 Rescission
2.1.2 Refusal of specific performance
2.1.3 Rectification
3.0 SUMMARY AND CONCLUSION
REFRENCES
ABSTARCT
The relationship between the architect , the client and other professionals in the building industry comprises of a number of factors, rules and guide lines which are in form of equatorial contracts or Equity in building contract which has been used to protect all parties involve. Equity which is seen as a form of fairness in law is a way of compensating a party in the law court. It could also be a form of considering the party involved.
1.0 INTRODUCTION
Definitions of contract are usually cast in terms of agreement or of promises. But neither of these is completely satisfactory as a basis for a definition. To define contracts in terms of agreement may well mislead readers as to the real importance of agreement in the modern law. And the definition of the American Restatement of Contracts is consequently accepted as the most accurate. A contract is a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognises as a duty. Some other definitions are in similar terms.
Pollock for instance defines a contract as a promise or a set of promises which the law will enforce. There is nothing seriously objectionable about this, and in fact lawyers constantly talk about contracts being enforced.
Strictly speaking, this definition is incorrect because the law does not actually compel the performance of a contract, but merely gives remedy, which is normally in form of damages where there is a breach. The word “promise” is used in this definition, and it is even used in the whole law of contract in a special sense. It must be noted that a promise in the law of contract does not necessarily postulate future conduct by the promisor. Hence, even a transaction which is immediately and completely executed on both sides such as cash sale in shop is a contract. It may seem artificial to talk of such a transaction as consisting of a promise or a set of promises, but the artificiality is reduced when it is recalled that a promise that a state of affairs exist, e.g. that the goods sold are of good quality is a contractual promise.
Similarly, a promise that something will occur in the future, even though it is not in the control of the promisor may perfectly be a contractual promise. But in some cases like this kind it will be more realistic to recognize that the contract or even part of it consists of an agreement. It is submitted that the weakness of the definition of the American Restatement is that it ignores the bargain element in contracts. No indication is made in the definition that a contract is a two-sided affair. Something being promised or done on one side in return for something being promised or done on the other side.
1.1 AIMS AND OBJECTIVES
- To create a basis for future project on the equity in building contracts.
- To aid architects and designers to be familiar with different constraints of equatorial contracts in buildings.
- To have a clear view and understanding of the legal constrains behind architectural designs and give with adequate information on how best to undergo top building contracts and projects.
1.2 JUSTIFICATION
Over the years illegalities arising from improper documentation and statement of contracts have been frown upon by the public where proper critical analysis and documentation of the equity in building contracts needs to be established. Equity must also be given to party involved in the contract so as to show leniency to the other party.
1.3 SCOPE AND LIMITATION
This paper focuses on the equity in building contracts in Nigeria were we will be looking at the forms in which it comes and how best to approach them.
1.4 DEFINITION OF TERMS
What does equity means
1.A stock or any other security representing an ownership interest.
2. ona company'sbalance sheet, theamountof the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as "shareholders' equity".
3. In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage.
4. In the context of real estate, the difference between the current market value of the property and the amount the owner still owes on the mortgage. It is the amount that the owner would receive after selling a property and paying off the mortgage.
5. In terms of investment strategies, equity (stocks) is one of the principal asset classes. The other twoare fixed-income (bonds) and cash/cash-equivalents. These areused in asset allocation planning to structure a desired risk andreturnprofile for an investor's portfolio.
2.0 EQUITY IN BUILDING CONTRACT
Equity is the law developed by the old English Court of Chancery as a result of the rigidity of the common law. Whenever the rules of the common law worked hardship or injustice, the litigant sent a petition to the sovereign as the fountain of justice and the Royal Council. The Lord Chancellor granted relief on behalf of the sovereign and the Council as he thought fit. He followed no established principles in dealing with such matters. His intervention was, however, always made on grounds of conscience. Only when such grounds were present would he interfere with the rules of the common law. The principles of equity developed in a piecemeal manner because equity presupposed the existence of the rules of the common law and had to act upon them on grounds of conscience in order to achieve justice. There developed a dispute between the Chancellor and the common law judges who frowned upon the interference of equity with the common law. The Chancellor maintained that he did not deny the right of the litigant at common law but acted only to avoid the hardship of the law. The dispute was referred to King James 1 for settlement and resolved in favour of equity. Accordingly, whenever there was a conflict between a rule of equity and a rule of the common law on the same matter, the rule of equity was to prevail. Since equity recognised some rights unknown to the common law, for instance, rights under a trust, the Chancellor and, later, the Court of Chancery gave judgement overriding the judgement of the common law courts. In particular, in cases where a person had obtained a judgement at common law by fraud, the court of chancery often gave relief by ordering the person not to enforce the judgement. Moreover, the chancery could border a litigant not to proceed with a common law action. The judicature Acts 1873-1875 fused the administration of the common law equity in England and provided, as James I had decided in 1615, that whenever there was a conflict. For example, the legal interest in property may be owned by a party and the equitable interest in it may be owned by another. The equitable owner may bring an action against the legal owner to enforce his equitable right. Finally, it should be mentioned that because equity was developed by a court, its rules are found only in judicial decisions, except that there are many equitable rules that have been incorporate into statutes.
2.1 Forms of Equity Relief.
The forms of equitable relief provided by equity in contractual mistake are rescission, refusal of specific performance and rectification.
2.1.1 Rescission
Although a mistake may not be void at common law because it is not sufficiently fundamental, the court will nevertheless set it aside if it will be unfair, or create under hardship, or if one of the parties (the party requesting enforcement of the contract) ough5 to have known the other was mistaken. Thus in sole V. Butcher a flat was extensively altered and modernised by the defendant, who thereafter left it to the plaintiffs for seven years at 250 pounds a year. Both parties believe at the time of contracting that the alterations had so changed the identity of the flat as to make it a ”new” dwelling house, and therefore, no longer covered by the Rent Restriction Act under which it would have been illegal to let it for more than 140 pounds a year. It turned out that he parties were wrong in this assumption. The flat was still subject to the act and the plaintiff, who had been in the flat for some years brought an action against the defendant claiming the rent over paid. The defendant counter claimed, alleginginter alia that he was entitled to eject the plaintiff as the lease had been entered into under a common mistake.
It was held by the court of appeal that although the parties made a mistake as to the identity of the flat, nevertheless the lease was not void at common law. But the court granted equitable relief by setting aside the contracts and putting the parties on terms that the plaintiffs should elect either to accept the rescission of the lease, or paid the full agreed rent of 250 pounds.
Also as we have seen in Magee. V. Pennine insurance Co Ltd. The court of Appeal set aside contractsfor mistake was not one as to the subject matter of the contract.
in setting aside such contract, the court, as we have seen in Cooper v. phibbs and sonne.v.butcher quite often attached to the rescission such terms as justice May require in order to put the respective parties back in as good as each of them was before entering into the defective agreement. Thus, in garrard.v.franken, the defendant agrees to take a lease of property from the plaintiff at 230 pounds per year. The drawn up agreement prepared by the plaintiff wrongly recorded 130 pounds per annum. The plaintiff brought an action for the rectification of the lease to read 230 pounds. It was held that the defendant must have realised the error made by the plaintiff and could not thus inequitably take advantage of it and that although the plaintiff was not entitled to rectification, the defendant would be put to his election. He could either take the lease at 230 pounds or half it rescinded.
Also in harris.v.peppereff, a vendor executed a conveyance and mistakenly included a piece of land he had not intended to sell but which the defendant alleged he had intended to buy. Here again, the purchaser was giving an option on either having the whole contract annulled or else taking it in the form in which the plaintiff originally intended, i.e, without the extra piece of land.
The principle underlying the granting by the court of equitable relief in this flexible and extensive manner was aptly summarised by Pollock in the following passage in his book of contract:
The will not hold the plaintiff bound by the defendant’s acceptance of an offer which did not express the plaintiff’sreal intention and which the defendant in circumstances could not have reasonably suppose to express it; nor yet required the defendant to accept the real offer but which was never effectively communicated to him and which perhaps he would not have consented to accept but will put both parties in the same position as if the offer was still open.
2.1.2 Refusal of specific performance
Where a mistake is not sufficiently fundamental to render a contract void at common law, the court may nevertheless refuse to grant specific performance of the agreement in the interest of justice, or in order to mitigate the hardship which the party resisting specific performance will suffer. In Dayv. Wells the defendant instructed an auctioneer to sell cottages, thinking they told the auctioneer to put a reserve price on them. When the auctioneer sold without a reserve price at a lower price, the court refused to decree specific performance of the contract.
Specific performance will also be refused were one party, to the knowledge of the other, makes a mistake as to the terms of the contract, and the other takes advantage of the mistake by accepting the offer. This was the main reason why the western state court of appeal refused to order the specific performance of the tobacco transporting agreement in Adul Yusuf v. Nigerian Tobacco Company.
In Webster v. Cecil, who had already refused his land for Webster for 2000 pounds, mistakenly wrote to the latter offering to sell it for 1500 pounds instead of 2500 pounds which he head intended. The plaintiff now sought specific performance of the contract. This was refused because since Webster was presumed to have known of the mistake, it was unconscionable of him to seek to enforce the contract against Cecil.
The power to refuse to grant the specific performance of a contract is a matter for the court’s discretion. In exercising this discretion, however, the court must weigh the hardship caused by granting specific performance against the uncertainty caused by refusing it. In Malins v. Freeman the defendant at the auction, bid for one lot under the impression that he was bidding for another, though he was liable at law, Lang date, M. R., held that specific performance should not be decreed against him.
It will be recalled that when a defendant made a similar error in Tamplin v. James, a case which was decided much later, Baggallay, L. J. ordered the contract to be enforced, stating, in spite of the decision in Malins v. Freeman, that where there has been no misrepresentation, and where and where there is no ambiguity in the terms of the contract, the defendant cannot be allowed to eyade the performance of it by the simple statement that he has made a mistake. However, Baggallay, L. J. stated a circumstance under which a court of equity will refuse specific performance of an agreement entered into by the defendant under a mistake, i.e., “where injustice would be done to him, were performance to be enforced”.
Also in the same, James L.J. stated that a defendant could only rely on a mistake to which the plaintiff has not contributed: “where a hardship amounting to injustice would have been inflicted upon him by holding him to his bargain and it was unreasonable to hold him to it”.
It has been suggested that the apparent conflict between Malins v. Freeman andTamplin v. James could be reconciled by saying that it is a”hardship amounting to injustice” to force a person to take one property when he thinks he has bought another, as in Malins v. Freeman, where as it would not be so if the defendant is merely forced to take property less extensive than he had thought as inTamplin v. James. It is, therefore, a question of the degree of hardship and injustice present in each case.
2.1.3 Rectification
The court in his equitable jurisdiction may allow a written agreement to be rectified either to be rectified either to exclude a team wrongly or mistakenly include or include a team wrongly left out. It may also order the specific performance of the agreement as rectified. The essence of such rectification is to bring the written agreement in harmony with the prior oral agreement.
In Cradock bros .v. hunt. for example a vendor orally agreed to sell to a purchaser a certain piece of property . by a mistake the written contract embodying the agreement include an adjoining yard which the parties had exempted from the sales and the subsequent conveyance actually conveyed this land to the purchaser . The court ordered that the conveyance be rectified to bring it in line with the parties, agreement.
Before ratification can be obtained there must be a prior and complete agreement which had been incorrectly put down in writing thus if the written agreement accurately reports the terms of the prior oral agreement. There can be no rectification merely because the prior oral agreement was made under a mistake. This is expressed by stating that the court will only rectify an instrument, and not an agreement. in riverlate properties ltd. V. Paul , discussed above, the landlord who had intended including a term that his tenant should share the cost of external repair to the house but failed to include it to the lease agreement was refused rectification because the lease document represented the only agreement between the parties . There was no prior oral agreement of which the term on external repairs had been part, but which ten had been let out in the later least document.
It is not necessary that the prior oral agreement should have been a legally binding one. it is sufficient even though it was not legally binding. Thus in eagle star etc insurance co .v. Rerner. It was healed that an initially slip prepared by an under writer getting out a summary of the essential terms of an insurance policy to be rectified when the subsequently executed policy was at variance with the slip similarly in josclyne v . Nissan an agreement between a father and his daughter provided for the transfer of his businesses and his premises and unconditioned that the would pay the gas and electricity bill. The term concerning payment for the gas and electricity bill was mistakenly left out in a subsequent written agreement. it was healed that the document could be rectified to include the missing terms although