LSP072: The Legal Implication of a Refusal to Sign an Agreement

In 2019, the Nigerian Contract jurisprudence recorded a landmark principle in the case of  MTN (Nig.) Communications Ltd. v Corporate Communications Investment Ltd. (2019) LPELR-47042(SC). The fact of the case goes thus:

MTN (“the Appellant”) entered into a Trade Agreement (Exhibit A) with Corporate Communications Inv. Ltd. (“the Respondent”) who is one of MTN’s trade partners. The agreement was drafted by MTN and sent to the Respondent for its signatures. The Respondent signed but MTN did not, and kept it. There is a clause therein that the agreement took its effect from the date the Appellant appended its signature thereto.

Parties, however, transacted on the basis of the contract. MTN thereafter terminated the agreement without giving the required notice, relying on the relevant clause in the agreement. Despite the respondent’s solicitor letter challenging the termination of the agreement and requesting an amicable settlement, the appellant withdrew 27 SIM registration kits assigned to the respondent. 

The respondent pleaded that in compliance with previous Trade Partner Agreements between the parties, it had incurred expenses in procuring facilities and equipment which were of no more use to it, given the purported termination of Exhibit A. It also pleaded that the abrupt cancellation of orders without a formal and valid termination of their agreement has caused it a huge financial loss.

At the end of the trial at the High Court, the court Court found for the Respondent and awarded N25 Million as damages and costs of N20,000. The same decision was also upheld by the Court of Appeal. Aggrieved by the two decisions, MTN took the matter to the Supreme Court.

The legal question becomes, can an unsigned agreement constitute a valid contract? At first, none of the parties raised this issue. It was in the course of writing the judgment that the trial judge, observed that Exhibit A was not signed by the appellant. Upon discovery, he adjourned the delivery of the judgment, and invited the parties to address him on the evidential weight to be attached to it. (An intelligent judge in my book. I stan). A court of law has the enabling power to raise a new issue and invite the parties to address that issue. Ezeudu v John (2012) 7 NWLR (Pt. 1298) 1.

MTN saw this as an opportunity to escape liability. It argued that the agreement was worthless and that it was immaterial that MTN was the one who prepared it. The appellant’s rationale is that it was one of the terms of the agreement that the agreement would take effect from the date the last person signs and that since it did not sign the document after it was signed by the respondent, the document was inadmissible and could not be relied upon as a valid contract between the parties. 

This argument was rejected by the court on two grounds. First, on conduct of the parties. Second, on the equitable maxim that equity looks at the intent of the parties rather than the form of the contract. Rejecting the argument, the Court held that the appellant could not be allowed, by deliberately withholding its signature, to take advantage of its wrongdoing and use it as a weapon against the respondent. The Court further stated, relying on the case of Adedeji v. N.B.N Ltd. (1989) 1 NWLR (Pt. 96) 212 @ 226-227 E-A, that it is morally despicable for a person who has benefited from an agreement to turn around and say that the agreement is null and void, or unenforceable, as contended in this case.

In addition, His Lordship, Ejembi Eko, gave an elaborate dictum thus: “though not mutually executed, Exhibit A was regarded by the parties as their binding contract. Equity acts in personam and therefore takes as done that which ought to be done, if from the conduct of the parties such inference can be drawn. In the instant case, such facts abound on which the two Courts below concurrently found that the parties intended to be bound by Exhibit A and that Exhibit A would be the basis of their mutual transaction, whether or not the document was formally executed. Again, Equity acting in personam would look at the intent of the parties and the substance and not at the form. In the instant case, insistence on compliance with all formalities of executing a written agreement will be oppressive to the Respondent. The Appellant, in the Court of Justice, will not be allowed to take advantage of the Respondent on his own iniquity by his ingenious booby trap by which he deliberately withheld his signature while at the same time it made the Respondent go with the impression that the relationship is governed or regulated by Exhibit.“

In conclusion, the principle of law is that an agreement, though not executed by one party, may be a valid contract. As such, if one party withholds execution but allowed the party who had executed to carry out any obligation under the agreement to the benefit of the party who did not execute, the agreement may still be deemed valid and enforceable notwithstanding that execution was by one party.

Thank you for reading. See you next week.