Download equity in building c..

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
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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.
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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. on a company's balance sheet, the amount of the funds contributed by the owners (the
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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 two are fixed-income (bonds) and cash/cash-equivalents. These are used in asset
allocation planning to structure a desired risk and return profile for an investor's portfolio.
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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,
alleging inter 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
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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 contracts for 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:
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
The will not hold the plaintiff bound by the defendant’s acceptance of an offer
which did not express the plaintiff’s real 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
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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
and Tamplin 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
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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 in Tamplin 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 .
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
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
Parties had not entered in to binding prior agreement; the oral barging disclosed the common
intention of the parties.
The power of the court to rectify a written agreement between two parties is only exercise
with extreme caution. Uwaifo. JCA, (in mbonu v. nwoti) quoting Bennett, j in fredensson v.
rothscheld stated as follows;
To substitute a new agreement for one which the parties have deliberately subscribe
ought only to be permitted upon evidence of a different intention of clearest and most
satisfactory description it is clear that a person who seeks to recertify a deed upon the ground
of mistake must be required to establish in tie clearest and most satisfactory manner that the
allege intention to which it is desire to be made conformable was contained concurrently in
the minds of all parties down to the time of execution and also must be able to show exactly
and precisely the form to which the deed ought to be brought.
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
Thus for rectification to be called for both parties must have intended that the term of the
prior agreement to put down in the later document unaltered otherwise, the written
agreement would represent the final intention. It must be clearly established that the later
document contained a mistake. The onus of proof is on the party pleading mistake.
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
3.0 SUMMARY AND CONCLUSION
Voluntary, deliberate, and legally enforceable (binding) agreement between two or more
competent parties as been seen and discuss in this paper as the definitive terms of contractual
document in equity. A contractual relationship is evidenced by ;
(1) an offer,
(2) acceptance of the offer, and a
(3) valid (legal and valuable) consideration.
Each party to a contract acquires rights and duties relative to the rights and duties of the other
parties. However, while all parties may expect a fair benefit from the contract (otherwise
courts may set it aside as inequitable) it does not follow that each party will benefit to an
equal extent. Existence of contractual-relationship does not necessarily mean the contract is
enforceable, or that it is not void (see void contract) or voidable (see voidable Contract).
Contracts are normally enforceable whether or not in a written form, although a written
contract protects all parties to it. Some contracts, (such as for sale of real property, hire
purchase agreements, insurance policies) must be in writing to be legally binding and
enforceable. Other contracts (see implied in fact contract and implied in law contract) are
assumed in, and enforced by, law whether or not the involved parties desired to enter into a
contract.
ARC/03/1927, OKE E.O ARC/04/3211
EQUITY IN BUILDING CONTRACT IN NIGERIA
REFRENCES
http://www.businessdictionary.com/definition/consideration.
http://www.businessdictionary.com/definition/contract.html
contracts.axxerionusa.com
Law.JustAnswer.com
www.aia.org/contractdocs
ARC/03/1927, OKE E.O ARC/04/3211