Fundamental Breach: Why Exclusion Clauses cannot avail Inufin Automobile Company

Fundamental Breach: Why Exclusion Clauses cannot avail Inufin Automobile Company

On the 13th day of August, 2016, Professor Laolu Omilana was appointed as the new Director of the Nigerian Institute of Human Nutrition and Dietetics, Abuja. He is to lead a team of 6 to pilot the affairs of the Institute for the next 2years. On the 5th day of November, 2016, the Institute entered into an agreement with Emmanuel Inufin Automobiles Ltd which was represented by her Legal Adviser, Damilola Bamisile(Miss) for the supply of 6 (official) Cars from Japan at an agreed sum of 180 Million Naira. The terms of the contract are as follows:
(a) That the purchaser has agreed to purchase 6 vehicles imported from Japan from the vendor at the agreed price of N180 million
(b) That the purchase price will be paid in 3 instalments. The first instalment being for the sum of N80million be paid upon the execution of this agreement, the second instalment being for the sum of N50million to be paid upon the presentation of evidence of clearance of the vehicle at the port and the third instalment being for the sum of N50million to be paid upon the delivery of the vehicles to the purchaser which is six weeks from the entry into force of this agreement.
(c)That all contractual conditions or warranties as to fitness are excluded from this contract.
Upon the arrival of the Cars, it was discovered that the engines of the cars were faulty and not be fit to be used as the official cars of the leaders of the institute. Prof. Omilana was in my office last week to brief me. “How can those people claim the outstanding sum of N50million when the cars are not working properly”, he insisted.

japanese car

Points to Note:
1. In Law, parties are free to decide the terms of the contract they are entering into and they are bound by that agreement. In essence, a party will not be allowed to scuttle out of a contract freely entered into by him because it wasn’t later favourable to him.
2. Apart from the express terms, there are implied terms in every contract of sale of goods, one of which is that the goods must be fit for the purpose for which it was purchased (or at least for the purpose for which it was manufactured).
3. However, the terms of the contract can contain “exemption clauses”. An exemption clause is a term in a contract which seeks to exempt a party from liability in a certain event which ordinarily he would be bound to make contingency plan for. For example, one of the reasons why most aggrieved persons cannot sue MMM is because there are exemption clauses on the website of the scheme and they are even highlighted in red.
4. To every general rule, there are exceptions. An exception to the validity of exemption clauses is “fundamental breaches”. Fundamental breach is an event resulting from the failure of one party to perform a primary obligation which has the effect of depriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain from the contract.
5. For the purpose of clarity,

Based on these Laws, I had to tell Prof. Omilana the story of another woman with a similar experience. This woman, Temitope Adegbuyi shipped cattle on board the ship of another man, Mr. Tomi Akano from Ankara to Lagos under a bill of lading which contain an exemption clause to the effect that the ship owner was not to be responsible “under no circumstance” for any damage, injury or death of the cattle. The cattle were infected with foot and mouth disease because the ship which was previously used to carry that had such diseases and was not disinfected by the servants of Mr. Tomi Akano. Temitope Adegbuyi suffered damage and sued. Mr. Tomi Akano relied on the exemption clause but the court’s decision was that “in this case, it is clear that the ship was not reasonably fit for the carriage of these cattle. There is therefore a fundamental breach of their implied engagement by Mrs. Elizabeth Temitope. The latter is entitled to damages”.
It is deducible that Emmanuel Inufin Automobile Company may not be able to successfully claim the outstanding sum of N50million because the company is in fundamental breach of the contract; ‘the engine is the car’! However, I’m of the simple opinion that the parties should just enter into a mediation or arbitration session to resolve their dispute so that a win-win position can be created. Time is business.
Joseph Jagunmolu Ogunmodede

Joseph Ogunmodede

Joseph Jagunmolu Ogunmodede is a budding lawyer and the Founder of THE LEGAL DIARY.
He was born in Ogun State, Nigeria, and holds a Bachelor of Laws (LL.B) Degree from the prestigious University of Ibadan, Ibadan, Oyo State where he was awarded a First Class (Honours). He is currently a Bar Aspirant at the Nigerian Law School (Lagos Campus).