Judiciary-Poetry-Logo
JPoetry

COMPANY WILL NOT BE USE AS AN INSTRUMENT OF FRAUD

Reach more audience. Place advert here.

Dictum

It must be stated unequivocally that this court, as the last court of the land, will not allow a party to use its company as a cover to dupe, cheat and or defraud an innocent citizen who entered into lawful contract with the company, only to be confronted, with the defence of the company’s legal entity as distinct from its directors. Most companies in this country are owned and managed solely by an individual, while registering the members of his family as the share holders. Such companies are nothing more than one-man-business; hence, the tendency is there to enter into contract in such company name and later turn around to claim that he was not a party to the agreement since the company is a legal entity.

– MUNTAKA-COMASSIE JSC. Alade v. Alic (2010)

Was this dictum helpful?

SHARE ON

COMPANY’S DIRECTORS MAY DEAL WITH ASSET OUTSIDE RECEIVERSHIP

The Receivership in the instant case which does not necessarily result in the liquidation or winding up of the company, the right to deal with the assets in the receivership are revived at the termination of the receivership. In all cases the right of the directors of the Company to deal with the assets of the company not in receivership or other matters not suspended are not affected by the appointment of a Receiver/Manager over the assets of the Company. The directors of the company do not by virtue of a receivership become functus afficio for all purposes of the company.

– Karibi-whyte, JSC. Intercontractors v. National Provident (1988)

Was this dictum helpful?

COMPANY CANNOT ACT ON ITS OWN, BUT ACT THROUGH HUMAN BEINGS

It is now trite in law that a company or corporate body not being a human being cannot act on its own and so carries out activities through human beings who are the operators or managers of the corporate body and so the manager or operators do not become personally liable for acts carried out for and on behalf of the company in the management or day to day business of the company. The follow up is that the company is an abstraction and operates through living persons and so an officer of the company takes an action in furtherance of the affairs of the company who is the principal and it is that principal that is liable for any infraction occasioned by those acts and not the official or employee. SeeN.N.S.C. v Sabana Company Ltd (1988) 2 NWLR (Pt.74) 23; Yusuf v Kupper International NV (1996) 4 NWLR (Pt.446) 17; UBN Ltd v Edet (1993) 4 NWLR (Pt.287) 288; Niger Progress Limited v North East Line Corporation (1989) 3 NWLR (Pt 107) 68.

— Tanko Muhammad, JSC. Berger v Toki Rainbow (2019) – SC.332/2009

Was this dictum helpful?

RATIONALE FOR PRE-INCORPORATION CONTRACT NOT BINDING AT COMMON LAW

At Common Law, a pre-incorporation contract was not binding on the company because there was no principal on behalf of whom an agent could have contracted. The company was not permitted to ratify or adopt it, and it could not, after incorporation, enforce the contract, nor sue, e.g. for damages for breach of contract – Natal Land etc Co. Ltd. v. Pauline Colliery Syndicate Ltd. (1904) AC 120. These common law rules were a source of considerable inconvenience for the promotion of business.

— U. Mohammed, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994

Was this dictum helpful?

RATIONALE BEHIND NULLITY OF PRE-INCORPORATION CONTRACT

In Kelner v. Baxter (1866) L. R. 2 C.P. 174 Erie C.J. explaining the rationale of the principle [pre-incorporation contract] said: “as there was no company in existence at the time, the agreement would be wholly inoperative unless it were held to be binding on the defendant personally…where a contract is signed by one who professes to be signing as agent, but who has no principal existing at the time, and the contract would be altogether inoperative unless binding upon the person who signed it, he is bound thereby; and a stranger cannot by a subsequent ratification relieve him from the responsibility”.

Was this dictum helpful?

CAMA MAKES IT POSSIBLE FOR PRE-INCORPORATION CONTRACT TO BE RATIFIED

All that has now changed in this country for section 72(1) of CAMA makes it possible for a pre-incorporation contract to be ratified by a company after its incorporation and thereby becoming bound by it and entitled to the benefit thereof. There seems to be no dispute in this appeal about this conclusion.

— Ogundare, JSC. Societe Favouriser v. Societe Generale (1997) – SC.126/1994

Was this dictum helpful?

PARTIES BOUND BY CONTRACTUAL TERMS IN ABSENCE OF FRAUD

The well laid down position of the law is that Courts do not rewrite contact for the parties where the terms of the contract are clear. In the absence of fraud, duress and undue influence, misrepresentation, the parties are bound by their contract. It is only parties to a contract that can sue and be sued on it.

– Rhodes-Vivour JSC. Alade v. Alic (2010)

Was this dictum helpful?

Load More
No more related dictum to show.

Click the icons to like, follow, and join JPoetry

Facebook Twitter Whatsapp Telegram

External link(s)

BOOK: First 2-years as a Law Student: Experiences and Lessons.