Post Covid-19: Breach of contract and Nigerian banking community


THE world is currently struggling with tens of thousands of cases of the Coronavirus (COVID-19) and Nigeria is not immune to this harsh reality. Many political leaders and people of high net worth have tested positive to this virus; likewise, the employees that ensure the mainstay of industries are not spared. It appears COVID-19 is a no-respecter of name, pedigree, office or class. In Nigeria, Lagos the Centre of commerce and Abuja, the political capital have been on a partial lockdown as the spread of COVID-19 becomes more evident. These are further acerbated by the presidential directive of 29/3/2020 that Lagos, Ogun and Abuja must be under curfew sparing only essential services. The main thrust of worry for commercial commentators in this clime and all over the world is the scale of disruption COVID-19 has and would have on trade relations and business communities. Focusing the banking community on this trend, one wonders how interest rates and the capital sum owed by customers would be paid or repaid, whereas the ink is completely dry on the agreement. Thus, the main principles that will determine the circumstances are the principles of breach of contract; the frustration of contract; and the defense of force majeure.


The breach of contract

More often than not, business people prefer juristic opinion on a subject matter to ensure that they have a bird’s eye view of what they are confronted with. The Supreme Court in Pan Bisbilder Nigeria Ltd V First Bank of Nigeria Limited (2000) LPELR-2900(SC) per Ayoola, JSC in supporting the lead judgment explains the term breach of contract when it held as follows: “A breach of contract connotes that the party in breach acted contrary to the terms of the contract either by non-performing, or by performing the contact not in accordance with its terms of by a wrongful repudiation of the contract.” The Supreme Court also re-echoed this stance in Cameroon Airlines V. Otutuizu(2011) LPELR-827 (SC). Other jurists have also held this position. The import of the foregoing is that a person who enters into an agreement with another and does not carry out his obligations as required by the terms of the contract is in breach of the contract.

What would naturally be the effect of a breach of contract in legal parlance is usually for the party not in the breach to seek specific performance of the contract or damages. In the case where it becomes clear that due to the nature of the contract, it could no longer be performed, the claim for damages would be the only possible and plausible means to assuage the losses occasioned by such breach.

Let’s cut to the chase. It is worth mentioning that Nigerian banks like their counterparts in other COVID-19 ridden areas are not immune to the upheavals of this plague and its attendant effect on business relations that preceded the plague’s visit to Nigeria. Without a doubt, before the emergence of COVID-19 in Nigeria, many business relations have been entered by the banks and their customers. Many of these customers are high net worth companies, and their existence keeps the banks in business. Needless to say, these customers themselves have other obligations to their staff and the society at large. So, as the effect of COVID-19 cascades into different areas of our economy; it pulls a lasting domino effect on the banks and their customers. With COVID-19 holding sway in Lagos and Nigeria at large, there is going to be a floodgate of cases after the plague on this very narrow area of our jurisprudence and courts are bound to respond as always to this vexed area of law. The interesting twists in the mix of all these are: Only foreseeable losses can be claimed; The party not in breach may claim under the principle of restitutio integrum, that is the right to be restored to the position he was before he entered into the contract or Quantum meruit depending on the circumstances of the breach or nature of the contract.

In defense of the above-mentioned claims, the party in breach may choose to deploy either of two of the most potent defenses which are the defense of frustration and the defense of force majeure.

The defense of frustration

Many have argued that psychologically, frustration is a common emotional response to opposition, related to anger, annoyance and disappointment. Others added that frustration arises from the perceived resistance to the fulfillment of an individual’s will or goal and is likely to increase when a will or goal is denied or blocked. In Mazin Engineering Limited vs. Tower Aluminum (Nig) Ltd. (1993) 5 NWLR (Pt 295) 526, the Supreme Court defined frustration of contract as ‘…the premature determination of an agreement between the parties lawfully entered into and in course of operation at the time of its premature determination owing to the occurrence of an intervening event or change of circumstance so fundamental as to be regarded by law both as striking at the root of the agreement, and as entirely beyond what was contemplated by the parties when they entered into the agreement.’

In A. G. Cross River State V. A. G. Federation & Anor (2012) LPELR-9335(SC) the Supreme Court per Adekeye, JSC went on to hold that: ‘’The courts have recognized certain situations or events as listed below that constitute frustration – a. Subsequent legal changes; b. Outbreak of war; c. Destruction of the subject matter of contract; d. Government requisition of the subject matter of the contract; and e. Cancellation of an expected event.” The learned jurist concluded that a court would recognize that a contract is frustrated where after the contract was concluded, events occur which make performance of the contract impossible, illegal or something radically different from that which was in the contemplation of the parties at the time they entered into the contract.

In Lagos, on 27/3/2020 the Lagos State Government introduced the Lagos State Infectious Diseases (Emergency Prevention) Regulations 2020 made pursuant to the Lagos State Public Health Law Cap Ch. P16 Laws of Lagos State, 2015. Some other states in Nigeria would most likely pass similar Regulations pursuant to the Quarantine Act, Cap Q2 Laws of the Federation of Nigeria, 2004 in an attempt to combat COVID-19 and prevent a state of Italy. These laws are being set in motion due to the capacity of the health care facilities in Nigeria. These laws and indeed the provisions of section 41 of the Constitution of the Federal Republic of Nigeria, 1999 (As amended) strips the choice of time to do what and go where from contracting parties. Nay! COVID-19 strips choices from the hands of reasonable governments; thereby, sets itself and the government against


The will of contracting parties. It is common knowledge that many events have been canceled, whereas numerous vendors have been paid to deliver either goods or services at such events. What then would become of such contracts? Are they frustrated? Would COVID-19 be classified as a new element of frustration? Your guess is as good as mine.

The defense of force majeure:

The other defense deployable by a party that is alleged to have a breach of contract is the defense of force majeure which is in commonplace referred to as “act of God”. The Court of Appeal in C.G.G. (NIG) Limited v. Augustine & Ors. (2010) LPELR-8592(CA) per Eko, JCA (as he then was) in an attempt to define what constitutes “Force Majeure” relied on the Black’s Law Dictionary 8th Edition and held that force majeure is an event or effect that can neither be anticipated nor controlled. It includes both natural and human acts. The human acts may be political including riots, strikes or war. In Globe Spinning Mills (NIG) Plc v. Reliance Textile Industries Ltd (2017) LPELR-41433(CA), the appellate court also held that force majeure is an unexpected and unforeseen happening, making nonsense of the real situation envisaged by parties. For example, Company A imports cars into Nigeria. He has obtained a Local Purchasing Order (LPO) for 5 new cars for company B who is about to recruit 5 new senior management staff. Company A obtains a loan facility from a bank for 60 days tenure to finance the LPO. Due to the pandemic, the bank’s personnel charged with the duty to ensure the fund was released to company A delayed by 36 hours. The importation takes about 5 weeks. By the time the vehicles arrive at Tin-Can Island Port of Lagos, the port is further congested due to Government’s movement restriction. Company B reduces its senior management to 2 and informs company A to reduce the cars to 2 and it was only going to pay when Lagos reopens fully for business. 60 days are over, the bank awaits repayment of the capital sum and accruing interest. This creates a cocktail of legal dilemmas for all the parties.

With COVID-19 not being an anticipated guest to the party, the dilemma of many a contracting party is how such occurrence will be interpreted by the courts in the event a failure to reach an amicable resolution within a reasonable time? Will COVID-19 be classified as a new element of force majeure?

Recently, commentators have argued that COVID-19 cannot be elevated to the level of force majeure as it is manmade, and not an act of God. Whereas, others have argued that, regardless of how COVID-19 came to be, its effect being unanticipated by any contracting party in the recent past should be classified as force majeure.


This recent event has shown the narrow perspectives of many contracting parties and their solicitors, the need to have robust terms of the contract covering all aspects of the direct and indirect events that may or may not militate against the fulfillment of contractual obligations.

COVID-19’s prophetic message to business people is to appreciate mediation and conciliation better than all other forms of dispute resolution mechanisms to enable commerce to thrive once again. The banks are also not excluded from the mix as the question of whether or not interest


Charges ought to be stopped during the period of the COVID-19’s visit and few months after its departure will demand an answer.

It is opined that for the banking community to remain in business, it may have to come down from its high horse to embrace the ash realities of the COVID-19.

This is because the banking community requires a thriving business community to survive in the first place before thriving in its own business. Isn’t it more expensive to kill the goose that lays the golden eggs?

Benson, a Senior Counsel, writes in via












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