Oral Settlement by Administrators of a Firm to Share Revenue With a Individual: Impact of Failure of Firm

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ORAL AGREEMENT BY DIRECTORS OF A COMPANY TO SHARE PROFITS WITH AND MAKE A PERSON A DIRECTOR FOR THE SERVICE RENDERED BY THE PERSON: IMPLICATIONS OF THE COMPANY’S FAILURE TO FULFILL THE SAID AGREEMENT UNDER THE EXTANT LAWS IN NIGERIA

SCENARIO

A (Managing Director) and B have been the one registered administrators and shareholders of a Nigerian Firm. The corporate determined to extend its enterprise prospects particularly within the public sector by involving C who was anticipated to make use of each his experience and political contacts to achieve enterprise benefit and enlargement for the corporate. A and B orally agreed with C that income made by the corporate shall be shared equally with C and that C can be made a director of the corporate. On the idea of the mentioned settlement, C contributed drastically in securing a contract for the corporate which made A commend C’s effort vide a letter.

Consequently, C was designated and instructed to behave because the Director of Enterprise Growth (DBD) of the corporate and different efforts have been begun to make sure that C was made a director of the corporate as orally agreed by all of the events. However there was by no means any written decision handed to make C a director neither was the register of administrators of the corporate amended.

Consequently, the corporate secured a contract the place it made a complete income of N60,000,000 (Sixty Million Naira solely). Shockingly, A and B had refused to share the mentioned income with C.

INTRODUCTION

The scope of this write-up is to: determine the attendant authorized points arising from the situation; and appraise the recognized authorized points within the mild of the extant rules of law (statutory and judicial). Additionally, a short try will probably be made to advise C on the energy or in any other case of his case.

LEGAL ISSUES

1. Whether or not C was in law a director of the corporate.

2. Whether or not C may be mentioned to be a companion with A and B.

3. Whether or not C was an worker or employee within the firm.

4. Whether or not C is entitled to share within the earnings made by the corporate

LEGAL POSITION ON ISSUES

1. Whether or not C was in law a director of the corporate:

Typically, the query of: who’s a director of an organization is extra of a query of law than reality. Part 244 of the Corporations and Allied Issues Act (CAMA) describes ‘a director of an organization registered below this Act is an individual duly appointed by the corporate to direct and handle the enterprise of the corporate’. Undoubtedly, the administrators’ roles are as elementary to the wellbeing of an organization simply as blood is to the survival of the human physique. Maybe, that’s the reason firm statutes all around the world make particular provisions concerning the procedures of appointment and elimination of a director.

Within the mild of the foregoing, one can safely say that C was not a director of the corporate as a result of he was by no means validly appointed so. Although, C was designated as a Director of Enterprise Growth (DBD) of the corporate however nothing was accomplished to amend the required registers of the corporate on the Company Affairs (CAC) registry. In different phrases, the designation of C because the DBD with out submitting needed amendments within the firm’s register of administrators was a mere expression of intention which was by no means perfected in law.

2. Whether or not C may be mentioned to be a companion with A and B:

In keeping with Part 3, of the Partnership law of Lagos State, partnership is the connection which subsists between individuals carrying on a enterprise in frequent with a view to revenue. From the foregoing statutory definition, one can say a companion is an individual who carries on enterprise with such different companions. It’s crucial to look at the assorted statutory guidelines that decide the character of partnership. Part 4 of the Partnership law supplies thus:

(a) ”Joint tenancy, tenancy in frequent, joint property, frequent property or half possession doesn’t of itself create a partnership as to something so held or owned whether or not the tenants or house owners do or don’t share any income made by use thereof.

(b) The sharing of gross returns doesn’t of itself create a partnership whether or not the individuals sharing such returns have or haven’t a joint or frequent proper or curiosity in any property from which or from using which the returns are derived.

(c) The receipt by an individual of a share of the income of a enterprise is prima facie proof that he’s a companion within the enterprise, however receipt of such a share or of a cost contingent on various with the income of a enterprise, doesn’t itself make him a companion within the enterprise; and particularly –

(I) the receipt by an individual of debt or different liquidated quantity by installments or in any other case out of the accruing income of a enterprise doesn’t of itself make him a companion within the enterprise or liable as such;

(ii) a contract for the remuneration of a servant or agent of an individual engaged in a enterprise by a share of the revenue of the enterprise doesn’t of itself make the servant or agent a companion within the enterprise or liable as such;… ”

From the foregoing, it’s clear that partnership is a query of specific settlement between the companions as a result of the law is not going to ordinarily presume the existence of partnership between individuals doing enterprise collectively. It then suffices to say that: a mere contract made with a servant or individual for remuneration or sharing of firm’s income doesn’t ipso facto make such servant or individual a companion.

It’s noteworthy to state that C’s case falls inside the contemplation of Part 4 (c) (ii). The authorized implication of that is that C was a servant of the corporate who was entitled to share out of the earnings of the corporate. However he was not a companion within the strict authorized sense.

3. Whether or not C was an worker or employee within the firm:

It’s crucial to look at first the Labour law angle of the connection that existed between the corporate and C earlier than contemplating the strict contractual facet of the connection. Accordingly, Part 91 of the Labour Act, ‘contract of employment’ means an ”settlement, whether or not oral or written, specific or implied, whereby one individual agrees to make use of one other as a employee and that different individual agrees to serve the employer as a employee”.

In the identical vein, the Act defines a employee as ”any one that has entered into or works below a contract with an employer, whether or not the contract is for handbook labour or clerical work or is expressed or implied or oral or written, and whether or not it’s a contract of service or a contract personally to execute any work or labour… ”

Within the case of Iyere v. Bendel Feed & Flour Mill Ltd., the Supreme Court docket of Nigeria described a contract of employment as follows:

”… a contract of employment connotes a contract of service or apprenticeship, whether or not specific, or implied, and whether it is specific, whether or not it’s oral or in writing”.

Therefore, C was a employee or an worker of the corporate as a result of he was certainly working for the corporate. In different phrases, there have been sufficient directions and instructions given to C which level to the truth that C was working for and on behalf of the corporate when he labored because the DBD of the corporate.

From one other viewpoint, the details at hand may also be addressed from the strict contractual settlement sense. It’s trite in law that events are certain by the phrases of their settlement. Within the case of Akanmu v. Olugbode, the Court docket held as follows:

”The weather of a sound contract are supply, acceptance, consideration and intention to enter into authorized relations… As soon as the supply is unconditionally accepted, a sound contract has come into existence”.

Additionally, within the case of Dragetanos Const. (Nig.) Ltd. v. F.M.V. Ltd & Ors., the Court docket of Attraction held as follows:

”… it’s applicable and essential to restate the time-honoured precept and ingrained within the law of Contract that, ‘pacta conventa quae neque contra leges neque dolo malo inita sunt, omni modo obsevanda servanda sunt’, so as phrases, contractual agreements which have neither been fraudulently nor illegally entered into by events, should in all respects be noticed or enforced”.

Additionally, within the case of Nicon Lodges Ltd. v. Nene Dental Clinic Ltd, the Court docket of Attraction held as follows:

”An settlement voluntarily entered into should be honoured in good religion. Fairness appears on the intent and never kinds and can at all times impute an intention to meet an obligation”

Within the mild of the foregoing, it’s secure to say {that a} contract may be established between the corporate and C as evident within the varied directions given to C by A, the Managing Director of the corporate. After all, the actions of the events present clearly that there have been supply, acceptance, consideration and intention to create a authorized relation amongst all of the events. Therefore, the choice of the corporate and the subsequently joint efforts made by all of the events in securing a contract represent a subsisting and enforceable contract among the many events.

4. Whether or not C was entitled to share within the earnings made by the corporate:

This difficulty offers primarily with the dedication of remuneration of C. Although, the pleasant oral understanding between the events about revenue sharing was not contained in any written ‘Revenue Sharing Settlement’, income shall be shared equally as a result of events had orally agreed it to be so shared. Nevertheless, it’s to be famous that there could come up an evidential difficulty if A and B deny their oral settlement. Additionally it is crucial so as to add that: assuming with out conceding that there was no settlement (oral or written) amongst A, B and C, fairness will nonetheless permit C to share within the income primarily based on C’s sweat fairness.

Subsequently, it’s secure to say that C is entitled to his personal share of the corporate’s earnings due to his sweat fairness (he contributed actively within the contract from the place the corporate made N60m). It was certainly incorrect for A and B to solely convert all of the earnings made by the corporate.

ADVICE FOR C

Within the mild of the foregoing, C can both sue for breach of contract of employment, or breach of contract simpliciter which may be deduced from the circumstances of each the actions and relationship of the events. As answered by the statutory provisions above, the query of what constitutes a contract of employment is a query of law. After all, the precise remuneration of C is equal proportion with A and C of the overall income made by the corporate from the contract carried out by A, B and C.

Conclusion

It’s crucial to state that C’s case is standing on a really weak footing in partnership law, however he could have a treatment for breach of contract of employment as a result of there was certainly an employment. Extra particularly as famous above, C can sue for breach of contract simpliciter as a result of there was certainly a subsisting contact among the many events.

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