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PRODECO INTERNATIONAL NIGERIA LIMITED
Texoland International Nigeria Limited entered into a loan agreement with First Bank of Nigeria to supply 80 pieces of brand new steel dredging pipes to Prodeco International Nigeria Limited. The loan obtained by Texoland International was clearly in contemplation of the contract with Prodeco International Nigeria Limited. First Bank visited Prodeco International to verify the purpose for which the loan was sought.
Prodeco International, therefore, had both actual and constructive notice of the credit facility sought by Texoland International to execute the contract. Prodeco International, however, failed to take delivery of the dredging pipes and pay Texoland International, which prevented Texoland International from servicing the loan it took from First Bank.
Following the turn of events, Texoland International instituted an action against Prodeco International and claimed the following:
1. A declaration that the action of Prodeco International in refusing to honour the contractual terms entered into between the parties constitutes a breach of the contractual agreement.
2. The sum equal to 23% percent interest rate on the capital sum of money borrowed from First Bank Plc from January, 2013 till the satisfaction of judgment debt.
The learned trial Judge heard the parties and entered judgment in favour of Texoland International, granting its claims.
Dissatisfied, Prodeco International appealed to the Court of Appeal and queried the decision of the High Court finding it liable for accrued interests on a loan obtained by Texoland International from First Bank of Nigeria Plc., when it was not a party to the loan transaction.
Can a party who is not a party to a loan agreement be liable to pay for accrued interests on the loan?
The Court of Appeal stated that in finding Prodeco International liable for accruable interests on a loan obtained by Texoland International from First Bank Nigeria Plc., the High Court applied the correct principles guiding assessment of damages for breach of contract. It is settled that in a claim for damages for breach of contract, the Court is concerned only with damages which are natural and probable consequences of the breach or damages within the contemplation of the parties at the time of the contract. Was the loan obtained from the First Bank of Nigeria Plc within the contemplation of the parties? A look at the evidence before the High Court clearly showed that the loan obtained by Texoland International was within the contemplation of the parties. The learned trial Judge was therefore right to have held Prodeco International liable for the accrued interests on the loan. This is a natural and probable consequence of the breach.
The Court of Appeal, therefore, dismissed the Appeal and upheld the decision of the High Court.