Business Law

NAME: KOMAIYA FOLARIN

MATRIC: 020504647

STREAM: 2

QUESTION

Alhaji Balogun, Chairman, MD Gentle Jaja Limited applied to the Federal Ministry of Works for the Ibeju Link road with the sum of N150m. Until now, the main business of the company is Corn Flour distribution and the company is registered as a major distributor of Dangote Corn Flourmill. Alhaji Balogun’ brother , Isiaku is supervising counselor in the Ministry of Works ensures that the contract is awarded to Alhaji Balogun and a 30% mobilization advance payment of N50m was paid by the ministry. Alhaji Balogun has failed, refused and neglected to rehabilitate the road as contracted. He contends that the contract is Ultra Vires to the Ministry of Works. Advise the parties.

You are to examine the legal issues raised by these facts and state the respective rights of Alhaji Balogun

ANSWER

1. Whether or not Alhaji Balogun,MD of Gentle JaJa Limited registered as a corn flour distributor provided in its object clause in the article, the ability to carry on other business except that registered for.
2. If the failure to inspect the memo of Gentle limited by the ministry will make the contract void
3.Whether Isiaku had the statutory duty to facilitate Alhaji Balogun's mobilization fee.
4. If Alhaji Balogun has the right to receive full payment of the contract even as the contract is Ultra vires.
       Alhaji Balogun the Managing Director of Gentle Jaja Limited registered the company for the distribution of Corn flourmill as stated in the memorandum and article of association of the company.
Memorandum of association is the document between the company and the outside. It is a document required to incorporate a company as contained in the Companies and Allied Matters Act 2004 (cama).
The object clause deemed to appear as part of the article, the company’s article forms the company's constitution. The memo gives the type of contracts the company is allowed to enter into. The memo is a public document which may be inspected by anyone who wants to enter a contract with any company. Such inspection may be done at the Corporate Affairs Commission (CAC).
A company’s memo contains an object clause which limits its capacity to act.
    The first issue: Gentle Jaja Limited didn’t provide in its articles and memo its ability to contract in construction jobs as against its objective of distributing Corn flour from Dangote. Alhaji Balogun has acted against his fiduciary duty to the company and the memo which therefore renders the contract Ultra vires.
      The second issue: It is the duty of the Federal Ministry of Works to inspect the memo of Gentle Jaja Limited as a public office entering a contract with a private company. However the failure to inspect the memo and contracting against the provisions of the object clause in the article renders the contract between the Ministry and Gentle void. Therefore the ministry will be liable to any loss that occurs from this act.
    The third issue: Has Isiaka acted in due responsibility for the company as the supervising council in ensuring 30% of the mobilization fee to his brother?
As an employee of the company, Isiaka owes a duty of care and skill and fiduciary duty towards the Ministry to act in good faith and for good purpose of the ministry as against his own personal interest. It is improper for an employee of the company to appropriate company assets for his own use. This act could also be regarded as insider dealing.
    Lastly, Alhaji Balogun has no right to full payment of the contract because the contract is Ultra vires and void. Alhaji’s act is fraudulent and improper; the law won’t be used as an instrument of fraud.