Breach of fundamental term of contract

Today's case on Nigerian Insurance Court cases blog: 

ISSUES:
Insurance Contract; performance of contract, time for performance not expressed, performance must be within reasonable time. Breach of fundamental term of contract, whether an exception clause will apply.
Insurance ditto; practice procedure, joinder of a third party to obtain indemnity, party applying to join third party must have a direct right arising from expressed or implied contract of the indemnity against the third party, such insurance contract must be pleaded by the party relying on it for the joinder. 


Niger insurance company Limited -plaintiff
Abed brothers limited & Anor -appellants

Suit SC/13/75 at the supreme court of Nigeria in Lagos on the 1st of july, 1975 before;
• Alexander CJN
• Fatayi williams JSC
• Bello JSC

COUNSEl:
• AA Ariori for appellants
• RS Horn for respondents
• FO Ndigwe for third party

FACT:
The appellants were the insurers of the respondents motor vehicle under a comprehensive insurance policy, during the currency of the policy a motor vehicle was involved in an accident and was badly damaged. The appellants elected to have the motor vehicle repaired, the repairs took three months to complete. The respondents claimed against the appellants in the high court damages for loss of profits arising from the appellants breach of an implied term of policy to repair within a reasonable time. The policy of insurance did not specify any period within which the appellants should repair the motor vehicles in the event of an accident.

The appellants set up a defense that under the terms of policy their liability was limited to the cost of the repairs and they were not liable for the consequential loss. Also that if there was any unreasonable delay in the repair of the motor vehicle it was caused by the respondents conduct. The appellants then made a claim for indemnity against a third party on the ground that if there were liable to the respondents that if they were liable then the third party was liable to indemnify them.

The learned trial judge held that there was implied term of the policy that the appellant undertook to repair the motor vehicle within a reasonable time (eleven months from the date of the motor accident) He found the appellants liable for breach of the implied term and awarded damages for loss of use against them. The claim against the third party was dismissed.

It was argued on appeal that the trial judge is holding that there was an implied pair of policy to repair within a reasonable time and that the appellants liability under the insurance policy was to pay the cost of repairs and were not liable for consequential by virtue of the limitation and exception clauses of the insurance policy. It was further argued that the appellants claim against the third party should not have been dismissed.

HELD:
A. It is trite law that where a contract has to be performed within no specified time, it implied that the performance must be within a reasonable time according to the circumstances of the case; that the trial judge was correct in finding that the appellants did not perform their obligation to repair the motor vehicle within reasonable time.

B. The question whether an exception clause or limitation of liability clause in an insurance contract is applicable where there is a fundamental breach of contract is one of the true construction of the contract. The guilty party cannot rely on the limitation and exception clauses under the contract which he has by his own breach brought to an end.

C. That upon the construction of the appellants policy the implied condition to repair the motor vehicle within a reasonable time was a fundamental term of the policy and having committed the breach of that term the appellants could not rely on the limitation and exception clauses which were only intended to protect them if they had repaired the motor vehicle within a reasonable time.

D. In order to bring the case within order IV rule 4 of the supreme court civil procedure rules, to permit the joinder of the party for the purpose of claiming indemnity, the defendants must have against the third party a direct right to indemnity which generally, if not always arises from contract expressed or implied the appellants did not plead any direct right to indemnity and did not prove such right. Appeal dismissed.

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