Compagnie Noga D'importation Et D'exportation SA v Abacha & Ors

Parol evidence may identify the subject matter of a contract or the shared meaning of an uncertain expression. It must be considered as a whole. A party seeking to enforce a written settlement must establish objectively that the parties intended the external term to complete the document as a final and binding agreement. A figure conditionally agreed during negotiations may not satisfy that requirement. In a tripartite settlement, the agreement cannot readily be separated into bilateral contracts where an essential obligation remains incomplete. Where an executory contract is rescinded and replaced, the mutual release of the parties’ outstanding promises supplies consideration. Rescission and replacement may occur concurrently, without any interval between them.

The appeals arose from a Commercial Court judgment after a lengthy trial concerning three written agreements made on 11, 13 and 16 August 1999. Noga sought to enforce the tripartite agreement of 11 August, which referred to a settlement amount or sum but did not state the figure. The judge found that $100 million had been agreed during negotiations, but held that the tripartite agreement was not final and binding because the agreement on the figure remained conditional on the Federal Government of Nigeria taking no further payment for the Ajaokuta claims.

The judge also held that the agreement of 16 August, which replaced the agreement of 13 August, was supported by consideration. The appeals concerned whether the tripartite agreement was binding and whether the later agreement was enforceable for want of consideration.

Tripartite agreement. By a majority, Waller LJ and Tuckey LJ dismissed the appeal. The court treated the document itself as the starting point. Parol evidence could identify the subject of the contract or the meaning of an expression, but the evidence had to be examined in its totality. The relevant question was whether, objectively at the moment of signature, the parties intended the words a settlement sum or a settlement amount to be replaced by $100 million so as to create a final contract.

The majority held that Noga had not established that intention. The figure had been conditionally agreed in negotiations, dependent on the Federal Government not demanding further payment. The wording of the tripartite document was consistent with an important stage in continuing negotiations rather than a completed settlement. The issue was not whether a condition subsequent had been agreed; conditionality was relevant to whether any final contract had been formed. Nor could the tripartite arrangement be separated into binding bilateral agreements when the essential obligation between Noga and the SJ Berwin defendants remained incomplete.

Lord Justice Laws dissented on this issue. He considered that the questions whether extrinsic evidence supplied the meaning of the uncertain expressions and whether the parties intended to be bound at signature had to be kept separate. In his view, the document bore all the characteristics of a binding contract once the meaning of the settlement sum was supplied, and earlier conditional negotiations did not prove that all three parties agreed not to be bound. He would have allowed the appeal on this issue.

Consideration. The court unanimously dismissed the appeal concerning the agreement of 16 August. Tuckey LJ held that the agreement of 13 August had been rescinded and replaced. Mutual release of the executory promises under the earlier agreement supplied consideration, together with the mutual promises in the later agreement. The principle in Stilk v Myrick (1809) 2 Camp. 317 therefore had no application, because the old obligations no longer governed performance. Rescission and replacement could be effected concurrently by the same document.

The formal order was that the appeals were dismissed. Further orders were to be minuted by counsel, with costs dealt with by written submissions.

1. Court of Appeal (Civil Division) The appeals were dismissed. The majority rejected the appeal concerning the binding effect of the tripartite agreement; the court unanimously rejected the consideration appeal. Judgment dated 23 July 2003, [2003] EWCA Civ 1100.
2. Queen’s Bench Division (Commercial Court) Following a six-month trial, Rix LJ held that the $100 million figure had been agreed but that the tripartite agreement was not binding. He held that the agreement of 16 August was supported by consideration.