Gambia: A Contract Issue And Not A Constitutional Issue At All!

Since the agreement that The Coalition entered is becoming an issue and there has been much talk of it lately including Mr. Osainou Darboe’s threat to go court to challenge it, below is an excellent article written...

Since the agreement that The Coalition entered is becoming an issue and there has been much talk of it lately including Mr. Osainou Darboe’s threat to go court to challenge it, below is an excellent article written by one Mr. Craig Yeung about the different aspects of Memorandum of Understanding, commonly known as M.o.U. Whatever agreement The Coalition agreed to, was not and is not a constitutional issue as such but a contract issue and hence contract analysis is proper. A principle of contract analysis is that absent duress, misrepresentation, mistake of subject matter, and the like, parties are held to the terms of the contract, here agreement, they entered. The Coalition members agreed to a three years transitional government and not the five years presidential term as stated in The Gambian Constitution under section 63(1). So any contract analysis that ignores the terms that the parties actually agreed to, absent mistake of subject matter, duress, misrepresentation and the like is illegal and therefore not proper. The Coalition member knew that the term of the office of the president is five years (see section 63(1)) and nothing stopped them from agreeing to a five years transitional government, but they chose three years instead so a competent court should and must hold the parties to the terms that they have agreed.  Mr. Darboe seems to hold a contrary view and if this is the case, then Mr. Darboe must have skipped contract classes when he was in law school. Below is Mr. Craig Yeung’s analysis of an M.O.U, and after which I make a few points:

Share to Print

I’ve met a guy who seemed a good fit for a partner and we’ve signed a Memorandum of Understanding.

But it turned out he had very different ideas of how the business should be built. At some point he just distanced himself, doing nothing.

So I decided to terminate the MoU, as I’ve found another person who could take the role. But that guy now says that part of the company (which is not yet incorporated) belongs to him, and if I want him out, I need to buy him out.

To be honest, I’m shocked; especially as he didn’t invest any money, just a few hours in some not very productive meetings.

So it looks like by signing a MoU I’ve locked myself up, and this paper has some legal value, and a partner can still take advantage of you. Am I right?

It is common for parties who have negotiated the key terms of a proposed relationship to enter into a preliminary written agreement, with the intention of recording their agreement in a more formal way in the future. These agreements are often referred to as a “memorandum of understanding” or “MoU”, “heads of agreement” or “term sheet”.

The issue to remember with these arrangements is to know whether there is a binding agreement or whether neither party is bound unless a formal agreement is entered into.

Arrangements of this type generally fall into one of three categories. Whether the arrangement has any “legal value” will depend upon which category your arrangement falls into. In many of these cases the “legal value” does not depend on what you call your arrangement, be it a “MoU” or “heads of agreement”. Rather, it depends on the terms and wording of the arrangement.

INTEND TO BE IMMEDIATELY BOUND

The first category is where the parties have finalised all the terms of their agreement and intend to be bound immediately but will put those terms in a form that is more precise (but no different in effect). For example, the parties may agree on all the terms of an agreement between themselves and draw them up and sign them but also state that that they will engage a solicitor to put those terms into a formal agreement.

An agreement will usually fall into this category if it is clear that the parties intended it to be binding and the terms are clear and certain enough so as to be legally enforceable. The introduction will also usually seek to clarify that the document is intended to be legally binding.

If your agreement falls into this class then you will be bound by it even if no formal agreement is ever signed, and even if you have called it a MoU.

INTEND TO BE BOUND TO ENTER INTO FORMAL AGREEMENT

The second category is where the parties may have agreed on all the terms of their proposed relationship and do not intend to vary them, but have made performance of the terms conditional on signing a formal document.

In this case there is likely to be a binding contract for the parties to enter into a formal contract only. If your MoU falls into this category, then your former partner may need to go to court and convince the court to order that both of you sign a formal contract based on the MoU.

INTEND NOT TO BE BOUND UNLESS FORMAL CONTRACT EXECUTED

The third category is where the parties do not intend to make a binding agreement at all unless they execute a formal contract. Agreements of this type often use words such as “subject to contract”, “subject to formal contract” and “non-binding”.

From experience, this is the most common category. Agreements falling into this category are often used to set out the parties preliminary intentions with respect to the proposed arrangement and to assist them to work out commercial details, so that the preparation and finalisation of any formal development agreement based on those general terms can proceed more smoothly. It also serves as an indication of some commitment by the parties to proceed with the project (even though it is legally not binding).

If your agreement falls into this category, then the MoU would not be binding on the parties.

WHICH CATEGORY DO YOU FALL INTO AND WHAT SHOULD YOU DO?

Whether you are bound by the MoU or some other arrangement you have signed will depend upon a consideration of the above factors and the actual terms of the MoU or the arrangement. In particular, the language used in the MoU and the certainty of the terms will be important considerations. It is also possible that some parts of the MoU or arrangement are binding while other parts are not binding.

To further complicate things, it is also possible that there may be a verbal agreement that sits “alongside” the MoU that is legally binding – remember not all legal agreements have to be in writing!

Therefore it will be important for you to seek advice about the terms of the MoU to find out what legal effect it has.

Going forward, in order to avoid arguments with partners if things go wrong, it is always better to be clear from the start about what the relationship is between the parties, and to have this relationship fully documented in writing. In addition, it is important to be clear on whether or not the arrangement is binding, or what part is binding and what is not binding.

The trap is to think that what you have entered into is not binding (and therefore you have not negotiated or pushed as hard) but end up realising that it was legally binding. I have seen situations in the past where a party makes an agreement less intimidating by “masking” it as a memorandum of understanding or heads of agreement, but when it was actually legally binding.

Therefore, if you are ever in doubt, it is always a good idea to seek professional advice before signing or agreeing to anything.

As is clear and contrary to what most people think, a party can enter into a contract without signing anything at all. Of course, Mr. Darboe can go to court to challenge whatever he wants but if the presiding Judge knows his contract law, The Coalition must and should be held to the terms of their agreement. May be Mr. Darboe have not sufficiently thought about, what was the reason why The Coalition members entered into an agreement if it actually meant nothing. Or, in other words, what was the reason for The Coalition members have entered into an agreement if no member was going to be bound by the terms of the agreement? The Coalition members knew about section 63(1) of the constitution and nothing prevented them from invoking section 63(1) as the basis of a transitional government if they win. They instead chose a three-years term, so three years it should be. This has absolutely nothing to do with The Constitutional being the supreme law of the land. That is not an issue. This issue is not a constitutional issue at all. This is a contract issue and should be analyzed as such. The Question presented is whether all the members of The Coalition should be held to the agreement they voluntarily entered prior to the run up to the December 1 elections? Suggested answer: Yes they should all be bound by the terms of the agreement they entered.

Here is another point worth keeping in mind to prove that this is not a constitutional issue, it is a rule of law constitutional law that in every constitutional issue the government must be a party to the case. Government in this sense could be the actual government or some an agency or a person that the government has delegated power, or it could be a county, a city or a borough. Here the government is not a party as such because when the members of The Coalition entered into their agreement, they entered into it as private citizens and not representing any level of government. The issue is not whether a president should serve five years in office, but whether parties to an agreement should held to the terms of their agreement. The agreement the Coalition members agreed to is not at all repugnant to section 63(1), and if Mr. Darboe and Co want to make that argument they should go right ahead. 

It is one thing to try to reduce a time period set out by a constitutional provision and it is another thing altogether to know exactly what a constitutional provision states and to voluntarily enter into an agreement for a time period less than what that constitutional provision says then turn back to say the agreement you entered is not binding because that same constitutional provisional says otherwise. 

By Gambian Outsider!

In this article