CONTRACT LAW ā Penalty Clause ā Parties Bound by Agreement ā Damages limited to contractual penalty provision where parties have pre-fixed limit
Principle Statement
It is settled law that the parties are bound by their agreement freely entered into. No party would therefore be permitted to go outside it for remedy. In my judgment, the Respondents are entitled to an amount equal to two times the fees payable to the CPI in the year of such termination.
Ratio Decidendi (Source)
Per Katsina-Alu, JSC, in Osun State Govt v. Dalami Nigeria Limited (2007) NLC-123-277-2002(SC) at pp. 14ā15; Paras EāB.
"It is settled law that the parties are bound by their agreement freely entered into. No party would therefore be permitted to go outside it for remedy. In my judgment, the Respondents are entitled to an amount equal to two times the fees payable to the CPI in the year of such termination."
Explanation / Scope
This principle reinforces the binding nature of contracts freely entered into by parties. No party can seek remedies outside the contractual terms. Where the contract specifies compensation for termination, that is the exclusive measure. The court must enforce the agreement as written. The principle applies where the contract contains a penalty or liquidated damages clause. It prevents parties from resiling from their bargain. The court will interpret the clause to determine the exact amount payable. This reflects the doctrine of freedom of contract. The principle applies in commercial contract disputes.
