A young pharmacist, Akinsola Bakare, plans to set up a community pharmacy in his neighbourhood. He approaches Shomolu Microfinance Bank for a loan to facilitate his project. His application is processed by the microfinance bank and a six-month loan facility is approved. However, one of the conditions of the loan is the provision of a guarantor with a net worth exceeding the value of the loan and interest payable.
Consequently, Akinsola contacts his father in Abeokuta and appeals to him to stand as guarantor for the loan. To support his son’s project, Pa Bakare travels to Lagos to meet with Shomolu Microfinance Bank, accompanied by his nephew, Olatunde. Pa Bakare is not literate in the English language. A simple Letter of Guarantee is therefore written on his behalf by Olatunde. The letter does not contain the name and address of the writer but it is signed by Pa Bakare.
Six months after the loan facility was issued, Akinsola’s community pharmacy is yet to generate enough revenue to repay the loan. To enforce the recovery of the outstanding sum, Shomolu Microfinance Bank contacts Pa Bakare to repay the loan on his son’s behalf. Pa Bakare, however, contends that he was not aware that he would be required to pay the outstanding sum in the event of a default. He explains that his understanding was that he was simply attesting to his son’s credibility and was in no way exposing himself to the risk of the transaction.
On the basis of this guarantee arrangement, what is the legal position of both parties?
A contract is defined as an agreement which is binding at law. However, even when all the ingredients of a valid contract are present, it may not be enforceable against certain categories of people like infants, lunatics, drunkards and the illiterate. Where the contract made by an illiterate person is an oral one, his position is no different from that of any other adult person. He will be entitled to no privilege over the other party and will be fully liable for all his obligations. Nevertheless, where the contract is in written form, special rules will apply. These rules are to be found in various laws enacted in Nigeria for the protection of illiterate persons.
The issues to be considered in this case are:
- The legal position of contracts made by illiterate persons.
- The duties of the writer of such a contract.
- The meaning of illiteracy.
Section 2 of the Illiterates Protection Law provides as follows:
Any person who shall write any letter or document at the request, on behalf, or in the name of any illiterate person shall also write on such letter or other document his own name as the writer thereof and his address; and his so doing shall be equivalent to a statement
(a) that he was instructed to write such letter or document by the person for whom it purports to have been written and that the letter or document fully and correctly represents his instructions; and
(b) if the letter or document purports to be signed with the signature or mark of the illiterate person, that prior to its being so signed, it was read over and explained to that illiterate person, and that the signature or mark was made by such person.
In our case, involving Shomolu Microfinance Bank and Pa Bakare, the writer of the document was his nephew, Olatunde. As earlier stated, the Letter of Guarantee does not contain the name and address of the writer. In the case of U.A.C. v. Edems & Ajayi, the defendant was also a guarantor of a debt owed to the plaintiff company by one of their customers. The defendant sought refuge under the Illiterate Persons Act, claiming that the guarantee was void because the contents of the document he thumb imprinted were not read over and explained to him.
From the decision in this case, it is now clear that the writer of such a document is not necessarily the person who negotiates the agreement. It is the person who enters the name and address of the illiterate person in the document. If such a writer fails to enter his name and address, or fails to prepare a statement to the effect that the agreement was read over and explained to the illiterate, before the latter put his mark on the document, as required by Section 3 of the Act, such a contract cannot be enforced against the illiterate person.
The most important issue to be determined in all such cases is whether the defendant is really an illiterate person, and so entitled to the protection of the law. In PZ. & Co. Ltd. v. Gusau and Kantoma, the High Court took the view that “illiterate” meant not literate in the language used in the document under consideration. It is irrelevant that the defendant might be literate in some other language. Justice Oputa further propagated this view in the case of Osefor v. Uwania, when he defined an illiterate person as one “who is unable to read with understanding, the document made or prepared on his behalf… Illiteracy is thus purely comparative. A graduate in English may well be an illiterate in German.”
Concluding this matter, it is evident that strict regulations are applied to protect illiterate persons who may be disadvantaged in contractual negotiations. In doing so, however, the position of Justice Kayode Eso must be considered that, “while the law is aimed at preventing an illiterate from being cheated, it does not, in our view, provide him with a weapon to cheat others.”
Principles and cases are from Sagay: Nigerian Law of Contract