Facts:

The 1st respondent entered into a contract with the 3rd respondent to do certain
work. In order to execute the contract, the 1st respondent approached the appellant,
a financial institution, for a credit facility of N720,000.00 (Seven Hundred and
Twenty Thousand Naira). The facility was guaranteed by the 2nd respondent. The
appellant granted the facility to the 1st respondent in June, 2005. The 1st and 2nd
respondents defaulted in repayment of the loan and consequently the appellant
made a demand on the 3rd respondent who declined payment on the ground that
the 1st respondent was yet to perform the work for which the appellant sought to
be paid. The appellant was aggrieved and filed a suit at the High Court of Lagos
State for damages of N699,970.59 (Six Hundred and Ninety Nine Thousand,
Nine Hundred and Seventy Naira, Fifty Nine Kobo) for breach of contract. The
appellant also claimed 7% interest on the sum, special damages of N104,995.58
(One Hundred and Four Thousand Naira, Nine Hundred and Ninety Five Naira,
Fifty Eight kobo) and One Million Naira as general damages. The appellant alleged
that it had a meeting with the accountant of the 3rd respondent wherein it was
agreed that as a condition for granting the loan, the proceeds of the contract
between the respondents were to be paid directly to the appellant via two local
purchase orders (IPOs). The appellant further alleged that it was in reliance on
the IPOs that it granted the facility to the 1st respondent.

The 1st and 2nd respondents did not defend the suit. The 3rd respondent, who
solely defended the suit, countered the allegation of the appellant stating that
there was no agreement between it and the appellant and that it was not privy to
the contract between the appellant and the 1st and 2nd respondents.

After hearing the parties, the trial court dismissed the suit of the appellant and
awarded cost of N70,000. (Seventy Thousand Naira) against the appellant in
favour of the 3rd respondent. The court further held that the 1st and 2nd respondents
were the parties in breach of the contract and that the 3rd respondent, not being
a party to the agreement between the appellant and the 1st and 2nd respondents,
cannot be held liable for breach of contract. The appellant was dissatisfied with
the decision of the trial court and filed a notice of appeal at the Court of Appeal,
Lagos Division urging it to overrule and set aside the judgment of the trial court.