Gavin Howe
Contracts are an essential part of business transactions in Nigeria, as they are elsewhere. A contract is a legally binding agreement between two or more parties that creates obligations enforceable by law. In Nigeria, a contract is considered legal if it satisfies certain basic requirements such as an offer, acceptance, legal consideration, and an intention to be legally bound. Contracts can be written or oral, and they can be classified in several ways, including formal and simple, express and implied, and bilateral and unilateral.
| Characteristics | Values |
|---|---|
| Definition | A contract is a legally enforceable agreement between two or more parties. |
| Binding Nature | Contracts are regarded as binding to ensure the smooth operation of commercial and economic activities. |
| Types | Formal, Simple, Express, Implied, Bilateral, Unilateral, Oral, Written. |
| Requirements | An offer, acceptance, legal consideration, and an intention to be legally bound. |
| Validity | A contract is valid if it follows the required formats and is not formed through vitiating elements such as mistake, duress, or illegality. |
| Enforcement | Contracts are enforced by a court of law, which can order specific performance or rescind the contract. |
| Discharge | A contract can be discharged through performance, agreement, breach, or frustration. |
| Capacity | Individuals under 18 years of age cannot enter into a valid contract. |
| Consideration | Something of value exchanged by parties, such as a service, goods, or money. |
| Domestic Agreements | Domestic and social engagements are generally not considered legally binding. |
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What You'll Learn
Legally binding agreements
A contract is a legally binding agreement between two parties that affects the legal rights and duties of both parties. While contracts often involve both parties conferring benefits on each other, this is not always the case. Sometimes, one party may agree to forgo legal rights and possibly suffer detriment in exchange for a benefit from the other party.
Gratuitous promises may be binding, but only if they exist in the form of a contract under seal, as there is a lack of consideration flowing from both parties. A contract under seal, also known as a formal contract, is a contract that is required to be in writing and to possess the seal of whoever is to execute the contract. However, the modern position has expanded to include a signature since seals have become common and easy to purchase.
Simple contracts, on the other hand, are every contract that is not a formal contract. This includes written contracts that are not under seal and oral contracts. Oral contracts, also known as parol contracts, are legally binding under Nigerian law, especially when there is a breach of contract. However, they can be difficult to prove. In the case of a breach of contract, the innocent party has several remedies available, including claiming damages or seeking specific performance.
For a contract to be valid and enforceable by law, it must follow certain formats. Firstly, there must be an offer, which is the expression of a person's readiness to enter into a contract on certain terms. The offer must be precise, clear, and final, and it must be made with the intention that it shall become binding on the parties when accepted. Secondly, there must be acceptance, which refers to the exchange of something of value, such as goods or services. This is known as consideration. Consideration is the inducement to a contract, and it must flow from both parties. It can be a benefit received by a party who gives a promise or performs an act, or a detriment suffered by a party who receives the offer. Thirdly, there must be an intention to create legally binding relations, which must be unequivocally expressed by both parties. Lastly, there must be legal capacity to contract, as minors under the age of 18 cannot enter into valid contracts under Nigerian law.
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Oral contracts
In Nigeria, both oral and written contracts are recognised and upheld by the courts. An oral contract is an express or implied agreement that creates legal rights and obligations outlined or agreed upon in spoken words. Oral contracts are legally binding under Nigerian law, especially in the case of a breach of contract.
However, oral contracts are difficult to prove. In the case of a dispute, the party asserting the existence of the contract must provide credible evidence of its existence and terms. Evidence of payment of a sum less than the full amount owed can be used as proof of an oral contract. Additionally, if third parties were present when the contract was made or performed, they may testify to the existence or non-existence of the contract and provide evidence of its terms.
It is important to note that certain types of contracts must be in writing to be legally binding in Nigeria. These include contracts for the sale or disposition of land, contracts to enter into mortgage agreements or charges on land, and contracts requiring another person to answer for the debt of a third party.
While oral contracts can be valid and enforceable in Nigeria, it is challenging to establish their existence and terms compared to written contracts, which have clearly stated and agreed-upon terms.
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Written contracts
In Nigeria, a contract is a legally binding agreement between two or more parties, creating enforceable duties and obligations. Contracts often involve both parties conferring benefits on each other, but this is not always the case.
While written contracts are easier to prove, oral contracts are also legally binding under Nigerian law, especially when there is a breach. An oral contract is an express or implied agreement that creates legal rights and obligations outlined or agreed upon in spoken words. An example of an oral contract is ordering food in a restaurant. The party who ordered the food cannot refuse to pay by claiming that the food is free or that there is no written contract.
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Contract formation
For a contract to be formed, there must be an offer, acceptance, legal consideration, and an intention to be legally bound. An offer is a definite undertaking or promise made by one party with the intention that it shall become binding on the party making it as soon as it is accepted by the other party. The offer must be precise, clear, and final, and can be made expressly or by conduct. It is different from an invitation to treat, which is simply an invitation to another person to make an offer.
Consideration is something of value exchanged by the parties to the contract. It is the cause, motive, price, or impelling influence that induces a contracting party to enter into the contract. It is the reason or material cause of a contract. For example, if you promise to pay a contractor a certain sum of money upon the completion of a house, and they, in turn, promise to build the house according to your specifications, there is consideration. If one party is providing value and the other is not, no matter how little, there is no consideration and therefore no contract.
It is important to note that some types of contracts must be written to be considered legally binding. For example, every contract for the sale of land or any contract involving the disposition of land, as well as every contract requiring another person to answer for the debt of a third person, must be made in writing. Oral contracts, on the other hand, are legally binding under Nigerian law, especially when there is a breach of contract. However, it is difficult to prove oral contracts.
In addition, there must be a clear intention to create legally binding relations, unequivocally expressed by both parties. The parties must also have the legal capacity to contract, as individuals under 18 years of age cannot enter into a valid contract under Nigerian law.
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Breach of contract
In Nigeria, a contract is a legally enforceable agreement between two parties that creates obligations that are enforceable or otherwise recognizable at law.
In the case of an anticipated breach, the innocent party may seek an injunction to prevent the breach from occurring. An injunction can be prohibitive, preventing a party from doing something, or mandatory, compelling a party to undo an action. The granting of an injunction is subject to a balance of convenience test and may be refused if the prejudice suffered heavily outweighs the advantage of such an action.
Oral contracts are legally binding in Nigeria, especially in the case of a breach of contract. However, it can be difficult to prove the existence and terms of an oral contract. Evidence of payment can be used to prove the existence of an oral contract, and third parties may testify to the existence and terms of the contract if they were present when the contract was made or performed.
Under Nigerian law, certain types of contracts must be made in writing, such as contracts for the sale or disposition of land, mortgage agreements, and contracts requiring a person to answer for the debt of another.
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Frequently asked questions
A contract is a legally enforceable agreement between two or more parties. It creates obligations that are enforceable or otherwise recognizable at law.
An oral contract is an express or implied agreement that creates legal rights and obligations outlined or agreed upon in spoken words. Oral contracts are legally binding under Nigerian law, especially in the case of a breach of contract.
A written contract involves terms that are clearly stated and agreed upon by the involved parties. Some contracts must be written to be legally binding, such as contracts for the sale or disposition of land, mortgage agreements, and contracts requiring another person to answer for the debt of a third person.
