Elements of a Contract in Nigerian Business Law

At the core, contracts continue to play a crucial role in private, public, and business sectors. It is therefore important that we need to understand what it means, especially in the business sector. Whether you’re signing a supplier agreement, hiring a contractor, or partnering with another business, knowing the elements of a contract in Nigerian business law will help you protect your interests.

One of the key takeaways from this article is that a contract, particularly a written one, gives clarity to the parties involved in the transaction. This is because it helps them state the intentions to mutually agree to certain important terms, thereby creating a binding and enforceable legal action.

WHAT IS A CONTRACT?

Simply put, a contract, by definition, is a legal agreement between two or more parties, stating their rights, obligations, and other important terms as they deem fit in such a circumstance. These rights and obligations, however, depend on the type of transaction being agreed upon by these parties.

In other words, contracts vary depending on the types of transactions. A contract can happen between private persons and or between the government and its agencies. It is important to note that the courts cannot rewrite the intentions between the parties, but can enforce them when required to do so.

ELEMENTS OF A CONTRACT

One must see the elements of a contract before one can be said to exist. For any agreement to count as a valid contract, it must include certain elements. These elements make the agreement legally binding and give both parties the confidence to move forward. Let’s look at each one closely.

1. Offer:

This is an expression of willingness to contract on specified terms. It is the starting point of any contract. It is a clear proposal by one party to another, showing they are both willing to do something under specific terms.

For instance, a supplier may offer to deliver 500 bags of rice at a fixed price within 30 days. The offer must be specific enough so that the other party knows exactly what is being proposed.

2. Acceptance:

After the offer comes acceptance. This element is a final and unqualified expression of assent to the terms of an offer. This is when the other party agrees to the exact terms of the offer without adding new terms.

Acceptance must be clear and definite, leaving no room for doubt. For example, if a buyer responds, “Yes, I agree to buy the 500 bags at the stated price and terms,” that is acceptance.

3. Consideration:

This is something of value that is given for a promise and is required to make the promise enforceable. Consideration is what each party gives or promises to give in return for the other party’s promise.

It can be money, goods, services, or even a promise to do (or not do) something. Without consideration, the contract may not be enforceable because there is no value being exchanged.

4. Intention:

The contract parties must intend their agreements to be legally bound based on their common understanding at the formation of the contract. In business dealings, this intention is usually assumed because both sides expect the agreement to be taken seriously.

However, not all agreements carry this intention. For instance, if two friends casually agree to meet and one fails to show up, there is no contract between them because there was no intent to create legal obligations. In contrast, when businesses sign a partnership deal, both sides intend the agreement to be enforceable.

5. Capacity:

The contract parties must be mentally capable of entering into the legally binding agreement. They must be capable of understanding what they are agreeing to.

This means they must be of sound mind and meet the legal age requirement. If one party is mentally unfit, intoxicated, or a minor, the contract could be void or voidable.

6. Legality:

Finally, the purpose and content of the contract must be legal. A contract to carry out illegal activities like selling banned substances or evading taxes cannot be enforced, even if all the other elements are present. Courts will only enforce contracts that involve lawful actions and purposes.

Conclusion

Knowing the elements of a contract in Nigerian business law helps you make informed decisions before signing any agreement. By ensuring that every deal you enter includes these six elements, you reduce the risk of disputes and protect your business interests. Always check that your agreements meet these requirements, and when in doubt, seek advice to avoid costly mistakes.