Grounds for Invalidating a Contract in Nigeria: The Complete Legal Guide

Introduction

In business and personal transactions, contracts provide the legal foundation that binds two or more parties to their promises. But not all contracts can stand the test of law. Some agreements, despite being signed or agreed upon, can be declared void or unenforceable in court.

In this article, we break down the grounds for invalidating a contract in Nigeria, drawing on judicial precedents and statutory principles to show when an agreement cannot be enforced.

What Makes a Contract Invalid in Nigeria?

Under Nigerian law, a contract may be declared invalid if it contains vitiating elements that weaken or destroy its enforceability. Courts will not hesitate to set aside such contracts, especially when fairness and justice demand it.

The main grounds for invalidating a contract in Nigeria include:

1. Mistake of Fact

A mistake occurs when parties enter into an agreement under a false assumption about an essential fact. For instance, if both parties believe the subject matter exists when in reality it does not, the contract becomes void. Nigerian courts recognize three main categories of mistakes: common mistake, mutual mistake, and unilateral mistake.

 In Knight, FrankRutley v A.G Kano (1990) 4 NWLR (pt. 143) 210, the Court of Appeal held that:

“Where the subject-matter of a contract has, without the knowledge of either party ceased to exist or never existed before the contract was made, the contract will as a general rule, be void on the ground of mistake”.

However, courts caution that a mistake cannot be claimed just because a contract later turns out unfavorable. Once entered voluntarily, parties remain bound unless the mistake goes to the very root of the agreement.

2. Duress

A contract must be entered into freely. Where one party is forced, either through physical threats or mental pressure, into signing an agreement, the law sees it as duress. A person under duress is stripped of free will, leaving no real choice but to comply.

But there’s a caveat: only natural persons, not corporations, can claim duress under Nigerian law.

In Oilserv Ltd. v. L. A. I. CO. (Nig.) Ltd. (2008) 2 NWLR (Pt. 1070) 191, the Court of Appeal held that only a natural person can claim duress, not a corporate entity.

3. Undue Influence

Not every persuasion amounts to undue influence. The law intervenes only when a dominant party abuses their position of power to pressure a weaker party into signing an agreement.

For example, a bank that manipulates a struggling borrower into unfavorable terms may be guilty of undue influence. Still, the aggrieved party must act quickly. Delay in repudiating the contract may imply acceptance, making it binding despite the influence.

4. Illegality

Perhaps the strongest of all grounds, illegality makes a contract automatically void. Courts will never enforce an agreement that requires breaking the law or violates public policy. Examples include contracts for criminal acts, money lending without a license, or agreements that defeat statutory provisions.

Once illegality is established, the contract collapses completely; neither party can rely on it, regardless of losses suffered.

5. Misrepresentation

Contracts depend on honesty. When one party is lured into an agreement by a false statement of fact, it qualifies as misrepresentation. Nigerian law recognizes three types:

• Fraudulent misrepresentation – deliberate falsehoods

• Negligent misrepresentation – carelessly made untrue statements

• Innocent misrepresentation – false statements made without intent to deceive

Each type gives rise to different remedies, ranging from rescinding the contract to claiming damages.

The Court of Appeal in Dantata Jnr. V Mouktar & Ors [2012] 14 NWLR, (pt. 1319) 122 held as follows:

“A misrepresentation is an unambiguous false statement of existing fact. A statement of intention is not a statement of fact. A person who fails to carry out his stated intention does not thereby make a misrepresentation”.

6. Incapacity

Certain individuals cannot legally enter into binding contracts. These include minors, persons of unsound mind, and intoxicated persons. Any agreement involving them may be declared void or voidable depending on circumstances.

What Must a Party Do to Nullify a Contract?

It is not enough to simply allege that a contract is invalid. A party seeking to rely on the grounds for invalidating a contract in Nigeria must provide evidence and plead relevant facts before the court.

Interestingly, courts take illegality so seriously that they may raise it on their own, even if neither party pleads it. If an agreement is patently unlawful, the court will strike it down without hesitation.

Conclusion

Contracts are powerful, but not indestructible. From mistake of fact, duress, undue influence, illegality, misrepresentation, to incapacity, Nigerian law provides clear grounds upon which an agreement can be nullified.

For businesses and individuals alike, understanding these grounds for invalidating a contract in Nigeria is critical. It helps prevent costly mistakes, ensures compliance with the law, and protects parties from exploitation.