Understanding Contracts in Nigeria: What Makes an Agreement Legally Binding?

Every day, in every transaction you make, from buying something at a store to paying for a bus ride,  buying fuel.. just basic daily interactions, we have more than once entered into an agreement. But when does a simple agreement become a contract under Nigerian Law? 

What is a Contract?  

A contract is an agreement that’s legally binding on two or more parties. According to The Nigerian Supreme Court in Orient Bank (Nig.) Plc v. Bilante Int’l Ltd (1997) 8 NWLR (Pt. 515) 37 a contract is:

“An agreement between two or more parties which creates reciprocal legal obligations to do or not to do a particular thing.”

Many people think contracts only exist as formal, signed documents. However, contracts can be either formal or informal. They serve as evidence of an agreement and help protect parties while minimizing risks in transactions. In Nigeria, contracts are primarily governed by common law principles and confirmed by court decisions.

What Makes a Contract Valid in Nigeria? 

To be legally enforceable, a contract must contain seven essential elements:

1. Offer: One party must propose to enter into an agreement under certain terms. For example, a realtor offering to sell a house for ₦30 million is making an offer.

   Note: Mere invitations to negotiate or purchase something is not an offer because an offer intends to bind parties upon acceptance.

   
   

2. Acceptance: This is when the other party agrees to the offer. This is when the contract gains its  form. It may be verbal, by action or by writing  as long as it is clearly communicated and corresponds with the offer. 

   
   

3. Consideration: Consideration is what separates a contract from a gift, without consideration, there is no contract, It is anything of benefit or value that is to be exchanged. Either Money, goods or services.

   
   

4. Intention to create Legal relations: The parties must intend for their agreement to have legal consequences. This is what separates informal, personal promises (like family arrangements) from business deals.

   
   

5. Capacity: All parties must have the legal ability to enter into a contract. This means they must:

   • Be of legal age

   • Be of sound mind

   • Not be under the influence of drugs or alcohol

   • Not be legally incapacitated 

   
   

6. Legality: The purpose and terms of the contract must be lawful. Any agreement formed on illegal grounds is void and unenforceable. 

   
   

7. Certainty: The contract’s terms must be clear and specific. Vague or ambiguous terms can render a contract invalid. 

Why These Elements Matter 

These Elements matter because without them a contract can be seen as void or unenforceable, it protects both parties from unfair obligations or meaningless promises. 

So, if you intend to draft a contract, and you do not know how to go about it, you can contact us at Maverick Solicitors to help you draft or review a contract.