CONTENTS

1.0       Introduction

2.0       Objectives

• Main Content
• Meaning of Law of Contract
• Is there a contract?
• What constitutes a contract?
• The building blocks’ of a contract

4.0 Conclusion

5.0 Summary

6.0 Tutor-Marked Assignment

7.0 References/Further Readings

 

INTRODUCTION

You may not be able to arrive at any universally acceptable definition of law, but you can describe it to an acceptable standard. The law of contract is  an integral part of those  rules in the Nigerian Legal System, pervasive and to a greater or lesser degree, ‘omnipresent’. It is, literally, everywhere in our lives. The relationship we enjoy with our employers; your status with NOUN as a learner on this course; the holiday you have booked with your travel agent; trips on the business venture you have formed with your colleagues; the clothes you frequently drop off at the laundry – these and myriads  of other examples typifying an underlying contractual element that much of the time

we take for granted. Common buying and selling any article whatever in the market, shop or roadside or boarding buses or taking taxi-cabs have contractual elements.

How then, in general terms, can we gain an enlightened view of this aspect of the law that represents such an important aspect of our lives? How can we understand better the laws of contract that are particularly applicable to the commercial world in which we function? And now, in particular, can we acquire the requisite knowledge and skills needed to handle the activities, assignments and the final examination?

This course is designed to provide as much as possible a comprehensive study of the contract as you are studying for accreditation in a legal capacity. Hence, you need to acquire a reasonable knowledge of some of the key principles Law of Contract. Consequently, you will be expected to demonstrate skill in recognizing and  implementing a preliminary analysis of a given legal problem and offer  suitable  advisory or drafting skill in the self Assessment Exercises.

The objects of the material are threefolds:

• To enhance your knowledge of key aspects of law of Contract
• To outline  a  resource  base  of   information   about   legal development past  and
• To provide you with practice in legal reasoning, by way of Self Assessment Exercises and Tutor-marked   By working through the exercises, you will acquire the skills needed to  score  high  marks  in  the   Assignments  and the Final Examination.

You will learn to appreciate that the law only recognizes and enforces  agreements  which, upon their formation, exhibit certain essential characteristics – the building blocks’ of a contract. In addition to the underlying presumptions that contracts have (for example, those which are not contracts at all, but merely social agreements), you will study the principles surrounding their formation: intention, offer and acceptance, consideration,  capacity  and intention to create legal relations. These   are   factors  which are fundamental to the formation of a contract.

You will then examine how failure to comply with the rules governing the formation of   a contract will render it potentially ineffective  to a greater or lesser degree. You will learn the distinction between void, voidable and unenforceable contracts and the impact that  trade usage, business  efficacy  and  previous   business   dealing   may   have   in  the relationship  between  the   parties.   You will   study   clauses   related   to restraint  of trade in relation to employment, the sale of a business, and agreements to fix prices.

The terms of a contract, inherent in all contractual dealings, are also studied, both implied and express. You will encounter the difficulties related to conditions and warranties and the respective remedies to which a party may be entitled in the event of a breach.

As  an   example   of   an   express   term  in   a   contract,   you  will   study exclusion,   or exemption clauses, in which a party attempts to limit its liability in the event of a breach of its obligations. Underlying these various concepts and principles, you will begin to appreciate that the law of   Nigeria   is   an   often   subtle mix    of    common law and equitable considerations, as modified by statutory enactments.

However, before you commence reading, we would like to make a few comments regarding the content of Self Assessment Exercises, Tutor Marked Assignments and the Final Examination. In all the questions you are asked to cover, you will be given both ‘single issue’ problems, and problems where there may be two or more issues. Sometimes, we will identify the issues for you; more often than not, you will have to spot them for yourself.   If you fail   to spot   the issue or   issues,   then clearly you are facing a serious problem in arriving at an appropriate answer.

OBJECTIVES

When you have studied this course, you should be able to:

• Know what is a contract
• Outline the    underlying presumptions     of    contract    as     distinct    from social
• Outline the elements, which constitute a contract: offer and acceptance, consideration etc
• Explain the   distinction   between   contracts   which   are   void,      voidable and
• Describe restrictive covenants    and    their      relevance    to employment, sales of business and agreements to fix
• Examine further the terms of a contract – implied and express – and their relevance to conditions, warranties and innominate
• Explain the  significance  of  exclusion  or  exemption   clauses   at common law   and by etc

CHARACTERISTICS OF A CONTRACT

We will examine the following:

• How do we identify a contract and confirm that one exists?
• How does the contract, if indeed it exists, operate and protect the parties?
• How do we enforce the contract if something goes wrong?

Consider  these  aspects  very  carefully  as  they  offer  an   appropriate ‘shorthand’  route to the underlying aspects of  what  represents a vast area of the contract law.  As  we have already noted in the Overview to this Unit, contract law is the foundation upon which Commercial Law rests.

Although this may seem a case of putting the cart before the horse, pay particular attention to the third point that has been made. How do we enforce the contract if something goes wrong; or alternatively, what ‘remedies’ are available to the  injured party if indeed something has ‘gone wrong’ and the other participants  in  this  contracting  process refuse to  cooperate? This rule is crucial to the Law of Contract and it is analogous to when you are feeling ill and seek medical help. In the latter case, you hope your family doctor will be able to prescribe a ‘remedy’ and make  you  feel  better.  In   other words, when you   consult   your lawyer, you   hope he or she, depending on the merits of your case, will be able to obtain a suitable remedy.

To complete this analogy in contract law, the parties have recourse to the legal process if one is in default. We will study this concept in more detail. In the meantime, bear in  mind that ideally, parties to a contract want nothing more than a successful conclusion to whatever it is they have agreed upon as the particular subject matter. In short, both hope that the contract will be ‘performed’.  Neither wants something to ‘go wrong’ and have  to resort to our adversarial process of litigation in the courts. Unfortunately, although most  contracts  are  successfully concluded, we live in a world that is far from perfect and parties to a given contract do not always behave themselves.  And sometimes, as   you will see, an innocent party in a breached contract may emerge in worse shape than the defaulting party, a concept known as unjust enrichment.

When there is a contractual dispute, as you will see from the cases you read, the parties are obliged to seek help in the courts, in which case someone will win – and someone will lose. The parties to a dispute may often settle differences by settlement out of court; in which case the matter will not be ‘reported’ and we will be denied the opportunity to extricate a point of law that might help us in our studies. Remedies therefore constitute a not always pleasant culmination of a  dispute  between  individuals,  between corporations and between individuals and corporations and sometimes between  individual or corporation and the State. Keep this in mind as you proceed with consideration of our first ‘rule’ of contract: does one exist?

• Meaning of Law of Contract

Defining a generalized concept like Contract is a little bit difficult. It is perhaps an over simplification to say that it is a “legally binding or enforcement agreement” it should be noted that, there are some definitions which have become by virtue of their having a common theme.

Treitel defined Contract as “an agreement giving raise to obligations which are enforced or organized by law. The factor which distinguishes Contractual from other legal obligation is that are based on the agreement of the Contracting parties.”

Anson defined Contract as a branch of law which determines the circumstances in which a promise shall become legally binding on the person making .

Yerokun defined a contract as a promise or set of promises, which the law will enforce. Contract is mainly concerned with relation between persons, which the law will  recognize and enforce where one of parties fails to perform his part of the bargain.

American Restatement (2nd) of the law of Contract 1978 defines it as … a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.

Okany defined “a Contract as an agreement in which is legally binding on the parties to it and which it broken may be enforced by action in court against defaulting parties”.

Also Okonkwo and Ilegun, defines Contract as an agreement which is legally binding on the parties to its and which if broken, any be enforced by an action in count against the defaulting party. 

Chitty, defined Contract as a promise or set of promises which law enforce.

It is worthy of note that, from the above, it can be seen that the common theme underlying all attempts to define the term “Contract” is that there must be an agreement. The idea of Contract as being based on agreement was introduced into English legal discussion only in the nineteenth century and does not accord with the raw material of the common law particular in relation to the requirement of consideration. English law does not general enforced gratuitous promises, the element of non-gratuity being expressed technically by the requirement that some consideration must move from the promises and in lay terms that it enforce bargains rather than agreement.

It should be noted that, it is in relation to the requirement of modern usage most readily relies on the language of promise, not consideration for party’s agreement. It is also 

obvious that, another justification for the enforcement of Contract is said to lie in the moral obligation of a party to perform his promise.

Moreover, one element which is common to all the definition of Contract is that the need for a prior agreement between the Contracting parties, which will give rise to enforceable rights and obligations. 

The requirements of agreement had led certain juristic writers, especially those of the nineteenth century to place greater emphasis upon the consensual nature of Contractual obligations. “The essence of a contract, it is said, is the meeting of the minds of parties in full and final agreement, there must be in fact, “consensus ad idem”.

Consensus ad idem is an agreement of parties to the same thing: as a meeting of minds. It is the coming together of two minds with a common intention: if the terms of an agreement are Vague or illusory no binding Contract will emerged from it. For there to be consensus ad idem, a Contract must of necessity involve, at least, the parties to it, for it is unrealistic for a person to Contract with himself.

  Is There a Contract?

Before we examine what is commonly referred to as the ‘elements’ of a contract, there are underlying presumptions upon which this analysis is based and which you will encounter in this and other units:

• There are countless ‘agreements’ which are part of our daily lives (to take a holiday, or to meet for dinner at 7.00 pm Friday) which are largely ‘social’whichdo not constitute a legal obligation which is enforceable in
• A contract in the legal sense is a form of agreement which a particular person will recognize as legally binding.
• In the Common Law System, we subscribe to  the  concept  of ‘freedom  of  contract’;   that   is,   parties   to   an   agreement   are completely   free    to    lay down  their  respective   rights   and obligations, provided of course they comply   with existing laws or other ‘rules’ which the particular society has
• There is a presumption, not always considered by the courts, those consumers (and we are   all   ‘consumers’)   possess   an   unequal bargaining position in their dealing with the world of
• There is  a  presumption   that   in   commercial   agreements,   say between the   XYZ Bank Plc and the Nigerian Government, that the parties occupy equal bargaining   power   and   as   such   they intend to be bound in law by whatever   it   is they have agreed upon.

Keep these concepts in the back of your mind as you work your way through the course and the various cases to which you will be referred.

What Constitutes A Contract?

By now, you should understand that legally binding contracts provide the basis for commercial transactions as well as performing a significant role in various ‘private arrangements between individuals: buying and selling a flat or purchasing a new car or a packet of toothpaste.

Remember you are about to study the “rules” of: what constitutes a contract? Consider the word ‘rule’ carefully, as there really are  no ‘rules’ to the Law of Contract in  common Law or any other aspect of the law.  There are concepts and principles  certainly, and if there are rules, they are frequently refined by exceptions. But they are not rules in a finite, empirical sense. In the previous section, we referred to the concept of ‘freedom of contract’” the inherent right which individuals may apply to the contracting process. Is freedom of contract a rule or concept? Certainly no if, among other things, we  consider  unequal  bargaining power as a factor for instance, the effect of duress or undue influence..

The ‘Building Blocks’ Of a Contract

With the comments noted above, let us turn to the ‘building blocks’ of a contract. As we have encountered before, in trying to define ‘law’ and pinpoint the sources in Nigeria   the preferred approach is not to seek a concrete, definitive conclusion but to take an overview, encompassing all of the points made, plus certain prescribed elements which we will now outline.

This is the prelude to our analysis of just what constitutes a contract; that is, an  agreement made between parties who truly intend to be legally bound in their relationship. The ‘constituent’ elements of a contract vary from writer to writer. Do not be disturbed by this apparent inconsistency. Writers have broken down the building blocks of a contract into five parts:

Offer Acceptance; Consideration;

Intention to create legal relations; Capacity;

We point out these apparent anomalies not in an effort to confuse, but rather  to   emphasis  the  vast  area which  our   law embraces   and   the different perspectives   from which it  is perceived.  We will   study all these aspects of the contracting process  as we work our way through this course.

SELF ASSESSMENT EXERCISE

1. Distinguish between ‘agreement’ and ‘contract’.
2. Outline five ‘constituent elements’ of a

You are  now  ready  to  examine  the  first  of  the  essential   contractual elements   by  which we can assess whether  or  not  a  legally  binding agreement exists, as distinct from an agreement where the parties are not legally bound to each other.

CONCLUSION

We have had an introduction into the law of  Contract  and  have discussed  characteristics and the building blocks of a contract.

 SUMMARY

In this unit, you have been offered a bird-eye view of what contract law is all about. You can now define and describe the term “Contract”. With what you have learnt about contract, you are able to identify a contract when you meet with any.

TUTOR MARKED ASSIGNMENT

A renounced judge once said “If there is one thing which more than another, public policy requires, it is  that men of  full  age  and  competent  understanding  shall  have  the utmost liberty of contracting and that contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by courts of justices” per Sir Goerge Jessel, MR: Discuss.

REFERENCES/FURTHER READINGS

BELL, MALCOLIN W: The Law of Contract: Elements and Terms in Corporate Law. The Open University of Hong Kong 2001

BLACK’S LAW DICTIONARY 7th Ed.

CURZON. B. Dictionary of Law 3rd Ed.

FOGAN. P. Law of Contract Malthouse Press Ltd. Lagos 1997.

OYAKCHIROMEN & ANOR: Compendium of Business Law in Nigeria, 2004 MACMILLAN C. & STORE R: Elements of the Law of Contract, Univ. G London Extenal Programme, 2003

YEROKUN O. Modern Law of Contract 2^nd Edition, Published by Nigeria Revenue Project Publishers, 2004

ANSON’S W.R Law of Contract: Gust 21^st ed, London, Oxford express 1959

TREITEL, GH the law of contract, 12^th ed, London Sweet and Maxwell 2007