WEEK TWO NOTE

Definition of contract

A contract may be described as a voluntary agreement between two or more persons which
confers legally enforceable rights, duties and liabilities on parties. It may also be described
as a promise or set of promises which if not fulfilled may be enforced by law. A contract is an
agreement between two or more people. Every contract is an agreement – but not every
agreement is a contract. Two people agree about something to be done. They are called “the
parties”. First, the subject of their agreement may be such that neither of them has the
remotest intention that any legal consequences should flow from it. For example, you invite
someone to dinner and he says “Yes, I would love to come”. You have an agreement.
However, if he just does not turn up, neither of you would expect to hurry round to court and
sue for the cost of the wasted food! So, the first essential of a contract is that the parties
should intend their agreement to have legal consequences. In the second place, the
agreement reached may have certain aspects about it which make it such that the law will
not enforce it. In other words, although it is a contract, it is not a valid contract.

CLASSIFICATIONS OR TYPES OF CONTRACT

A Contract can be classified in various ways. These include:
(1) Contract under seal
(2) Simple or formal
(3) Express or implied
(4) Quasi contract
(5) Bilateral or unilateral
(6) Valid, Void or Voidable Contract
(7) Executed or Executory Contract

1. Contract under seal or formal contract.

A contract under seal is one reduced in writing, signed by the party(s) and impressed with a
seal. It is not necessary that every contract must be under seal, however contracts such as
conveyance of land or contract of guarantee, contract of loan by a moneylender, certain hire
purchase agreement, Bills of Exchange, Promissory Notes and contract of insurance are
required to be under seal. A party who has not furnished any consideration provided that
person is a beneficiary of such contract, can enforce it. It does not need consideration to be
valid or enforceable.
2. Simple Contract
This is a contract not under seal. It may be in writing or by mere word of mouth. The major
distinction between a simple contract and contract under seal is that unlike a contract under
seal, only a party who has furnished the consideration can bring a direct legal action to enforce
a simple contract. Thus, the validity of a simple contract is dependent, to a large extent, upon
consideration. The limitation period for simple contracts is six years
3. Express or Implied Contract
A contract is express when all the terms of it are clearly spelt out. "Express" within this
context, is not limited to writing. It includes both writing and word of mouth. The essence is
clarity of intent and purpose.
A contract is implied where though all the terms are not expressly spelt out but are known to
the parties or to any reasonable person knowing of the circumstances. For example, a
passenger usually enters a bus without any dialogue between him and the conductor/driver
yet to all reasonable men, his action implies that he will pay his fare while the driver is obliged
to take him to his destination.
 4. Bilateral and Unilateral Contract
A bilateral contract arises where a promise or set of promises on one side is exchanged for a
promise or a set of promises on the other side. In other words, the parties reach an agreement
whereby each party undertakes obligations: for example, one party agrees to deliver goods
and the other to accept and pay for them.

A unilateral contract on the other hand is a one-sided contract. It is a contract created by an

offer that can only be accepted by performance. To form the contract, the party making the
offer (called the “offeror”) makes a promise in exchange for the act of performance by the
other party. For instances, A promises to pay B N100, if B finds A’s lost bag or B walks from
Obalende to Ikoyi.

5. Quasi contract
The word quasi means something like or a resemblance. The quasi contract do not necessarily
arise from agreement or intention of parties. Indeed, they often arise against the will of a
party. The principle on which the law imposes quasi contractual obligation is that no one is
allowed to enrich himself inequitably at another’s expense. For instance, money is paid by A
to B by mistake, there is a contractual obligation on B to refund the money.

6. Valid, Void or Voidable Contract

A contract is said to be valid when it contains all the essential elements that engender the
enforcement of the obligations therein, while a voidable contract is one in which one or both
parties thereto have the power to avoid the legal relation created by the contract. It must be
noted, however, that a voidable contract imposes on the contracting parties the same
obligations as a valid contract unless it is rescinded (i.e. set aside) e.g. contract of guarantee,
sales or leasing of land, contract of Hire purchase, contract of insurance, marriage agreement
and contracts for sales of shares.

A void contract is a formal agreement that is effectively illegitimate and unenforceable from
the moment it is created.

A voidable contract is valid in the first place but may be ended at the instance of one of the
parties to it due to some lately discovered defects. Infancy, fraud, duress, undue influence,
and illegality are all sufficient ground for refusing to perform.

7. Executed or Executory Contract

An executed contract is one in which both parties have performed their obligations while an
executory contract is one in which both parties have not yet performed their obligations

TERMS OF A CONTRACT
Terms of a contract are the legal contents of a contract and they may be either ‘express’ or
‘implied’ terms. Terms of contract may also be classified as either Conditions or Warranties.
They may also be further classified as innominate (term or intermediate) and fundamental
term.
1. Implied Terms: These are terms which though not specifically stated in the contract
would be read into as if the parties had agreed to it. Terms are implied into a contract
by:
✓ Terms implied by custom or trade
✓ Terms implied by statute

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 ✓ Terms implied by courts
2. Express Terms: These are terms agreed upon by the parties and expressly stated in
the agreement.

3. Conditions: These are terms which are considered very essential to a particular
contract and the breach of which may empower the aggrieved party to consider himself
discharged from his obligation under the contract or to deem the contract as subsisting
and thereby empowering him to seek redress by way of damages. Conditions could
also be classified as promissory (promise to be fulfilled) and contingent.

4. Warranties: Unlike conditions, these terms are subsidiary or collateral to the contract.
A breach of a warranty would not entitle the other party to repudiate the contract but
rather only to damages.

5. Innominate: This term at the inception of the contract would not appear to be so
essential as to qualify the innocent party to a right of repudiation but subsequent
events towards the performance of the obligations of parties may render it so.

6. Fundamental terms: This type of terms has evolved out of case law in order to provide
some remedy for wide exclusion clauses.

ELEMENTS OF A VALID CONTRACT

A valid contract must have certain key elements for it to constitute a contract. There must
be:
(1) Offer
(2) Acceptance
(3) Consideration
(4) Capacity
(5) Intention to create legal relations

1. OFFER
For a contract to exist there has to be an offer by one party to another party and an acceptance
by the person to whom the offer is addressed. An offer may be defined as 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 party to whom it is addressed. An offer
can be inferred from conduct. This type of offer is very frequent in everyday life. For example,
if you board a bus, you are offering to pay the fare if it takes you to your destination.

Characteristics of offer

1. There is an offeror and offeree.

2. An offer must be precise an unequivocal leaving no room for speculation or conjecture
as to its real content in the mind of the offeree.
3. The offer must emanate from a person liable to be bound if the terms are accepted
4. The offer must be communicated to the offeree.
5. An offer can be made to one or more specified people, or it can be general, made to
“the world at large”. This is where a person announces that he will do so and so, if
anyone who cares to accept will do what is required by the offer. For example, a person
puts an advertisement in the newspaper: “5 naira reward will be given to anyone who
returns my lost dog, Ajawhite”. That is a valid offer to anybody who finds Ajawhite,
and duly returns him. If the offer is in the form of a promise by the offeror to do or
pay something in return for some act by the offeree, then the performance of the

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 required act is in itself an indication of acceptance of the offer. The famous case which
illustrates this principle is Carlill v. Carbolic Smoke Ball Co. (1893). The company
manufactured a patent “smoke ball” which, it claimed, prevented influenza. It
advertised in the press that it would pay £100 to anyone who contracted influenza
after taking one of its smoke balls. Mrs. Carlill read the advertisement, bought a smoke
ball from the chemist, and used it as directed. However, she promptly got influenza,
and she sued the company for the promised sum of £100. The company claimed that
it was a “mere puff”, and not meant to be taken seriously. It was held that the promise
to pay £100 was a valid offer to the world at large. Mrs. Carlill had accepted by
complying with the conditions and was entitled to the money.

Offer distinguished from the following:

Invitation to treat
An invitation to treat has been described as an invitation to negotiate. It is communication
which invites the other party to make an offer. These negotiations between parties may lead
to the making of an offer by the interested party. For example, if Toju advertises his intention
to sell his house ‘for a suitable sum not less than N500, his advertisement cannot constitute
an offer because he is clearly reserving to himself, the right to reject offers from members of
the public who become aware of his intention. He is not bound to sell to the highest bidder.
It is the bids made to him in response to the advertisement that may be regarded as the
offers and a contract is only formed when he accepts a bid. Thus, the original bid constitutes
an invitation to treat.

Numerous examples of situations involving invitation to treat.

1. Auctions
An auctioneer request for a bid is not an offer but an invitation to treat. The bid itself is the
offer and acceptance occurs when the auctioneer‘s hammer falls. In Payne v Cave, Mr Cave
was made the highest bid for a good in an auction. But then, Mr Cave changed his mind and
he withdrew his bid before the auctioneer brought down his hammer. It was held that Mr.
Cave, the defendant, was not bound to purchase the goods. His bid amounted to an offer
which he was entitled to withdraw at any time before the auctioneer signified acceptance by
knocking down the hammer. Note: The common law rule laid down in this case has now been
codified in Nigeria in section 58(2) of Sale of Goods Act.

2. Advertisement and display of goods.

The general rule is advertisements in newspapers are not usually offers. They are invitation
to treat; the general interpretation being that the advertiser is only indicating that he is
prepared to receive offers and he is at liberty to accept or reject the offers. In Partridge v
Crittendon, the defendant put an advertisement in a paper stating that he had certain wild
live birds for sale. He was charged with unlawfully offering for sale of live wild birds contrary
to the existing British Statute. It was held that the advertisement was not offer but merely
an invitation to treat.

In Pharmaceutical Society of Great Britain v Boots, the defendant owned a chemist shop
organized in accordance with the self-service system. A customer selected a drug with poisons
in it, which the law required to be sold under the supervision of a pharmacist. Although the
shop had a resident chemist, who was authorized to prevent customers from removing
dangerous drugs without proper authority, the question that arose in this case was whether
acceptance took place when a customer put the drug in the shopping basket provided by the
defendant's shop. If this was the case, then it would be too late to prevent a customer from
removing the drug since the contract to buy and sell would have been concluded by
acceptance. It was held by the English Court of Appeal that goods were merely displayed to
enable customers to choose what they wanted and that the contract was not completed until

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the customer, having indicated the article which he needed and the shopkeeper accepted the
offer. In other words, the display of goods on shelves constitutes an invitation to treat; the
customer makes the offer by selecting the particular goods and the shopkeeper accepts by
receiving payment from the customers.

Another case law illustration of this principle can be found in Fisher v. Bell, a shopkeeper
found himself prosecuted for 'offering' flick-knives for sale in a shop window. This was a
criminal offence under the Restriction of Offensive Weapons Act 1959. Thus, the outcome of
the case depended upon the interpretation of a term of contract. It court held as follows:
It is clear that according to the ordinary Law of Contract, the display of an article with
a price on it in a shop widow is merely an invitation to treat. It is in no sense an offer
for sale, the acceptance of which constitutes a contract

In Lasky v Economy Grocery Stores, the plaintiff remove a bottle of “tonic” from the shelf
in a self-service shop owned by the defendant. When she was about to place it in the basket,
the bottle exploded and she was severely injured. The action was dismissed by the court on
grounds that there was neither a sale nor an agreement to sell at the time the bottle exploded.

3. Invitations to tender.
An invitation to tender is merely an invitation to treat or a mere call for offers from interested
persons. It is not an offer unless it clearly indicates that the lowest tender will be accepted,
in which case it becomes all invitation without reserve.

4. Sale of Shares by a Company.

An invitation from a company to the public, requesting members of the public to subscribe for
shares in the company, is not an offer but a mere invitation for offers from the public to
subscribe for its shares. The application from the members of the public is an offer which the
company may accept or reject. But where however, the company resolves to make a 'Rights
issue of shares to its existing shareholders, entitling each share-holder to buy a number of
new shares in proportion to the shares he or she already holds, the letter informing the
shareholder of his/her right is regarded as an offer to such shareholders.

2. ACCEPTANCE
Acceptance may be defined as the final and unqualified expression of assent to the terms of
the offer. It may be manifested in various ways names: a) by the conduct of the parties, b)
by their words, c) documents passing between them.

In Alfotrin v Attorney- General of the Federation, the FGN ordered cement through a
foreign company called Gilt Investment. Gilt chartered a ship belonging to the Appellant to
bring the cement from Barcelona to Lagos. When the ship arrived Lagos, the cargo could not
be discharged due to congestion at the port. Even though the FGN had no contractual
relationship with the Appellant, it directed the Appellant move to Ghana to discharge the
cargo. The Appellant subsequently brought an action for recovery of demurrage and the FGN
denied liability on grounds that there was no contract between them. The court held that a
contract existed between both parties when the Appellant accepted by conducted to move the
cargo to Ghana.

Characteristics of Acceptance
1. Acceptance must be plain
2. It must be unequivocal
3. It must be unconditional

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 4. There must be no variance of any sort between it and the proposal(offer)
5. It must be communicated to the other party without unreasonable delay. Mental or
internal assent which is not apparent to the other party is not sufficient to constitute
acceptance. In Felthouse v Bindley, The plaintiff made a written offer to his nephew
to purchase his horse for a certain amount, adding that if he did not receive a reply,
he would assume that his nephew accepted the offer. The nephew intending to accept
the offer took no action to demonstrate this except to request his auctioneer to reserve
the horse during auction. The auctioneer forgot to carry out the instruction and sold
the horse. The plaintiff brought an action for conversion against the auctioneer. The
success of the action was dependent on whether the nephew accepted the offer. It
was held that at the time the horse was sold there was no valid acceptance of the
offer.
The motive for accepting is not relevant but the offeree must be aware of the offer. In
Williams v. Carwardine (1833), a reward was offered for information leading to the
arrest of a murderer. P knew about the reward but she gave the information “to ease
her conscience”. It was held that she was entitled to the reward.

Exception to communication of Acceptance

1. Postal acceptance – once a letter of acceptance is posted, it takes effect whether it is
received or not
2. If the offeror expressly states that acceptance need not be communicated to him
3. In Unilateral contracts, the performance of the required act constitutes an acceptance.
E.g. Carlill v. Carbolic Smoke Ball Co
Acceptance by post - The courts have held that where an offer is communicated by letter,
the acceptance takes effect upon the posting of the letter of acceptance. In Adam v Lindsell,
the Defendants mailed their offer to sell on the 2nd of September 1817. The Defendants’
letter was misdirected and did not reach the plaintiffs until 7:00 p.m., Friday the 5th. That
night, Plaintiffs accepted Defendant’s offer, and mailed it directly back in a timely manner. It
was received by Defendant on the 9th, but they expected to receive it on the 7th and, in the
meanwhile, had offered and sold their wool to another person. Plaintiffs brought suit for the
losses they sustained by not receiving the fleeces. It was held that the contract came into
existence on September 5 when the plaintiff posted the letter of acceptance.

Exception to the rule in Adam v Lindsell

a. Where the terms of the offer either expressly or implicitly indicate that acceptance
must reach the offeror. In Holwell Securities Ltd v Hughes, the Defendant issued
a grant to sell a property to the Plaintiff, containing clause stipulating option must be
exercised by notice in writing to the Intending Vendor within six months. The Plaintiff
sent letter exercising the option, within the time limit, it was lost in the post and never
received by Defendant. It was held that that postal rule did not apply as the method
of acceptance required written acceptance.
b. Where the application of the rule would produce manifest inconvenience and absurdity
c. Where the letter of acceptance is wrongly addressed or inadequately stamped
d. Where the letter was not properly posted. In Re London & Northern Bank, Ex P.
Jones, Dr Jones makes an offer to the bank, at 07.00 a letter of acceptance, addressed
correctly, was handed to a postman, who had no authority to receive letters only to
deliver post. At 09.30: Dr Jones delivered letter to bank revoking his offer. The bank's
acceptance delivered to Dr Jones afterwards. It was held that the postal rule did not
apply due to incorrect posting, a letter must be posted in post box or handed to post
office employee authorised to receive mail.

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Invalid Types of Acceptance
1. Counter offer
Any qualification or amendment of an offer will constitute a counter offer which cancels the
original offer. The purported acceptance becomes a fresh offer which is open to the original
offeror to accept or reject. In Hydes v. Wrench, the defendant offered to sell his farm for
£1,000. The plaintiffs agent made an offer of £950 and the defendant asked for few days to
think about it after which the defendant wrote saying he could not accept it, whereupon the
plaintiff wrote purporting to accept the offer of £ 1,000. The defendant did not consider himself
bound and the plaintiff sued for specific performance. The court held that the plaintiff could
not enforce this 'acceptance' because his counter-offer of £950 was an implied rejection of
the original offer to sell at £1,000. In Okubule v Oyagbola, parties had been engaged in
renegotiating the lease from N1,000 to N6,000 per annum. The lessor wrote to the lessee
demanding 20 years rent at N6,000. The lessee in response offered to take 5 years in advance.
The Lessor while accepting the lessee’s offer requested that payment be made in 15 days.
When the lessee failed to pay, the lessor sued to enforce the contract. The court held that the
Lessee was not bound by any contract.

2. Conditional acceptance – acceptance ‘subject to contract and provisional acceptance

A conditional acceptance is not a valid or binding acceptance. In Winn v Bull, the defendant
agreed to take a lease of a house subject to the preparation and approval of a formal contract.
It was held that in the absence of a formal contract, the agreement was not binding.

3. Cross offer
This occurs when two offers identical in terms are sent by two parties to each other by post
or any other means. In Tinn v Hofman & Co, the defendant, Mr Hoffman wrote to the
complainant, Mr Tinn with an offer to sell him 800 tons of iron for the price of 69s per ton. He
requested a reply to this offer by post. On the same day, without knowing of this offer, Mr Tin
also wrote to Mr Hoffman. He offered to buy the iron on similar terms. This case concerned
the validity of these two cross offers. It was held that there was no contract.

Termination of Offer

An offer may be brought to an end or be terminated by any of the following ways:

(i) Withdrawal/Revocation
The general rule is that an offeror may withdraw or revoke an offer at any time before it is
accepted by the offeree. This rule also applies where the offeror has expressly stipulated that
he would keep the offer open for a period of time. In Routledge v Grant, the defendant
offered to buy the plaintiffs house for a certain sum ad allowed the plaintiff 6 weeks within to
accept or reject the offer. The defendant however withdrew the offer before the expiration of
6 weeks. It was held that the defendant could withdraw the offer at any moment before
acceptance even though time limit had not expired.

Any such withdrawal or revocation would only be legally effective when it is properly
communicated to the offeree before acceptance. Thus, communication of a withdrawal
revocation of an offer must reach the offeree. This rule applies even when the revocation of
the offer is sent by post. The revocation of the offer by post will be effective only when the
letter of revocation reaches the offeree. In effect, if the letter revoking the offer is lost in
transit and never reaches the offeree, there will be no revocation in law as such. Here, the
postage of the letter of revocation is not enough to make the revocation valid. It must reach
the offeree, otherwise it has no effect. In Byrne v Van, the defendant posted a letter from

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their office in Cardiff to the plaintiff offering 1000 boxes of tinplates for sale on 1 October.
The Plaintiff got the letter on 11 October. They telegraphed acceptance on the same day. But
on 8 October, the defendant had sent another letter withdrawing their offer, because tinplate
prices had just risen 25%. They refused to go through with the sale. It was held that the
defendant’s letter of revocation posted three clear days before the offered posted his letter of
acceptance was ineffective because the letter of revocation was not actually received before
the latter posted his letter of acceptance.

(ii) Lapse of time

'Time' here refers to the duration for which the offer is supposed to last or subsist; or non-
existence or fulfilment of condition or conditions upon which the offer is made. An offer would
lapse after the duration for which it is made, and thus be incapable of being accepted because
of the passage of time. It would also lapse because the condition to be complied with before
acceptance ceases to exist or is not fulfilled.

Where there is no time limit, the general rule is that the offer lapses after the expiration of a
reasonable time. The determination of what constitutes a reasonable time is a matter of fact
depending on the circumstance affecting the offer. The mode of the offer and acceptance may
be relevant in determining what may be a reasonable time. In Ramsgate Victoria Hotel v
Montefiore, The defendant, Mr Montefiore, offered to purchase shares in the plaintiff’s hotel
on 8 June. He did not hear anything until six months later, when the offer was accepted and
he received a letter of acceptance from the complainant. By this time, the value of shares had
dropped and the defendant was no longer interested. Mr Montefiore had not withdrawn his
offer, but he did not go through with the sale. It was held that the defendant’s offer had
elapsed by the company delay in accepting it.

(iii) Death of the offeror or offeree

The general rule is that death of either of the parties would terminate an offer. Where,
however, the offer is not one that requires personal services, and the' offeree not knowing of
the offeror's death accepts the offer, there is a valid agreement. The offeror's executors or
personal representations may be obliged to' fulfil the contract.

Apart from death, either of the parties may lose contractual capacity either through ill health
or any other form of incapacitation before the offer is accepted: For example, the offeror
becomes insane, is trapped in war or kidnapped within the period. These conditions may bring
the relationship to an end depending on the nature of what is involved in the offer

(iv) Rejection
Rejection of an offer terminates the offer. It is immaterial that the offer was left, open for a
given duration. But the rejection- can only be meaningful and effective when communicated
or brought to the notice of the offeror. A counter offer would also constitute a rejection of an
offer. A counter may itself become an independent offer from the offeree, in this instance, to
the offeror, whose initial offer has been rejected by the counter offer

3. CONSIDERATION
The purpose of a contract is usually to gain some benefit. Consideration is therefore of essence
in a contract. Something of value is exchanged for another thing of value. There are various
types of consideration – “good”, “valuable”, “nominal”, and “bad”. In order to be valid,
consideration must be both “good” and “valuable”. Valuable consideration is where some
benefit is given or some detriment suffered. It is only consideration which is valuable in the
eyes of the law which is sufficient to support a valid contract – although it must also be good,

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in the sense that it is not forbidden, or “bad”. A definition given in Currie v. Misa (1875) was
as follows.
“A valuable consideration, in the eye of the law, may consist either in some right,
interest, profit or benefit accruing to the one party, or some forbearance, detriment,
loss or responsibility given, suffered, or undertaken by the other.”

The rules governing consideration include:

1. Consideration must be sufficient but need not be adequate
Since consideration is a “price” it must be something real, something of value .this is the
meaning of the requirement that consideration must be sufficient. accordingly if the price at
which the plaintiff bought the defendants promise is worthiness or unreal, that price whether
it be in the form of an act or a promise to do an act or a promise to do an act, will be
insufficient consideration and therefore incapable of supporting, and it is immaterial that is
not adequate for or commensurate to, the defendant promise. In Thomas v Thomas, a
testator, before his death, expressed that his wife should continue to live in his house for the
rest of her life. After he died, his executor wrote to the wife confirming her late husband wish
and stated that the widow could have the use of the house for the rest of her life on payment
of N1 a year which was regarded as a good consideration.

Consideration will be insufficient and therefore incapable of supporting a contract in the

following cases:
a. Where the thing which the plaintiff does or promises to do in consideration for the
defendant promise is no more than something which is already bound by contract or
law to do for the defendant.
b. Where the sum of money which the defendant pays to the plaintiff request is no more
than the whole sum of a lesser part of a sum, which the defendant is already liable to
pay to the plaintiff. According, in the payment of the lesser sum than the amount due,
if the plaintiff had promised to forgo the balance the plaintiff may afterward break the
promise without incurring any contractual liability, for there being no consideration for
his promise, no contractual obligation exist between him and the defendant in respect
of it. This is called the rule in the PINNEL’S CASE put briefly, the rule stated that the
payment of a lesser sum does not discharged the lager sum.

Under the rule in Pinnel’s case, the plaintiff can in contract make and break his promise
with impunity. Thus, in the case of Richards v Bartlet, a seller who had previously
agreed to accept a lesser amount in full satisfaction of the debt, subsequently sued
the customer of the balance and was held to be entitled to claim it. The operation of
the rule in Pinnel’s case resulted in hardship and injustice against the defendant who
will have believed and relied on the plaintiff promise to forgo the balance. In other to
mitigate this hardship, equity intervened. In the HIGH TREES case, Lord Denning
enunciated the rules as follows: if one makes to another a clear and unambiguous
promise which is intended to affect their legal relations and to be acted upon by that
other and is infect acted upon by him to his prejudice, the promisor is estopped from
bringing an action against the promisee which is inconsistent with his promise, even
though the promise is not supported by consideration.

The rule in high tree’s case is based on estoppel and springs from the operation of equity
upon a promise made by the plaintiff. Because of this rule is also known as “equitable
estoppel” or promissory estoppel”
The scope and the limits of the rules are as follow:
i. Unlike common law estoppel which operates only in relation to representation as
to an existing fact, the rule in high tree case or equitable estoppel operate in
relation to representation or promise as to the future position of the parties.

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 ii. The rule can operate to abrogate as well as to suspend the promisor legal rights.
iii. The rule does not dispense with the necessity for consideration as a vital element
in the formation of a binding contract.
iv. The promisee who wishes to rely on the rule in high trees case must show also that
it is inequitable to allow the promisor to go back on his words.

2. Consideration must move from the promisee, though not necessarily to the promisor

The rule is that the plaintiff suing for breach of contact must show that it is he who has offered
consideration. In the case of Tweddle v Atkinson, William tweddle and the daughter of
Williams guy, were about to marry. In other to provide the prospective couple with the
advancement a contract was made between Williams (Guy and john tweddle, the father of
the plaintiff whereby each promised to pay the plaintiff a sum of money. Williams’s guy failed
to do so, and the plaintiff sued on the contract. It was held that he could not sue as he was a
stranger to the consideration”.
3. Consideration may be executed, executory, but it must not be past
Consideration may be executory, where the parties exchange promises to perform acts in the
future, e.g. promised to do something in return for the act of another rather than the mere
promise of future performance of an act. Here the performance of the act is required before
there is any liability A promises to deliver goods to B and B promises to pay for the goods; or
it may be executed where one party on the promise. Where X offers a reward for the return
of his lost dog, X is buying the act of the finder and will not be liable until the dog is found
and returned. In Akenzua II Oba of Benin v. Benin Divisional Council, the plaintiff who
was president of the defendant council, was prevailed upon by the council to use his influence
to persuade the African Timber and Plywood Company had an absolute concession as a
gesture of goodwill. The plaintiff approached the company and successfully obtained the
release of four forest areas from the company to the council. Subsequently, the plaintiff
requested that one of these areas should be released to him by the Council for his exclusive
exploitation. The Council readily acceded to this request. Subsequently, the council withdrew
its consent and the Oba instituted these proceedings for breach of contract. The defendants
resisted the claim on the ground that the plaintiff had furnished no consideration for the
promise. It was held that since the Oba’s services in getting the four reserves released took
place before the resolution granting him the exclusive use of one of them and that in the
absence of prior promise on the part of the council that the Oba would be granted any of the
released areas, before he got their release, he had furnished no consideration whatsoever for
the council’s subsequent promise.

As a general rule, consideration must not be past but there are exceptions to this rule that
regarded past consideration as valid. This includes:
a. Where services are rendered at the express or implied request of the promisor in
circumstances which raise an implication of a promise to pay. In this situation, the act
which follows the request but precedes the settling of the reward is more in the nature
of executed consideration which will support a contract.
b. Where a debt is statute barred and is revived by a subsequent acknowledgement in
writing.
c. Section 27 of the Bill of Exchange Act, 1882, provides that an antecedent debt or
liability will support a Bill of Exchange

4. Consideration must not be illegal, immoral or contrary to public policy

Where the consideration is illegal, immoral or contrary to public policy, it will not be valid in
law. For example:

10
 a. A promise to pay B N100 in consideration of B killing A’s enemy C. B kills C and sues
A for the money. B’s action will fail. The consideration is illegal
b. X agrees to have illicit sexual intercourse with Y who promises to pay N20 in return. If
Y sues for the N20, the action will fail

4. INTENTION TO CREATE LEGAL OBLIGATION

The parties to the agreement must have the intention to create legal obligations. But whether
an agreement is intended to create legal relations or not is a question of interpretation
depending on the nature of the agreement. That is, whether it is a mere social and domestic
agreement or a business or commercial agreement. In the case of social and domestic
agreements, the law presumes, as a fact, the absence of intention to enter into a legally
binding relationship and will not enforce such agreements unless the contrary is proved. This
was the approach adopted by the court in Balfour v. Balfour (1919) the parties in this case
were husband and wife. The defendant was employed in Ceylon. He returned to Britain on
leave with his wife, but was unable to go back with her because of her ill health. He then
persuaded her to stay behind and promised to be sending her an allowance of £30 a month
"until she was well enough to join him. When he failed to fulfil this promise, she then sued
him to enforce the promise. The English Court of Appeal held that this was a mere domestic
relationship, which could not have been intended to create an enforceable contract. Even
though there was what looked like offer, acceptance and consideration as such, nevertheless
such promise which flowed naturally from such husband and wife relationship cannot be
enforced in law.

Similarly, in Spellman v. Spellman (1961), a husband promised to buy a car for his wife.
He then entered into a hire purchase agreement in respect of the car which was delivered to
them. He, however, refused to transfer the car to his wife's name. The wife sued to enforce
the promise. It was held that this was purely a domestic arrangement not intended to create
any legal relations which could entitle the wife to any legal right over the car as such.

Note that the law presumes as a fact, that social and domestic agreements are not legally
binding. It is, therefore, left for the party wishing to enforce the agreement to rebut that
presumption of fact. In effect therefore, where the party can rebut same, the law will enforce
that agreement even though on the face of it, it is a mere social and domestic agreement.
This was rebutted in Simpkins v. Pays (1955). In this case, three people sharing a house;
the owner, her granddaughter and a paying lodger, regularly entered a competition in a
Sunday newspaper. The entries were sent in the name of the grandmother, but all of them
contributed. When an entry won, the grandmother refused to share the price won with them.
The plaintiff sued for her share of the sum. The defence was that there was no intention to
create legal relations; and that it was a mere friendly arrangement binding in honour only. It
was held that the others were entitled to share because their agreement to this effect was, in
the view of the court, intended to be legally binding. Far from being a friendly arrangement,
the evidence showed that it was a joint enterprise and the parties expected to share any price
that was won.

Similarly, in Parker & Anor v. Clark & Anor (1961), the plaintiffs at the request of the
defendants, their relations came to live with them and shared all the household expenses.
Under this arrangement, the plaintiffs sold their house and the defendant promised to
compensate them in turn by leaving their house for them in his will. A year after accepting
this offer and moving into the defendants' house, the parties had a misunderstanding and the
defendants asked the plaintiffs out of the house. The plaintiffs left the defendants' house and
instituted this action claiming for breach of contract. The defendants argued that there was
no intention to enter a legal relation or a binding contract but rather a mere domestic

11
arrangement. But the court rejected the defence, holding that an arrangement binding in law
was intended by both parties.

5. CAPACITY TO CONTRACT
Legal capacity relates to the ability of persons to acquire rights and incur obligations under
the contract. Persons here refer to natural persons (human beings) or corporate persons such
as companies. In general, anybody over the age of 21, who, at the time, is sober and mentally
unimpaired, is capable of contracting. This also applies to corporations which can contract in
exactly the same way as living persons. However, certain categories of person have no
capacity (or only limited capacity) to contract, these include:
A. A minor or infant

An infant is a person of either sex who is under the age of twenty-one years. The law
governing contractual capacity is borne out of a social need to protect infants and may not be
considered legally rational. The degree of protection depends on the category of contract
involved.
a. Contracts that are binding

i. Contracts for necessaries

It has long been recognized that an infant is bound to pay for necessaries that have been
supplied to him. These are goods that the infant requires to live a reasonable life, e.g. contract
for clothing materials, feeding etc. Note however, that the good must be suitable to the status
of the infant and the goods must not be in excess of the infant’s requirement. See the case
of Nash v Inman where a tailor sought to recover the price of 11 fancy waistcoats he had
supplied to an infant undergraduate. It was held that the action must fail for the evidence
showed that the infant was already adequately supplied with clothing suitable to his position.

ii. Beneficial contracts of service

A beneficial contract of service is a contract which is intended to give the infant a means of
earning his livelihood or income in life, e.g. contracts of apprenticeship, contracts of
education. Note that the contract must be substantially for the benefit of the infant and not
absolutely for his benefit. Thus, if the beneficial terms in a contract outweigh those that are
detrimental to the infant’s interest, the contract shall be a beneficial contract of service. In
Doyle v. White City Stadium Limited, a contract between an infant boxer and the British
Boxing Board of Control under which the infant received a license that enabled him to gain
proficiency in his profession was considered substantially the benefit of the infant and
therefore amounted to a beneficial contract of service. Note trading contracts are not binding
on an infant however much it may be for his benefit. In Cowern v Nield, The infant had sold
goods to the plaintiff, but did not deliver them. The buyer sought repayment of the sums paid.
The infant had fraudulently hidden his age. Held: The fraud went to the heart of the contract
since it concerned the ability to contract. The promises of an infant are not enforceable against
that infant. According to Philimore J said:
‘An infant is not necessarily liable on a contract merely because it is for his benefit. I
am satisfied. . That the only contracts which, if for the infant’s benefit, are enforceable
against him, are contracts relating to the infant’s person, such as contracts for
necessaries, food, clothing and lodging, contracts of marriage, and contracts of
apprenticeship and service. In my opinion a trading contract does not come within that
category.’

b. Contracts that are voidable at the instance of the infant.

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These are contracts in respect of which an infant acquires an interest in property of a
permanent nature to which continuing obligations attach. For instance, lease, partnership or
contract for the purchase of shares in a company. The general rule is that such contracts are
regarded as valid and binding on an infant unless they are repudiated either during infancy
or within a reasonable time of reaching majority. In Steinberg v Scala (Leeds) Ltd, an
infant applied for shares in a company. She paid the sum due on allotment at first call. But
she received no dividends. She repudiated the contract and sought to recover the payments
already made. It was held that the company had done what it agreed to do under the contract
and therefore she could not recover the payments already made.

c. Void Contracts by Infants

S. 1 of the Infant Reliefs Act declared absolutely void, three types of contracts if made with
an infant:
a) Contracts of Loan: Any loan advanced to an infant is irrecoverable under the Act
even if the infant has fraudulently obtained the loan. In Leslie vs. Shell, an infant
obtained loan by fraudulently mistaking his age. The loan was obtained to purchase
necessaries and the loan has actually been used for this purpose, the creditor will
be entitled in equity to recover the necessaries from the infant just as if he was an
unpaid seller of the goods.
b) Contracts for goods supplied: Any contract whereby goods are sold to an infant or
goods are exchanged for goods from an infant shall be absolutely void, except if
the goods are necessaries.
c) Accounts stated: An account stated is a written admission of indebtedness made
by one person to another (e.g. I.O.U). Any account stated given by an infant is
absolutely void, even if the account stated is in respect of necessaries.

B. Corporation
A company registered under the Companies and Allied Matters Act is recognized to have a
legal personality, independent of the members. The implication is as stated in Salmon v
Salmon corporation is an artificial person created by special authority and endowed with
special capacity. The contractual capacity of corporations is limited in two ways: First, by the
doctrine of ultra vires, and second, by restrictions placed on the form of contracts made by
corporations.
(i) The doctrine of ultra vires
This doctrine applies only to corporations which have been created by statute and provides
that such corporations can exercise only those powers which are expressly or implicitly
conferred on them by the statute itself. For instance, a trading company incorporated under
the Companies and Allied Matters Act, 1990, is required by that Act to have a memorandum
of association which sets out the objects of the company and the extent of its powers. Such
a company cannot enter into a contract the effect of which would be to take the company
outside the ambit of the objects and powers set out in its memorandum of association. If it
does purport to enter such a contract the contract will be held ultra vires and void.

(ii) The form of contracts made by corporations

The general rule is that a corporation must contract under seal, but this rule is subject to the
following exceptions:
(a) A corporation may be empowered by his constitution to enter into contracts without a
seal.
(b) Contracts which relate to routine matters of frequent occurrence or to matters of the
vitality do not require a seal.
(c) In the case of trading corporations only, contracts which relate to the objects and
purpose for which the company is incorporated can be made without a seal.

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 (d) In the case of non-trading corporations only, when a contract for work or services in
respect of matters for the doing of which the corporation was created has been
executed, and the corporation has accepted the benefit of such work or services, an
action will lie against the corporation at the suit of the party who has performed the
work or services, and the absence of a seal is no defence.

C. Persons of unsound minds

A contract made by a person of unsound mind is prima facie valid i.e. he is bound by the
contract unless he can prove: (a) that at the time he made the contract, he was so insane as
to be incapable of appreciating the nature of his act, and (b) that the other party knew of his
state of mind, the contract will be voidable at his option. However, even if this be the case,
the person of unsound mind may render the contract binding upon him if he ratifies it after
he has recovered his sanity or during a lucid interval. Contracts entered during lucid periods
are valid and binding as they would an ordinary person.

D. Drunk
Drunkenness is considered by the law to be a temporary form of insanity and the rule for
drunkenness is the same as that of insanity. Thus, if a person is at the time he entered into
a contract, so drunk as not to know what he is doing and the other contracting party is aware
of this (and it is difficult to see how he could fail to be so aware), the contract is voidable at
the option of the drunkard. He may, however, ratify it when he regains sobriety.

E. Illiterate Persons

An illiterate is a person who cannot read, write or understand a particular document. The law
that provides the necessary protection are found in various laws of the state. In Lagos State
the applicable law is the Illiterates’ Protection Law. The law is designed to protect illiterates
from being taken advantage of by being made to sign or acknowledge a written document
which does not bear out their real intention. S. 2 of the law requires the person acting on
behalf of the illiterate to do the following:
a. Write his name and address on the letter or document to show (a) that he was
instructed by the Illiterate to write such letter or document (b) that it represents the
illiterate’s instruction.
b. Ensure that the document was read and explained to the illiterate before it was signed
and the signature represents that of the illiterate.

VITIATING FACTORS OR ELEMENTS IN CONTRACTS

The basis of contract is ‘voluntary agreement’ between the parties i.e. consensus ad idem. So
any conduct that casts doubts on the genuineness of the agreement may affect the validity
of the contract. These include:
a. Mistake
b. Misrepresentation
c. Duress and undue influence

DURESS

Duress at common law means actual violence or threats of violence to the person i.e. threats
calculated to produce fear or loss of life or bodily harm. Thus, where a party is coerced, the
contract shall be held void or regarded as illegal. There are other means of coercion that does
not necessarily involve force of threat called ‘economic duress’. In Atlas Express v Kafco,

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Kafco Ltd had a contract to supply Woolworths with baskets. They had a ‘trading agreement’
with Atlas Express for at least six months to do the deliveries. Atlas Express realized it had
underestimated the size of cartons to be carried. So, it was costing more to deliver. Kafco
would not vary the price. Atlas sent an empty truck to Kafco, with a letter saying if a higher
charge was not agreed to, the truck would leave empty. Kafco would go broke without the
contract, so they signed. Later, Kafco refused to pay, and argued there was economic duress,
and also no new consideration. Judgment was awarded in favour of Kafco. Kafco were found
to have signed the agreement under economic duress as they felt that in the circumstances,
they had no alternative but to sign the varied contract. Kafco had not approved the new terms
of the agreement (as they had previously rejected the proposed variation) and further, there
was no consideration for the new agreement as the variation placed Kafco in a less favourable
position financially. Thus, their non-payment of the money of account resulted from the
duress.

UNDUE INFLUENCE

The principle of undue influence was designed to give relief where in circumstances not
amounting to duress, a person enters into a disadvantageous contract. This is common in
situations where one party exercise some dominance over the other: examples of such
relationships include:
a. Parent and child
b. Doctor and patient
c. Solicitor and client
d. Religious adviser and disciple

A contract induced by undue influence is voidable. However, such a party must rescind the
contract within a reasonable time of the influence being withdrawn. In Allcard v. Skinner,
the plaintiff was introduced by her spiritual adviser to the defendant who was the lady superior
of a protestant institution known as “The Sisters of the Poor”. The plaintiff’s spiritual adviser
was the spiritual director and confessor of this sisterhood. The plaintiff because she is a sister
and took the vows of poverty, charity and obedience and in accordance with the vows, the
plaintiff gave about £2,000 to the head of this sisterhood. Six years after renouncing her
membership, the plaintiff sues for the recovery of the money on the ground that it had been
procured by the undue influence of the defendant. It was held that the gifts were made under
a pressure that she could not resist and they were recoverable in principle when the pressure
was removed by her resignation, there been no independent advice and there was no
opportunity of obtaining one.
Note: The plaintiff in Allcard v Skinner failed to recover her money because it was held that
the commencement of her action six years after resigning from the sisterhood, she had waited
too long before suing.

MISREPRESENTATION

Misrepresentation will vitiate a contract is a statement of fact made by a party to a contract

relating to a fact or facts of the contract to another intending that other to rely on it which
statement is not true and based upon which the other party entered into a contract he or she
would not have entered. In misrepresentation, we are dealing with a situation where one is
induced into a contract based on false representation of facts. Essentials of misrepresentation
The following must be proved to establish a misrepresentation.
1. There must be a representation or a statement of fact or facts and not of law or mere
opinion. Thus, mere silence may not be a representation. The statement must relate
to specific existing facts and not mere opinion. In Edgerton v Fitzmaurice, the
Directors of a company issued a prospectus which invited loan from the public and

15
 stated that the money would be deplored in the improvement of the building and the
extension of the business. This was untrue since the intention from the first had been
to expend the loan upon the discharge of certain existing liabilities. It was held that
the act of the directors was a fraudulent misrepresentation of the fact because they
have misrepresented their intention. On other hand, a statement of opinion are not
statement of fact so that their falsity does not afford a relief from misrepresentation
In Bisset v. Wilkinson, the vendor of a holding which had not previously been used
as sheep farm told a prospective purchaser that in his judgment, the farm would
accommodate 2,000 sheep. It was held that this was an honest statement of opinion
of the farm and not a representation of its actual capacity.

2. The statement must induce the contract, that is, that the other party was influenced
by the representation to enter into the contract;
3. The representation must be intended to be acted upon and was acted upon;

4. The representation must be false.

Misrepresentation and non-disclosure

The law is that mere silence does not amount to misrepresentation. However, failure to
disclose or mere silence may amount to a misrepresentation where:
a. it is a contract Uberrimae Fidei( utmost good faith);
Contract uberrimae fidei” means contract of utmost good faith. They are the type of contracts
in which one party possesses full knowledge of the material facts. The law mandates such a
person to show good faith, so that the other party is not put at a disadvantage. He is therefore,
bound to inform the other party about everything which may likely affect his judgement,
whether they are asked for or not. Failure to disclose such material facts renders the contract
voidable at the option of the party prejudiced, that is, the party to whom disclosure ought to
have been made.
Examples:
i. Contract of insurance
ii. Contract for the allotment of stocks and shares in companies
iii. Contract of the sale of land
iv. Suretyship and guarantee ship contracts.

b. where there is a fiduciary relationship between the parties;

If there is a fiduciary relationship between the contracting parties in which one party is in a
more influential position over the other, this stronger party must disclose all material defects
to the weaker party. Examples of this include parent and child, solicitor and client, trustee
and beneficiary, religious superior and inferior relationships; and company directors and their
companies.
c. Where non-disclosure or silence distorts a positive representation.
While a contracting party is not bound to make a disclosure during contractual negotiations,
if he does elect to do so, he must say all fully and frankly and not indulge in a half-truth, so
that what is not disclosed would amounts to misrepresentation. It must be the whole truth
and nothing but the truth.

Types of Misrepresentation

A misrepresentation can either be a fraudulent misrepresentation or an innocent

misrepresentation or negligent misrepresentation.

16
 1. A fraudulent misrepresentation is a false statement which when made, the party who
made it did not honestly believe it to be true. It is a false statement which was made
knowingly or without believe in its truth or recklessly careless whether it be true or
false. See Edgerton vs. Fitzmaurice (supra).
Remedies for fraudulent misrepresentation:
a. Damages
b. Rescission and damages
c. Repudiation of the contract

2. Innocent Misrepresentation: This is a misrepresentation without fault. The remedy

available is Rescission of the contract. This is because the aim of the law is to put both
parties to the contract as much as possible in the same position as they enjoyed before
the contract.
Remedies for fraudulent misrepresentation

a. Rescission and damages

b. Repudiation of the contract
3. Negligent misrepresentation: This is a false statement made by someone who had no
reasonable grounds for believing in its truth. Damages are awarded unless the
defendant can prove that he/she reasonably believed it to be true when he/she made
it. In Hedley Bryne Co. Ltd vs. Heller & Partners Ltd (supra). The successful action
for negligence mis-representation entitles the plaintiff to damages.

Effects of Misrepresentation
Where the misrepresentation is fraudulent or innocent, the contract is voidable at the option
of the party to whom a false representation was made.

MISTAKE

Mistake in the law of contract means a misapprehension or mis-understanding of the facts

which form the basis of a contract. Note that mistake bears a restricted meaning in the law
of contract than in popular speech. The mis-apprehension may arise as a result of:
(i) Non Est factum
(ii) Common mistake
(iii) Mutual mistake
(iv) Unilateral mistake

(1) Non Est factum

This literally means “it is not my deed”. This mistake is peculiar to written contract and it
allows a party who has signed a document under a fundamental mis-apprehension as to the
nature of the document to claim that it is not his deed, for a person to rely on this defence,
he has to prove that the document which he signed is fundamentally different in nature and
effect from what he has in mind to sign. In Lewis v Clay, the defendants was induced by a
friend to sign certain documents under the representation that he was witnessing a private
and confidential family document which were in fact promissory notes and two letters
authorizing the plaintiff to pay the proceeds of the promissory notes to the friend, the
defendant was held not liable on the promissory notes because under the doctrine of non-est
factum, he has made a mistake. Note that negligence or carelessness on the part of the
person who signed a document mistakenly shall exclude the application of the doctrine,
because no man can take advantage of his own wrong.

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 (2) Common Mistake
Common mistake: Common mistake arises when the parties to a contract suffered the same
misapprehension. For instance:
a. Mistake as to Title (Rex sua): This mistake arises when unknown to both parties to a
contract, the buyer is the owner of what the seller purports to sell to him. In Abraham
v Chief Oluwa, the plaintiff bought a piece of land from savage, which savage himself
earlier bought from someone else without any written agreement. The defendant who
was a judgment creditor of one Oloto family wrongly thought the property belonged
to Oloto and obtained court order to sell the land. The plaintiff fearing that it either
has a defective title or no title at all bided for the property at auction sale by the
defendant and bought it. The plaintiff later confirmed that his title had all the time
been valid, brought an action for the agreement to be set aside, and the purchase
money refunded to him, on the ground of mistake. It was held that the transaction
was void and the plaintiff was entitled to recover his money. See also Tabs Assurance
Ltd v Awuzie Industries Ltd, the respondent ordered raw materials from Europe.
On 17 March, it received notification that the raw materials had away into sea during
its convey to Lagos. It thereafter obtained an insurance cover for the goods which to
its knowledge was no longer in existence. The insurance cover was back dated to
February. The court declared the insurance contract void.

b. Mistake as to existence of the subject matter of contract (Rex extincta): This mistake
arises when contracting parties believed in the existence of a non-existence subject
matter, e.g. In Couturier v Hastie, a cargo of corn was in transit being shipped from
the Mediterranean to England. The owner of the cargo sold the corn to a buyer in
London. The cargo had however, perished and been disposed of before the contract
was made. The seller sought to enforce payment for the goods on the grounds that
the purchaser had attained title to the goods and therefore bore the risk of the goods
being damaged, lost or stolen. The court held that the contract was void because the
subject matter of the contract did not exist at the time the contract was made.

(3) Mutual Mistakes

Mutual mistake arises where both parties mis-understand each other and are at cross
purposes. Each party is mistaken as to the other’s intention, though neither realizes that the
respective promises have been mis-understood. Where such a mutual mistake is fundamental
the contract shall be held void. In Raffles v Witchelhaus, the defendant agree to buy and
the plaintiff agreed to sell a consignment of cotton which was to arrive “ex peerless from
Bombay”. In actual fact, two ships called Ex Peerless sailed from Bombay, one in October and
the other in December. The plaintiff intended to put the cargo on the second ship which sailed
in December, while the defendant expected it on the first ship which sailed in October. It was
held that the contract was void and the defendant (the buyer) was not liable for refusal to
accept cotton dispatched by the December ship.
(4) Unilateral mistake
This mistake arises where only one of the parties is labouring under mistake. The other knows
or must be taken to know of this mistake. The majority of cases in which the question of
unilateral mistake has arisen have been cases of mistaken identity. Note that unilateral
mistake is not restricted to mistaken identity. The party who wants the court to hold a contract
void on this ground must prove the following:
a. That he intended to deal with some person other than the person with whom he has
apparently made a contract. In Sowler v Potter, the defendant known as “Ann
Robinson” was convicted of permitting disorderly conduct in 1938. In the same year,
she assumed the name of “Ann Potter” and negotiating under the name obtained a

18
 lease. The agent who conducted the negotiations on behalf of the lessor stated in
evidence that he remembered the conviction of Ann Robinson and when he entered
into this contract with the defendant, he thought that he was entering into a contract
with some person other than Miss Ann Robinson who had been convicted. It was held
that the lease was void ab initio since the plaintiff was mistaken with regard to the
identity of the tenant.
b. That the person who has actually dealt with the plaintiff knew or ought reasonably to
have known that he to deal with a different person.
c. That at the time of negotiating the agreement, he regarded the identity of the other
contracting party as a matter of crucial importance.
d. That there was no opportunity for him to verify the true identity of the person with
him or if there was such opportunity, that he took all reasonable steps to verify the
identity.
Exceptions to the Rule:
(1) Agency
(2) Assignment of contractual obligation. This refers to procedure whereby parties to a
contract transfer their rights and liabilities to third parties.
Note however that the assignment must be absolute. It must be in writing. Written
notice of the assignment must be given to the debtor.
(3) Promises made by the promissor on behalf of himself and his successors
(4) Insurance contracts: This is because policy created a trust in favour of the objects
named e.g. see Married Women Property Act 1882; Motor Vehicle (Third Party)
Insurance Act 1958.
(5) Trust concept: In equity, the beneficiary of a trust is entitled to compel the
enforcement of the trust against the trustee so that the trustee will act for the benefit
of the beneficiary, even though the beneficiary is not a party to the trust.

ILLEGAL AND VOID CONTRACTS

An agreement will be illegal where it is invalidated either by express statutory enactment or

by rules of common law. On the other hand, where the law refuses to assist in any way, a
person who founds his cause of action upon such an agreement or where the law states that
such an agreement is not to have legal effect, the agreement is void. It is clear that there is
no real distinction is not to have legal effect, the agreement is void. It is clear that there is
no real distinction between the two situations presented above. In discussing this topic three
classifications will be adopted.-
a. Contracts illegal by statute
b. Contracts illegal at common law and
c. Contracts void at common law.
Contracts illegal by Statutes

An illegal act is defined as: "unlawful" an act which the law forbid, as to commit a murder.
Where a statute expressly prohibits or bans the making of certain types of contacts any such
contract subsequently made is illegal and void. For example, a contract to import goods like
champagne, lace materials into Nigeria would be illegal in view of the various statutes
prohibiting the importation of these items. In Nwasike v Onwuameze, the plaintiff brought
a claim of N1,000 against the defendant being the purchase price of a car he had sold to the
defendant in "Biafra" in 1969. The defendant admitted these facts but alleged that the
transaction was entered into within Biafra during the civil war and that the car was to have
been paid for in Biafra currency, He argued that since the Biafra currency had ceased to be
legal tender, the contract was frustrated and both parties were discharged from further

19
performance. It was held that the transaction between the parties. was an illegal contract
which could therefore not be enforced, because it was based on an illegal currency.

Contracts illegal at Common Law

These are contacts forbidden by common law on grounds of public policy. There are regarded
'as being' so injurious to society and prejudicial to the social and economic interests of the
community, that they are prohibited and declared illegal. The following contracts are generally
regarded as coming into this group:
a. A contract to commit a crime, a tort or a fraud. In Allen v Recous where one of the
parties agreed to beat up a third party at the request of the other for consideration. It
was held that agreement was void and unlawful.
b. A contract prejudicial to the status of marriage the validity of a contract prejudicial to
the status of marriage came up for consideration in the case of Alake v Chief
Oderinlo the respondent had brought a claim against the appellant for N 1,000 being
the amount received by the defendant for a consideration which failed. This was the
total sum of various amounts he claimed to have given the appellant in consideration
of her promise to marry him. At the time of parties entered into this agreement, the
appellant was, to the knowledge of the respondent lawfully married to another man.
The court held that at common law, a promise by a man to marry one who knows him
to be already married is void as against public policy and as tending to immorality.
1. Contract prejudicial to the Public Safety - It is 'contrary to public policy to engage a
commercial intercourse with an enemy country.

2. Contract prejudicial to the administration of justice - A contract, which has the effect
of impeding or preventing the course of justice, or of stiffing prosecution, is contrary
to public policy and therefore illegal. In R v Panayiotou where a man tried to bribe a
woman to withdraw her complaint of rape against the accused. It was held that this
constitute an attempt to pervert the course of justice.

3. Contract that tends to promote corruption in public life.

4. Contract to defraud the revenue.
Any contract deliberately entered into the parties with the intention to depriving thy state of
revenue it is lawful entitled to, is contrary to public policy and therefore illegal and void.

Contracts Void at Common Law

A void contract is a contract which does not have legal effect. Contracts regarded as merely
void at common law. In contrast to those which are both illegal and void are three in number.
These are:
a. Contracts to oust the Jurisdiction of the Courts
Any provision in any agreement which purports to deprive the parties of their right to resort
to the courts for the settlement of any dispute arising out of the agreement, is void on the
grounds of public policy. In Bennet v Bennet, the wife agreed not tousle the husband to
court for maintenance, if the husband will transfer certain properties to her. When the husband
failed the wife sued him. it was held that the covenant by the wife not to apply to the court
for maintenance was void and the whole agreement was void.
b. Contracts that are Sexually Immoral
What will constitute sexual immorality will to some extent differ from society to society. Thus
prostitute cannot sue for her fees. In the case of Upfill v Wright, the plaintiff let a flat to a
woman, the defendant. At the time of letting it he know that the defendant was the mistress

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of a certain man who would pay the rent. When the landlord sued the woman for unpaid rent.
It was held that the agreement was tainted with immorality and he could not claim the rent.

c. Contracts in Restraint of Trade

Contract in restraint of trade is one which a part covenants to restrict his future liberty to
exercise his trade, business or profession in such a manner and with such persons as he
chooses. Such contract is void. But where it can be established that such restrictions are
justifiable in the circumstances as being reasonable form the points of view of the parties and
the public, they are valid and binding.

Effect of an Illegal Contract

Where the contract is illegal, then it is void ab initio and without any legal effect. The
consequences are as follows:
a. Neither party can sue on the contract
This is expressed in the latin maxim ex turpi causa non oritur action (no right of action can
arise from a base cause)
b. Any money paid or property transferred by one party to the other under the contract
is irrecoverable. This is in accordance with the maxim in pari delicto portior est conditio
defendantis (where the parties are equally at fault, the position of the defendant is the
more favourable). In Okoronkwo v Nwoga O, a contractor gave £7,500 and a car to
N, a public officer. N in return promised to secure a government contract for O. O
failed to get the contract. He sued to recover his money and car. Held: the contract
was illegal and so no action to recover the money or the car could be maintained.

Exceptions to the in pari delicto rule

The rule as seen above is to the effect that property and other rights transferred under an
illegal contract is vested in the transferee and cannot be recovered. To this rule are three
exceptions:
(a) a party can recover money or property which may have been transferred if he is not
in pari delicto. The circumstances may arise in two ways:
i. where the contract is prohibited by statute or public policy in order to protect
a class of persons to which the plaintiff belongs. For example, the Moneylenders
Act of the Federation of Nigeria was enacted to regulate the business of
moneylending and to protect helpless borrowers or debtors who were often
exploited by money-lenders. A money-lender was required to conform with the
requirements of the Act otherwise the contract would be illegal and void. In
such a case the lender cannot recover the money; but since the Act was enacted
to protect persons dealing with money-lenders, such persons (i.e., borrowers)
can recover securities transferred into the hands of the money-lender under
the illegal contract. Thus, in Kasumu v. Baba Egbe the Privy Council held that
a mortgage transaction not having been recorded as required by the Act was
illegal and unenforceable, and the money-lender could recover neither the
interest nor the capital loan. In addition, the court ordered that the security
given for the loan be re-transferred to the borrower.
ii. Where a party has been induced to enter an illegal contract by fraudulent
misrepresentation, or where an ignorant man enters an illegal contract under
the influence of a clever man. For instance, in Hughes v. Liverpool, H was
induced by the fraudulent misrepresentation of an insurance agent to enter an
illegal contract of life insurance. H sought to recover the premiums paid. Held:
the parties were not in pari delicto and the premiums were recoverable.

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 iii. a party can recover what he has transferred to the other if he repents before
the contract is performed. In this way the law encourages repentance (locus
poenitentiae). In Item v. Paul, the defendant agreed to let part of a building
to the plaintiff for £300 a year. After paying the rent but before moving into
the building, the plaintiff discovered that by a local government regulation, only
one family could live in the building at a time. Another family was already
occupying part of the building. He brought an action to recover the rent already
paid. It was held that he was entitled to a refund of the advance payment on
the agreement. When he became aware of the terms of the certificate of
occupancy, he declined to take up the occupation of the premises .

iv. The plaintiff brought an action to a party can recover property or money if he
can establish his case without reliance on the illegal contract; that is, the action
must be independent of the contract. In Bowmakers Ltd v. Barnet
Instruments Ltd, the plaintiffs were successful in claiming damages by
founding their action on the tort of conversion, and not on an existing illegal
hire purchase contract.

DISCHARGE OF CONTRACT

The discharge of a contract means in general that the contractual relationship between the
two parties has come to an end and the parties are freed from their obligations to each other
thereafter. A contract may be discharged in any four of these methods:

a. By Performance

When the parties to the contract perform their obligations under the contract, the contract
will be completely extinguished. The performance in this case must be precise and exact. A
party who has only partially performed his contract recovers nothing and no promise to pay
on a quantum merit basis will be implies since any such implied promise will be inconsistent
with the express contract.

b. Discharge by Express Agreement

The parties to a contract may by express agreement. discharge themselves from the contract
if the contract to be discharged is wholly or partially executory, the discharge is said to be
bilateral, in that each part surrenders something of value. But if the original contract is wholly
executed one side, the discharge is unilateral, in that only one party surrenders something of
value.

c. Discharge by Frustration

Frustration occurs whenever the law recognizes that without default of either party a
contractual obligation has become incapable of being performed because the circumstances
in which performance is called for would render it a thing radically different from what was
undertaking by the contracts. The doctrine of frustration stipulate that parties to a contract
are discharged from further performance of their obligation if some unexpected event occurs
during the currency of the contract without the fault of either party. It was judicially laid down
in Taylor v Caldwell

It has been held in the case of National Carriers ltd v. Panalpina ltd. that the doctrine of
frustration does not apply to a lease and that the tenant remains liable on his covenants
irrespective of any supervening event affecting the leased premises. An example of a

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frustrating event can be seen in the case of Uzomah v Uzomah, a contract to erect a building
on a designated site was held to be frustrated when the Lagos Executive Board prohibited the
erection of any building in the locality.

At common law, the occurrence of the frustrating event "brings the contract to an end forth
with, without more and automatically". The contract is terminated as to the future only.
Therefore, from the beginning to the time of frustration the contract is valid. In Krell v Henry,
the plaintiff had agreed to let a room to the defendant for the purpose of viewing the
coronation procession of the king. But before that date the procession was cancelled owing to
the sudden illness of the king. It was held that the plaintiff could not recover the rent as it did
not fall due until after the, frustration.

The types of supervening events which can frustrate a contract are:

i. Death or incapacity for contract that requires personal service;
ii. Destruction of the subject matter without fault of either party,
iii. Non-occurrence of an event upon which the performance is dependent upon;
iv. Impossibility arising from a change in circumstances or the law. Where there is a
substantial change in circumstances which makes the performance of the contract
impossible, e.g. war, civil crisis or military takeover of government.
Effect of frustration
The common law rule is that frustration automatically brings the contract to an end and
renders it void. But any money paid in pursuance of it before the frustrating event is
recoverable including other properties. All monies yet to be paid cease to be payable.
However, the Law Reform (Contract) Laws in some states have extended the rule by providing
that:
i. Any money paid before the frustrating event is recoverable;
ii. Any money payable before the frustrating event ceases to be payable;
iii. A party to whom money has been paid may recover the value of his expenses or
retain the value of the expenses from the money received, if any;
iv. A person can receive on quantum merit, the value of any valuable benefit conferred
on the other party to the contract before the frustrating event occurred. The
valuable benefit for this purpose does not include money

d. Discharge by Breach

A breach of contract will arise where a party fails to or refuses to perform, or evinces an
intention not to perform, one more of the obligations imposed on the parties by the contract.
There are two types of breach of contract.
1. Actual breach: This will arise where a party fails to perform his obligation on the date
fixed for performance.
2. Anticipatory breach: This will arise where a party before the date fixed for performance
evinces an intention not to perform the contract.

A breach of contract entitled the innocent party to bring an action for damages. In the case
of Frost v Knight, Knight promise Miss Frost that when his father died, he would marry her.
While his father was still alive, the knight broke off the engagement. Miss Frost sued him. The
court held that Miss Frost was entitled to damages.

REMEDIES FOR BREACH OF CONTRACT

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There are five remedies available to an innocent party in the event of a breach of contract.

1. Damages
Once a party to a contract establishes to the satisfaction of the court that the other party has
committed a breach of contract, the most common claim is that for damages. In Robbinson
v Harman. The court observed thus the rule of the common law is that where a party sustains
a loss by reason of a breach of contract, he is. so far as money can do it, to be placed in the
same situation, with respect to damages, as if the contract had been performed.

A claim damages raises two principal questions:

a) Remoteness of Damages:
The rule of remoteness of damage was enunciated in the case of Hadley v Baxendale to the
effect that damage is not too remote and must be compensated for if it is "such as may fairly
and reasonably be considered either arising naturally, i.e. according to the usual cause of
things, from such breach of contract itself, or such as many reasonable be supposed to have
been in the contemplation of both parties, at the time they made the contract, as the probable
result of the breach of it".
Damage due to special circumstances is too remote unless the special circumstances were or
ought to have been, known to the defendant. In Diamond v Campbell, the defendant
contracted to sell some premises to the plaintiff was a dealer in real estate, but 'they did not
know that he intended to convert the premises himself. The defendant were held liable for
loss of the profit which the plaintiff, who would have made by resale, but not for loss of the
much larger profit which he might have made by converting the premises.

b) Measure of Damages

The general rule is that the plaintiff recovers his actual loss in respect of damage which is
not too remote. He must, so far as money can do it, be put in the same position as if the
contract had been performed.
c) Mitigation of Loss
The plaintiff is under a duty, to do what is reasonable to mitigate the loss, once a breach had
occurred. The plaintiff cannot recover damages for breach resulting from the plaintiff's failure
to mitigate.

2. Rescission
This is a remedy developed by the court of equity. Where there is a breach of contract, the
innocent party can rescind from the contract. The effect of rescission, in the case of
misrepresentation and mistake is to terminates the contract, puts the parties in status quo
ante and restore things, as between them, to the position in which they stood before the
contract was entered into. On the other hand, rescission in the case of breach of a condition
only terminates the contract from the moment of rescission. The' right of rescission will be
lost where the innocent party has affirmed the contract as subsisting.

3. Specific Performance
There remedy of specific performance is an equitable remedy. It is an order of the court
compelling a defendant to specifically perform his own part of the contract. Where the plaintiff
claims specific performance, the court has power to award damages either in substitution for
or in addition to, ordering specific performance. The court will only grant the remedy of
specific performance where the remedy of damage will be insufficient to compensate the
plaintiff for the injury suffered.

4. Injunction

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The remedy of injunction is an equitable remedy. It is an order of the court compelling or
restraining a person to do or not to do a certain act. In the law of contract an injunction can
be sued to restrain a party from committing a breach of contract. The court will only grant all
injunction where the remedy of damage will be insufficient to compensate the plaintiff for the
injury suffered.
5. Quantum Meruit
Quantum meruit "as much as he deserves". This will arise where the/one person has expressly
or impliedly requested another to render him a service without specifying any remuneration,
but the circumstances of the request imply that the service is to be paid, for there is implied
a promise to pay quantum meruit. Similarly, Quantum meruit will arise where work is done
in partial performance of a contract which is severable or divisible.

EXTINCTION OF REMEDIES
The right of an innocent party to sue for breach of a contract may be extinguished or
terminated in two main ways:
a. By a discharge or release agreement between the parties.
b. By lapse of time
In equity, claims for equitable relief are limited by the equitable doctrine of [aches. This is
based on the maxim of equity which stipulate that "delay defeat equity"

Doctrine of privity of contract

The doctrine of privity of contract state” that a stranger to a contract cannot enjoys the benefit
nor suffers the loss or liabilities therein”. These suffice me to say if you are not a party to a
contract you cannot enjoy the gain or loss of that contract. Even if the contract is in your
favour so far you are not one of the party to that contract you cannot sue for damages in case
of breach of contract. This general rule was upheld in the case of Dunlop Pneumatic Tyre
Co Ltd v Selfridges & Co Ltd, where Dunlop sold tyres to X on terms that they would not
sell above a certain price. Selfridges bought from X who agreed with X not to sell below
Dunlop’s price but breached that price. Dunlop sued Selfridges and the courts held that there
was no enforceable contractual relationship between Dunlop and Selfridges as no
consideration passed between them.

Exceptions to Rule of Privity of contract

To this general rule however, there are certain exceptions. These are:

d) Insurance: By virtue of the Motor Vehicles (Third Party Insurance) Act, (Cap M22)
Laws of the Federation of Nigeria 2004, a third party can sue in respect of a third party
insurance contract. Under this law, where a third party is affected by the act of the
insured, he is entitled to sue the Insurance Company as well as the insured upon giving
of requisite notice.
e) Trust: A trustee who holds property in trust for another can sue in respect of that
property.
f) Agency; An agency occurs where someone appoints another to act on his behalf. The
rights and benefits would normally accrue to the person who appoints the agent but
the agent usually under a power of attorney can sue and be sued on behalf of his
principal.

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 g) Restrictive covenants: This covenant is often used in land law and where there is a
restriction running on land as to the use to which it maybe put either between the
original owner and the first purchaser, the subsequent purchaser would be bound by
the said covenant.
h) Negotiable Instruments: Where one person stands as guarantor to another in a
negotiable instrument, the guarantor becomes privy to the contract and a party by
substitution.

Exemption Clauses

The purpose of exemption clause in contract is that a party is limited or exclude from liability
of an event or incident that may recurred after the contract is made or agreed upon by both
parties.

Exemption clauses and limiting terms are usually found in standard form contracts made by
commercial companies and public authorities. These exclusion clauses are as a rule, contained
in printed forms and are used for all contracts of the same category. More often than not, the
consumer is not even aware of these exclusion/exemption clauses and when he cares to read
them, he may still have no choice than to accept them. For example, a passenger who is
hurrying to reach a particular destination by air at a particular time has no option than to
accept the exclusion clauses contained in his airline-ticket, unless of course, he can afford a
private jet.

We shall consider these rules under the following headings:

i. Unsigned Documents
In the case of Parker v. South Eastern RY Co. Mr. Parker left a bag in the cloakroom of
Charing Cross railway station, run by the South Eastern Railway Company. On depositing his
bag and paying two pence he received a ticket. On the front it said "see back". On its back,
it stated that the railway was excluded from liability for items worth £10 or more. Mr. Parker
failed to read the clause as he thought the ticket was only a receipt of payment. However, he
admitted that he knew the ticket contained writing. Mr. Parker's bag, which was worth more
than £10, was lost. He sued the company. The question of law put to the court was whether
the clause applied to Mr. Parker. At trial the jury found for Mr. Parker as it was reasonable for
him not to read the ticket . The rules formulated by the court are follows:
a. If the person receiving the ticket did not see or know that there was any writing
on the ticket, he is not bound by the conditions;
b. If he knew that there was writing on the ticket, and knew or believed, that the
writing contained conditions, then he is bound by the conditions; and
c. If he knew that there was writing on the ticket, but did not know or believe that
the writing contained conditions, nevertheless he would be bound if the party
delivering the ticket to him had done all that was reasonably sufficient to give
him notice that the writing contained conditions.

ii. Signed documents

In the case of signed documents, the position seems to be simple and straightforward. The
general rule is that in the absence of fraud, duress or misrepresentation, the person signing
a document is bound by the exemption and limiting clauses contained therein. This rule was
settled in the case of L’Estrange V, Graucob in which a lady signed a form printed by sellers
of an automotive shot machine which she ordered from them. In addition to the main
(express) terms of the contract, an exemption clause contained in a very small print contained

26
the following term: ‘any express or implied condition, statement or warranty statutory or
otherwise not stated herein is hereby excluded”. When the machine was eventually delivered,
it did not work satisfactory and the buyer sued the supplier for breach of contract. The sellers
relied on the exclusion clause stated above as their defence. The lady, in turn stated that she
did not read the exclusion clause at the time of signing the contract, and that moreover, the
letters were too small to read. It was held that in the absence of fraud and misrepresentation,
the party signing it is bound, and it is wholly immaterial whether he has read the documents
or not.

TUTORIAL QUESTIONS-CASE STUDY

Question 1
(a) What do you understand by the term “acceptance” in relation to the Law of Contract?
(b) For an acceptance of a bilateral offer to be operative, certain conditions must be
fulfilled. What are these conditions?
(c) Ade offers to sell his car to Bala for N1million. Chukwu, Ade’s friend standing nearby
says “I will take the car for N1milion if Bala does not”. Bala is not interested in the
car. Does a contract arise between Ade and Chukwu? (CITN, Foundation April 2016)

Question 2
Smith is a trader dealing in Toyota Motor Spare parts. He purchased a carton of Alternators
from Okechukwu, the seventeen year old shop assistant of Mr. Price. Okechukwu who was
not in the shop when Mr. Price brought in the goods gave Smith a carton of Ford Car
alternators instead of Toyota Car alternators. Smith just discovered that the goods he bought
on credit were not Toyota alternators. It is the position of Lawyer Ralph is that there is no
contract ab initio as there are vitiating elements.
Required
Advise Smith on the position of his contract with Mr. Price. (ICAN Adapted).

Question 3

Bigsam android is played in Abolore mart with a sticker which says “For sale N124,000”.
Ajawhite walked into the showroom and ask the sales girl to sell the phone for N150,000. The
girl refused to sell the phone to him and he intends to sue the Abolore mart for breach of
contract. Show the legality of the case.

Question 4
Adebimpe is a businessman and the sole proprietor of Adebimpe and Associates. In January
2015, when he wanted to travel to Italy, Apeke, his wife could not go with him as usual
because of her highly paid job. As compensation, Adebimpe promised to buy for her three
different type’s jewelry and send to her. Unfortunately, he forgot to do so. Apeke is
considering suing Adebimpe, Advise her.

Question 5
Dr. Adebimpe who had just arrived in Lagos on a business trip decided to pass the might at
Sabo Royal Guest House. Upon driving his car into the car park, he was given a parking ticket
with inscription “Cars are parked at owner’s risk”. The following morning when he got to the
car park, he discovered that his car was missing. Dr. Adebimpe contemplates suing the
management of Sabo Royal Guest House although he admits that he reads the inscription on
the parking ticket. Advise him as to his chances of success.

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Question 6

Akin-Lola Nigeria Limited recently placed an advertisement in the Vanguard Newspaper,

requesting interested members of the public to tender for the supply of certain specific
machines to his company. Tajudeen duly sent his quotation. After two weeks of the advert,
Akin-Lola awarded the contract for the supply of the machines to John who did not even
submit a quotation. Tajudeen is contemplating suing Akin-Lola for breach of contract. Advise
him.

Question 7

A contract is not complete unless parties have capacity to contract. Explain the capacity of
parties and persons who lack capacity to contract.

Question 8.
a. Define mistake in contractual relationship
b. Give three (3) types of mistakes
c. Briefly explain the effect of mistake in a contract. (CITN, April diet 2013).
Question 9

Explain what “Contract uberrimae fidei” is and name Four (4) contracts in which the doctrine
applies. . (April diet 2015).

Question 10
Explain the following terms:
(a) An offer must be complete (2 Marks)
(b) An offer must be final (2 Marks)
(c) Distinguish with examples, between offer and invitation to treat (6 Marks)

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