Professional Documents
Culture Documents
COURSE OUTLINE
a) Definition of company
b) Types of company
c) Formation of company
d) Effect of Incorporation
e) Constitution of company
f) Principal organs of a company
g) Winding up of a company
h) Business Name
5. Partnership law
a) Definition
b) Types of partnership
c) Rights of partners
d) Relating of the partners with 3rd party
e) Dissolution of partnership
MEANING OF LAW
There is no universally accepted definition of law. The definition of law varies from one
individual, society or country to another. Several attempts have been made by learned
jurists to define the term law, but none of the definitions gained universal acceptability.
In general, the term law may be viewed from two broad senses: the general sense and the
technical sense. Law in the general sense is a broad and open usage of the concept to
mean a rule of action expressing a verified regular pattern of behavior or consequence in
given circumstances. Thus, you hear the law of gravitational force, Newton’s Law of
motion, bois Law, etc in the pure sciences. You also hear economists speak of the laws of
demand and supply, the law of diminishing marginal utility, etc.
In the technical sense however, law can simply be defined as consisting of body of rules
which regulate human conduct in a society and are equally recognized as binding, and the
breach of which can be enforced in a court of law, either by the state or the affected
individual.
NATURE OF LAW
1. Law is a body of rules: It consists of a multiple of rules, which are not contained in one
document.
2. Law regulates human conduct: Law is normative in nature; it serves as a guide for
human behavior by telling us what to do or what not to do
3. Law can be enforced: Breach of law normally attracts sanction. Enforcement is very
essential to the existence of the law.
4. Law is recognized as binding: Where law is not recognized as binding by the people of
the community, nobody will be interested in complying with it.
5. Law has territorial application: Law is meant to regulate human conduct in a given
community, and it has validity only within that particular community.
The laws operating in Nigeria are derived from the following sources:
1. ISLAMIC LAW – Islamic law is the law governing the lives of Muslims and it is
divine in origin but human effort helps in extending and developing it. Islamic law
is found in the Quran, Sunnah, Ijma’I (Consensus of Ulamas) and Qiyas (analogy).
2. CUSTOMARY LAW – Customary law is an important aspect of law in the lives
of many Nigerians because it regulates their culture, marriage and social
relationships. For a custom to be applied, it must not contradict a law made by the
Nigerian legislature, and must not be a law that promotes injustice.
3. ENGLISH LAW – English law comprises of the English common law, doctrines
of equity and statutes of general application. This type of law is normally applied
by the magistrate courts and the High Courts.
4. NIGERIAN LEGISLATION – These are statutes passed in Nigeria by the
Nigerian Government whether at state or federal level.
5. NIGERIAN CASE LAW – These are decisions made by the Nigerian superior
courts of record and are regarded as sources of Nigerian Law. According to the
doctrine of judicial precedent, courts are required to follow earlier decisions in
similar cases.
CLASSIFICATION OF LAW
1. CRIMINAL AND CIVIL LAW – Criminal law is the law of crimes, and a crime
is an act or omission which is punishable by the state. Civil law on the other hand
is concerned with the rights and duties of individuals towards each other. The
purpose of criminal law is to punish the offenders, whereas the purpose of civil
law is to enable an individual to obtain compensation or remedy for the wrong
done to him by another person or persons.
2. PUBLIC AND PRIVATE LAW – Public law deals with matters of public
interest, whereas private law deals with matters of private interest. Examples of
public law are criminal law, constitutional law, revenue law, etc. Examples of
private law are the law of contract, law of torts, law of succession, etc.
3. SUBSTANTIVE AND PROCEDURAL LAW – Substantive law defines or
creates rights, duties, or liabilities in a particular branch of law. It covers subjects
such as criminal law, law of contract, constitutional law, etc.
Procedural law is the law of procedure. It deals with the procedure or methods of
initiating proceedings or proving a case.
An example of substantive law is penal code law which defines all criminal
actions. Example of procedural law is the criminal procedure code (CPC), the
Administration of criminal justice Act (ACJA) which all provides how the guilt of
an accused person may be proved.
4. MUNICIPAL AND INTERNATIONAL LAW – Municipal law consist of all
the laws operating within the territorial boundaries of a given country. E.g. ACJA,
Custom and Excise Act, etc
International law on the other hand governs the relationship between nations. E.g.
Universal Declaration on Human Rights (UDHR)
BRANCHES OF LAW
There are many branches of law and some of them are named here as examples;
1. CONSTITUTIONAL LAW – This is the branch of law that defines the functions
and powers of the organs of Government at various levels and their relationship
with the citizen.
2. CRIMINAL LAW – This is the branch of law that defines offences and provides
punishment for the offences.
3. COMMERCIAL LAW – This is the branch of law that lays down rules and
regulations relating to commercial and business transactions.
4. FAMILY LAW – This is the branch of law that regulates family relationship
including marriage, divorce and custody of children.
5. LAW OF SUCCESION – This is the branch of law that lays down rules and
regulations on how to distribute the estate of a deceased person to his heirs.
6. LAW OF EVIDENCE – This is the branch of law that lays down the nature and
procedure of proving a case before the court.
LAW OF CONTRACT
Definition:
A contract is defined as an agreement between one or more person with a view to enter
into legal relations, the breach of which entitles the aggrieved party to a remedy in a court
of law.
A contract has also been defined as an agreement which is binding on the parties to it,
and which may be enforced by court in the event of default by any of the parties.
Classification:
For any contract to be valid and enforceable in law, it must meet certain requirements:
1. Agreement consisting of Offer and Acceptance
2. Consideration
3. Intention to create legal relations
4. Legal capacity and
5. Absence of vitiating elements
Offer
- 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.
- Offer must satisfy certain conditions: 1) It must be definite, certain and
unequivocal, 2) its objective must be to create a legal obligation, 3) it must be
communicated to the offeree. See BCC Plc V. SKY Insp. Nig Ltd (2002) 17
NWLR 91
- Offer could be:
a. Specifically addressed to a particular person or general, addressed to the whole
world. See CARLILL V CARBOLIC SMOKE BALL CO. (1893)1 Q.B.253
- An offer can be made expressly (ie by word of mouth either in the presence of
each other or by telephone, as well as by telex or telegraphic message or by
writing) or by conduct (impliedly).
Offer & Invitation to Treat
- Often an invitation to make an offer (i.e an invitation to treat) is confused with an
offer.
1. Display of goods in shelves in a shop supermarket, self-service shops: Fisher V. Bell
(1961)1 QB 394 where it was held that ‘ it is clear that the display of an article with a
price on it in a shop window is merely an invitation to treat. It is in no sense an offer for
sale, the acceptance of which constitutes a contract.
2. An advertisement of goods in a catalogue: Partridge V. Crittenden (1968) 2 All ER 421
3. Invitations to tender: Spencer V. Harding (1870) LR 5 CP 561
4. Auction sales: Harris V. Nickerson (1873) LR 8 QB 286; Payne V. Cave
Termination of Offer
Once an offer is made, it remains open for acceptance until terminated before acceptance.
Termination takes place in the following situations:
1. Revocation (i.e. withdrawn). But notice of termination must reach offeree before
acceptance.
2. Rejection:-Rejection of an offer may occur in two ways namely:
a) By a direct, intentional refusal of the original offer
b) By a counter offer.
3. Lapse of Time: - If an offer is stated to be open for a fixed time, it clearly cannot be
accepted after that time.
4. Conditional Offer: where an offer is made subject to the fulfillment of certain
conditions, then it terminates where the conditions are not met
5. Death: Death of either party terminates the offer
6. Loss of capacity before acceptance
Acceptance
Acceptance is the final expression of assent to the terms of an offer.
• An acceptance like an offer may be made by word of mouth, in writing, or by
conduct.
• For acceptance to be valid, the following conditions are necessary:
• 1. The acceptance must be unqualified, an attempt to accept an offer with
qualification, condition or addition operates as a counter-offer, not an acceptance:
2. It must correspond with the offer;
3. An offer can only be accepted by the person to whom it is made or by his agent duly
authorized. But where an offer is made to the public at large, any member of the public
may accept if (see Carlill V Carbolic Smokeball Co. (supra).
4. An acceptance must be made not only with full knowledge of the offer but also in
reliance on it. Therefore, a contract cannot result from the mere coincidence of two
independent acts.
5. The general rule is that acceptance of an offer is not complete until it has been
communicated to the offeror either by the offeree himself or by his duly authorized agent.
Acceptance may be effected in the following ways:
1) If the offeror prescribes or indicates a particular method of acceptances, and the
offeree accepts in that way, there will be a contract, even though the offeror does not
know of the acceptance.
2) Acceptance communicated to a duly authorized agent of the offeror is effective in law.
3) Acceptance by post
4) Where the offeror himself expressly or impliedly states the need for communication.
5) Communication of acceptance is waived impliedly, i.e, is deemed to be waived where
it is to take the form of the performance of an act, as in the case of unilateral contracts.
Consideration
The general rule of law of contract is that a contracted not supported by consideration is
unenforceable. Therefore for a contract to be valid there must be an exchange, either of
promises, or a promise for an act. The basic feature of the doctrine is reciprocity. Thus, it
is the law that something of value in the eyes of the law must be given for a promise in
order to make it enforceable as a contract.
Rules
- A moral obligation does not constitute consideration: Eastwood V Kenyon
(1840)11 A & E 438.
- Consideration must move from the Promisee, only one who furnished a
consideration can bring an action to enforce the promise.
- Consideration may be executory or executed.
- Consideration must not be past: Consideration is said to be past when it consists
of a promise or an act prior to, and independent of, the promise which the plaintiff
seeks to enforce.
- Consideration needs not be adequate but must be of value in the eyes of the law:
Thomas V Thomas (1842)2 Q.B. 851.
- Consideration must be real, valuable , genuine and sufficient.
- Consideration must be legal: Kwaddeh V. Akante (1975) 2 GLR 193
INTENTION TO CREATE LEGAL RELATION
Contract is a serious issue which must evince an intention to be bound. Lord Atkin said
‘to creat a contract there must be a common intention of the parties to enter into a legal
obligation, mutually communicated expressly or impliedly’: Rose & Frank Co. V.
Crompton Bros (1923) AC 445. Therefore, there are certain situations in which the law
presumes presence or absence of intention.
1. Domestic and Social Engagements: Here there is a presumption in law that the
contractual intention is absent and the parties to such an agreement cannot sue each other
on it: Balfour V Balfour (1919)2 K.B 571; McGregor V McGregor(1888)21 Q.B.D. 424
2. Commercial Agreements: Here the courts presume that an intention to create legal
relations exists, unless and until the contrary is proved: Carlill V Carbolic Smoke Ball’s
Case (supra)
3. Mere Puff: These are exaggerated advertorials and the law presumes absence of
intention.
Legal Capacity
• For a contract to have any validity, the parties must have full legal capacity. This
means not every legal person has legal capacity as examined hereunder :Labinjoh
V Abake (1924) 4 N.L.R. 33.
a. Infants: An infant is one who does not attain the age of 21 years, some state laws
reduced the age to 18 years. The validity of the contract of an infant depends on
the nature of the contract.
- Valid contracts of an infant (contract of necessaries)
- Voidable contracts of an infant: these are contracts voidable at the instance of the
minor.
- Void.
b. Insane Persons: An insane person lacks the capacity to contract and if he entered
into such contract it is not binding on him.
c. Drunken Person: A drunken person cannot enter into a valid contract because he
cannot appreciate the terms of such contract. However, such contract will become
binding where at the time of entering he appreciates the terms and the other party
was not aware of his state: Methews V. Baxter (1873) L.R. 8
d. Corporations: Companies have legal capacity to enter into contract but such
capacity may be limited by the object clause or any law.: Ashbury Rly Carriage &
Iron Co. V. Riche (1875) H.L.653
Vitiating Elements: Mistake
Meeting of the minds is fundamental to any contract. Absence of the meeting of the
minds vitiates the contract. Consent of both or each party must be real, genuine and freely
and voluntarily given. The following may vitiate consent.
1. Mistake: This occurs where the parties are not at one on some material facts at the
time of entering into the contract. Mistake could be:
a. Common mistake, where both parties have the same misunderstanding as to the
facts
b. Mutual Mistake: where the parties are at cross-purposes
c. Unilateral Mistake: where only one party is mistaken and the other knew or is
deemed to know. Instances are mistaken identity, e.g. agency and documents
mistakenly signed.
Vitiating elements: Misrepresentation
Misrepresentation occurs where a statement made during negotiation turns out to be a
false representation. Misrepresentation can be:
a. Fraudulent, where a representation is deliberately made knowing that it is false or
having no reason to believe that it is true: Fereet V. Hill (1854) 23 L.J. 185
b. Negligent, where a representation is made by a person who has no reasonable
grounds for believing the statement to be true: Jennings v. Broughton (1854) 5
DGM 126
c. Innocent, where the maker has reasonable grounds for believing that the statement
is true: New Bigging V. Adam (1886) 34 Ch D. 582; Oscar Chess Ltd V. Williams
(1957) 1 All ER 325.
Vitiating Elements: Duress & Undue Influence
DURESS: No free will or consent where a party was forced into the contract by violence
or threatened violence. Hence, such contract is void.
UNDUE INFLUENCE: This is any influence that prevents a person from exercising his
free will or judgment to enter into contract due to existence of a special relationship. For
instance the fiduciary relationship existing between teacher/ student; Doctor/patient;
Lawyer/client; uncle/nephew; etc.
Termination/ Discharge of Contract.
Discharge occurs where all the rights and obligations under the contract are
extinguished and it may occur in any of the following ways:
1. By performance
2. By expiration of time
3. By mutual agreement
4. By breach, giving rise to claims for remedies.
5. By frustration, if the contract becomes impossible to perform without the fault of
the parties which may occur in the following situations
- Where there is a destruction of the subject matter
- Non-occurrence of fundamental event
- A change in law
- Personal incapacity in a contract of personal service
- Outbreak of war
Remedies for Breach of Contract
On the occurrence of breach of contract, the following remedies are available to the
aggrieved party;
1. Action for damages (compensation for loss)
2. Repudiation (cancel or rescind the contract)
3. Injunction (ask the court to command a party to perform or restrain from
performing the contract)
4. Quantum meruit (ask the court for compensation to the extent of work done).
Formation of Contract of Employment – All the essentials of a valid contract are also
applicable to contract of employment, which means there has to be offer, acceptance,
capacity, etc.
Rideout defines contract of employment as an agreement between an individual employer
and individual employee where by the employee agrees to work for the employer in
return for wages.
By section 7(1) of the Labour Act of 1974, if you are employing a worker you must give
him his letter of appointment within the expiration of 3 months and the particulars of
which should contain the followings;
1. The name of the employer and the employee with the particulars of the
employment;
2. The name and address of the worker and the place and date of his employment;
3. The nature of his employment. If the contract is for a fixed term, the date at which
the contract is going to expire;
4. The appropriate period of notice to be given by the party wishing to terminate his
contract;
5. The rate of wages and method of calculations thereof and the manner and period
of payment of wages;
6. Any term/s or condition/s relating to-
a. Hours of work,
b. Holidays and holiday pay
c. Incapacity for work due to sickness or injury, including any provision for sick
pay
d. Any special condition/s for the contract.
Contract of employment may be terminated through any the following two ways;
1. By mutual agreement between the parties
2. By operation of law. e.g.
- Death of one of the parties
- Frustration: the contract can be frustrated by some elements. For instance
bankruptcy, act of God, insanity, fire disaster, paralysis, etc/
Formation of a Company
Any two or more person may register a company: section 18. The steps for incorporation
are:
1. Delivering incorporation documents:
2. Filing incorporation documents:
3. Issuance of certificate of incorporation by CAC.
Constitution of a Company
The Memo and Articles of Association are the key incorporation documents. While the
memo contains key issues such as the objects, name and liability of members, the article
is a fundamental instrument for the internal operation and organization of any company
in Nigeria. The functions of the two documents include to ensure balance of powers and
to provide for the duties of directors and shareholders, distribution of risks, profit and
control. The two documents once registered will become contracts between the company,
members and officers: section 41.
The Principal Organs of a Company
The company is a fictional entity that acts through its principal organs, viz: the
shareholders in general meeting and the board of directors. While the members of the
latter are appointed by the former to manage and run the affairs of the company, the
former is a statutory organ consisting of all the shareholders of the company: see Marshal
Valve Co. V. Manning Wardle & Co (1909) 1 Ch 267; Isle of Wright Rly Ltd V.
Tahourdin(1883) 25 Ch. D. 320. Automatic Self-Cleansing Filter Syndicate Co. V.
Cunninghame (1906) 2 Ch. 32; Shaw & Sons Ltd V. Shaw (1935) 2 KB.113;
Grammaphone& Typewriter Ltd V. Stanley (1928) 2 K.B. 89. See also ss. 63 and 64 of
CAMA and the cases of AVOP Plc V. A-G. Enugu State (2000) 7 NWLR (Pt. 664) 260;
Ladejobi V. Odutola Holdings Ltd (supra)
Winding up of a company
1. The court: the court may wind up a company if a petition is presented before it
either by the company itself, creditors or the Corporate Affairs Commission that
the company be wound up on any grounds mentioned under section 408 of the
Company and Allied Matters Act. The court may wind up the company if in its
opinion it is just and equitable to do so.
2. Voluntarily: voluntary winding up is further sub-divided into members’ and
creditors’ voluntary winding up.
3. Winding up subject to the supervision of the court: this comes into effect where
the company passes a resolution for voluntary winding up. The court may on
petition order that the voluntary winding up shall continue subject to the
supervision of the court
A petition for winding up subject to the supervision of the court operates for most
purpose as a petition for winding up by the court.
Partnership
Partnership is defined as the relation that subsists between persons carrying on a business
in common with a view of making a profit. Generally, partnership is governed by the
partnership agreement. Each partner must have the requisite capacity to enter into a
contract and the objectives of the partnership must be legal because law does not give
credence to illegality.
The partnership agreement usually contains the following;
1. Name of the firm
2. Place and nature of business
3. Formula for sharing profit and loss
4. Functions of partners
5. Account and dissolution of partnership
Types of partnership
There are four main types of partnership, namely;
1. General partnership (active)
2. Limited partnership (dormant/sleeping)
3. Corporate partnership (two or more companies as partners)
4. Group partners (partnership of firms)
Rights of partners
1. Action for specific performance in case of breach
2. Claim for damages for misrepresentation
3. Injunction to restrain partner from acting contrary to the terms of partnership
agreement
4. Order for account
Relation of the partner with 3rd party
There is an agency relationship between the partners and where a partner does not act for
the furtherance of the partnership business, he will be personally liable.
Dissolution of partnership
Subject to the terms or agreement between the partners, partnership is dissolve due to the
occurrence of any of the following;
1. If entered for a fixed time and the time has elapsed
2. Termination of venture or undertaking
3. By death of one of a partner if they are not more than two, or when one of the
partners becomes bankrupt
4. If the objective of the partnership business becomes illegal
5. By court