EIE329

17th June, 2017

Cyberpreneurship and Cyber Law
THE LAW OF CONTRACT
Kennedy Okokpujie
THE LAW OF CONTRACT :Outline 2

Definition
Classification of Contracts
Essential Ingredients for a valid
Contracts
Discharge of Contracts
Definition of CONTRACT 3
 Definition: law of Contract 4
• Defining a generalized concept like Contract is a little bit difficult. It
is perhaps an over simplification to say that it is a “legally binding or
enforcement agreement” it should be noted that, there are some
definitions which have become by virtue of their having a common
theme.
• American Restatement (2nd) of the law of Contract 1978 defines it
as a promise or set of promises for the breach of which the law
gives a remedy or the performance of which the law in some way
recognizes as a duty.
 law of Contract (cont’d) 5

• Consensus ad idem is an agreement of parties to the same

thing: as a meeting of minds. It is the coming together of
two minds with a common intention: if the terms of an
agreement are Vague or illusory (deceptive) no binding
Contract will emerged from it. For there to be consensus ad
idem, a Contract must of necessity involve, at least, the
parties to it, for it is unrealistic for a person to Contract
with himself.
What Constitutes A Valid Contract? 6
In order that a valid contract between the parties should come into existence,
certain essential requirements must be fulfilled:
a. There must be an offer
b. There must be an acceptance
c. There must the contract must be consideration
d. There must be an intention to create legal relations
e. Parties must have full contractual capacity
e. Where special formalities are required by law to accompany the contact, these
formalities must be complied with.
f. The object of the contract must not be unlawful.
See further the elements of a valid contract in Anwasi v. Chabasaya; Omidiji v.
F.M.B. (2001) 6 NWLR (pt 731) 408 C.A. and Nwaigwe v. Transproject (Nig.) Ltd.
(2000) 8 NWLR (pt 669) 364 C.A
 Classification of Contracts
7

Contracts are classified into three basic types namely:

• Contracts of record
• Simple Contracts
• Contract under seal
It must be noted that every contract whether records,
simple contracts or contracts under seals, come under
one or more other classifications.
 Contract of Record 8
This consist of Judgment of and recognizances.
Where a court of record pronounces a judgment in favor of a
party to suit, the mere entry of judgment in record of the
court gives rise to a debt of record which makes payment of
the amount recorded by court obligatory.
As to recognizance, it may be said that where the person
enter into a written undertaking before the court, and in
default to pay a certain fixed amount of money, this create a
contract between the party giving the undertaking and the
judicial officer (judge or magistrate) representing the state.
 Simple Contract 9

This a contract, whether written or oral,

which is not under seal. Such contracts are
also called informal contract. Originally,
simple contracts were also referred to as
‘‘parol’’ contracts, but in modern times,
lawyers apply the “parol” specially to simple
contracts made orally and not in writing.
 Contract under Seal 10
A contract under seal is one reduced to writing, signed by the party or
parties contracting, and impressed with a seal. Any contract may take this
form but it is not necessary. However, certain contracts, such as
conveyances or grants of land, are required by law to be under seal. A
contract under seal is variously called “a deed”, “a specialty contract” or
“a formal contract”.
Contracts under seal enjoy two privileges which other contract lack.
First, they derive their binding force independent of agreement.
Second, they are binding whether there is what we call consideration or
not.
11
Contracts on the basis of enforceability 12
 Valid contract: A contract which satisfies all the conditions
prescribed by law is a valid contract. E.g. X offers to marry Y. Y
accepts X offer. This is a valid contract.
 A contract is void if it lacks one of the essential ingredients and
by implication, it never existed at all. A contract which cases to
be enforceable by law becomes void when it ceases to be
enforceable. In other words, a void contract is a contract which is
may be valid when entered into but which subsequently became
void due to impossibility of performance, change of law or some
other reason. E.g. X offers to marry Y, Y accepts X offer. Later on
Y dies this contract was valid at the time of its formation but
became void at the death of Y.
Contracts on the basis of enforceability (cont’d) 13
 A Voidable contract is one that is valid initially but may be brought to
an end (avoidable) at the option of one of the parties. The contract
ceases to be operative from the time one of the parties exercises his
option; that is a voidable contract is not automatically void unless
something is done to avoid it or set it aside. E.g. X threatens to kill Y, if
the does not sell his house for N200,000. Y sells his house to X and
receives payment. Here, Y consent has been obtained by compulsion
and hence this contract is voidable at the option of Y the aggrieved
party. If Y decides to avoid the contract he will have to return N200,000
which he had received from X. If Y does not exercise his option to
repudiate the contract within a reasonable time and in the meantime Z
purchases that house from X for N200,000 in good faith. Y can not
repudiate the contract.
Contracts on the basis of enforceability (cont’d) 14

A contract is unenforceable if it is perfectly valid

in all respect expect for the fact that it cannot be
enforced by an action in law. An example is where
the party wishing to enforce the contract lacks
some particular types of evidence, like evidence in
writing which is necessary for the enforcement of
this type of contract. Except for its
unenforceability, the contract is still a valid one.
Contracts on the basis of enforceability (cont’d) 15

Illegal Agreement: An illegal agreement is one the


object of which is unlawful. Such an agreement cannot
be enforced bylaw. Thus, illegal agreements are always
void – ab- initio (i.e. void from the very beginning)e.g.
X agrees to Y one million naira, if Y kills Z. Y kill and
claims one million naira. Y cannot recover from X
because the agreement between X and Y is illegal and
also its object is unlawful.
Contracts on the basis of Formulation 16
Express contract: Express contract is one which is
made by words spoken or written. Example1 : X
says to Y, will you may buy a car for N100,000? Y
says to X, I am ready to buy you car for N100,000.
It is an express contract made meeting.Example2:
X writes a letter to Y, I offer to sell my car for
N100,000 to you. Y send a letter to Y, I am ready
to buy you car for N100,000. It is an express
contract made in writing
Contracts on the basis of Formulation (cont’d) 17
Implied contract: An implied contract is one which is made otherwise than by
works spoken or written. It is inferred from the conduct of a person or the
circumstance of the particular case. Example1: A’s car gets a tyre puncture and A
drops the tyre with B ( a vulcaniser ) without a word, there is an implied contract
of repair of repair between A and B.
Example2: X, a coolie in uniform picks up
the bag of Y to carry it from railway platform to the ------ without being used by Y
to do so and Y allow it. In this case there is an implied offer by the coolie and an
implied acceptance by the passenger. Now, there is an implied contract between
the coolie and the passenger is bound to pay for the services of the coolie.
Contracts on the basis of Formulation (cont’d) 18
Quasi or constructive contract: It is a contract in which there is
no intention either side to make a contract, but the law imposes
contract. In such a contract eights and obligations arise not by
any agreement between the practice but by operation of law.
The principle on which the law imposes quasi-contractual
obligations is that no one should be allowed to enrich himself
inequitably at another’s expense.
Example: where certain books are delivered to a wrong address
the addresses is under an obligation to either pay for them or
return them.
Contracts on the basis of Extend of performance 19
Executed contract: It is a contract where both the parties to the contract have
fulfilled their respective obligations under the contract. Example: X offer to sell
his car to Y for 1 million naira, Y accepts X offer. X delivers the car to y and Y pays
1 million naira. it is an executed contract.
 Executory contract: It is a contract where both the parties to the contract have
still to perform their respective obligations. Example: X offers to sell his car to y
for 1 million naira. Y accepts X offer. It the car has not yet been delivered by X and
the price has not yet been paid by Y, it is an Executory contract.
Contracts on the basis of Obligation to Perform Contract 20

A bilateral contract consists of exchange of promise for a promise under a bilateral

contract, both parties have outstanding obligations which they must fulfill under the
buyer is obliged to pay and the seller is obliged to deliver the goods to the buyer.
In a unilateral contract, only one party is obliged from the onset while the other
party is completely free whether or not to accept. A unilateral contract can simply
be put as where one party is to set a stage for the other party to react or accept. It
is a kind of standard contract which goes beyond offer to the whole world, where a
reward is offered to anyone who finds and return a lost or stolen article, such as
money, load or information leading to the arrest of a criminal. The classical case of
Carlill v. Carbolic Smoke Ball Co (1893) I QB. 226. illustrate the good example of a
unilateral contract.
Other forms of contracts: 21
Joint Contract:
This is a contract made by two or more promisors who are
jointly bound to fulfill its obligations . Example: Where A and B,
owing a piece of land jointly, contract to see it to B.
Joint and Several Contract:
This is a contract in which two or more person are not only
equally bound together, but also individually bound. An example
is a contract between A and B jointly and severally guarantee
C’s loan to D.
Other forms of contracts (cont’d) 22
Entire Contract:
An entire contract is the one in which the entire fulfillment of the
promise by either party is necessary as a condition precedent to the
performance of the other party. For example, if there is a contract
between B and C whereby B promises to paint C’s car at a fee of
N10,000, B cannot by painting part of the car claim to be entitled to
the whole or part of the fee.
Severable Contract:
This is a contract which is intended by the parties to be divisible and
enforceable in portions. Under this types of contract some performance
may be given by one side so as to correspond to what is done by the
other party. A classic example is where in a contract between A and B,
A is to supply 2,000 bags of rice at 500 bags per month and each
monthly installment is to be regarded as a distinct undertaking.
 Essential Ingredients for a valid Contracts
23
In order that a valid contract between the parties should come into existence,
certain essential requirements must be fulfilled:
a. There must be an offer
b. There must be an acceptance
c. There must the contract must be consideration
d. There must be an intention to create legal relations
e. Parties must have full contractual capacity
e. Where special formalities are required by law to accompany the contact, these
formalities must be complied with.
f. The object of the contract must not be unlawful.
 Offer 24
An offer is a proposition made by one party called the offeror,
to another party, called the offeree, clearly and precisely
indicating the terms under which the offeror is willing to enter
into a contract with the offeree.
For a proposition to amount to an offer capable of acceptance,
it must fulfill three requirement.
1. It must be definite, certain and unequivocal. In other words,
it must amount to a definite promise to be bound provided the
certain specified terms are accepted.
 Offer (cont’d.) 25
2. The proposition must emanate from the person liable to be
bound if the terms are accepted, that is from the offeror or his
authorized agent. A proposition made by a person having no
authority to do so, purporting to be an offer, cannot create a
contract if accepted.
3. The offer must be communicated to the offeree. A person
cannot accept an offer of which he has no knowledge.
A offer may be made a definite person, to some definite class of
persons, or to the world at large.
Offer Distinguished From Invitation to Treat 26
On the other hand, an invitation to treat is a preliminary to an
offer. Its essence is that by it the supposed offeror is merely
initiating negotiation or “flying a kite” from which an
agreement or might not in time result. The negotiation
crystallizes into an offer, properly so called, when one of the
parties (who thus become the offeror) finally assumes a
definite and un-shifing position of preparedness to be bound if
the other party accepts.
Offer Distinguished From Invitation to Treat (cont’d) 27
Over the years, instance of invitation to treat have evolved through case
law. Some of those examples are:
1. Auction Sales and Request for Bids ( Harris v. Nickerson)
2. Display of Goods for Sale ( Pharmaceutical Society of Great Britain
v. Boots Chemist (Southern) Ltd )
3. Request for Tenders
4. Announcement of a Competitive Scholarship Examination
5. Invitation to Interview for a Job
6. Advertisement of Sales in Catalogue
7. Negotiations for Sale of Land and for Other Complicated Contract
Termination of Offer 28
Once made, an offer remains open for acceptance until one of the
following events happens to terminate it:
1. Revocation
2. Rejection
3. Lapse of time
4. Occurrence or Non-Occurrence of an Event
5. Death before Acceptance
6. Loss of Contractual Capacity by Either Party.
 Acceptance 29

Acceptance is an unconditional assent communicated by the offeree to

the offeror. It is a final expression of assent to the terms of the offer. A
reply to an offer without equivocation, qualification or addition. An
acceptance with qualification or addition operates as a counter-offer and
not an acceptance.
1. In the case of Hyde v. Wrench, the defendant offered to sell a farm
to plaintiff for €1000. In reply, the paintiff offered €950. This court
held that there was not contract. The counter offer of €950 was a
rejection of the original offer.
2. What is “an offer of mere coincidence of two independent acts”?
3. What is a “Cross-offers”?
Consideration
30
Consideration is defined as some right, interest,
profit or benefit accruing to one party, some
forbearance, detriment, loss or responsibility given,
suffered or undertaken by the other.
However, the most preferred definition in
contemporary world is that consideration is the price
for which the defendant’s promise is brought. The
‘price’ or ‘something’ is the consideration and it may
be either an act or a promise.
Consideration Illustration
31
1. A received N1000 in return for which he promises to deliver goods
to B. Here, the money A received is the consideration for the
promise he makes to deliver the goods.
2. C promise he deliver goods to D, and D promises to pay for the
goods when they are delivered. Here, the benefit C receives is D’s
promise to pay, and in return he promises to deliver the goods.
3. X lends a book to Y and Y promises to return it. Here, the
advantage is entirely on Y’s side, but X suffers a detriment in
parting with his book, and this is consideration to support Y’s
promise to return it.
General Rules on Consideration 32
The courts have, over the years, developed some general rules on
consideration and these rules are as follows:
1. Consideration is required for all simple contracts.
2. Consideration must not be illegal, immoral or contrary to public
policy.
i. A promise to pay B N10,000 in consideration of killing B A’s enemy C;
B kills C; B kills Can sues A for the money. B’s action will fail because
the consideration he furnished is illegal.
ii. X agrees to have illicit sexual intercourse with Y who promises to pay
her N800 in return. X does her part of the agreement and sues Y for
the N800. X’s action will fail because the consideration she furnished
is sexually immoral.( Aiyede v. Norman-Williams (1960) L.L.R. 253)
General Rules on Consideration (cont’d) 33

iii. E promises to pay N200,000 to D if D would influence Justice X to dismiss a

criminal case pending before Justice X. D accomplishes the result and sues E for the
money. The action will fail for D’s consideration for E’s promise is contrary to the
public policy.
3. Consideration Must not be past
4. Consideration must move from the promise, though not necessarily to promisor.
5. Consideration must be sufficient but need not be adequate
 Intention to create legal Relations 34
Intention to create legal relations is another essential element necessary for the
consummation of a valid simple contract. The party seeking to enforce a contract
must not only prove that there was an agreement in the form of a definite offer and
unequivocal acceptance with presence of consideration, he must be also go ahead
and prove to the court that he intended to be bound by the agreement. The
existence of an intention to create legal relation need not be expressly stated.
Where it is not expressly stated, the test to discover whether it exist or not is
objective. This means that it is the view which an officious by-stander will have the
transaction that matters.
1. Domestic Agreement.
Engagements of purely domestic or social nature are often not intended to be
binding in law but are intended to rely on bonds of mutual trust and affection
( Balfour v. Balfour) also (Jones and Padevatton)
 Intention to create legal Relations (cont’d) 35
2. Commercial Agreement ( Rose & Frank Co. v. Cromption Bros. Ltd)
3. Collective Agreements ( Ford Motor Co. v. Amalgamated Union of Engineeing and
Foundry Workers)
4. Ex Gratia Payment ( Edwards v. Skyways Ltd)
5. Without prejudice Negotiations ( Tomlin v. Standard Telephones and cables Ltd)
 Capacity 36
As a general rule, any person is capable of entering into contract or all persons of
full age are capable of entering into contract. However, some classes of persons are
rendered incompetent in law to enter or have limited contractual capcity.
1. Corporations (Section 38 of the companies and Allied Matter Acts)
2. Illiterates
3. Married Women
4. Persons of Unsound Mind (Section 2 of the Sale of Goods Act 1893)
5. Drunken person (Section 2 of the Sale of Goods Act)
6. Infants ( Infants Relief Act 1874)
 Formalities 37
As a general rule, no special formalities are required for the creation of a contract.
Writing, for example, is not usually necessary: a spoken word, or even a nod or a
wink will do. But there are certain major exception to the general rule.
1. Contracts Which must be Under Seal
The principal examples which apply through-out Nigeria are conveyances of land and
leases exceeding three year. ( Real Property Act 1845, section 3, an English Statue of
General Application in Nigeria; Property and Conveyancing Law 1956 cap. 100 ( W.N))
In States within the former Western Nigeria and Bendel State, a statutory charge
must also be by deed. Where a deed is not used, the conveyance, lease, or charge
will be in ineffective to transfer a legal estate, but may operate in equity only
( Ezejiofor, et. al. op. cit pg. 34)
 Formalities (cont’d) 38
2. Contracts Which Must be In Writing
There are a few contracts, which are required by Statute not to be under seal but in
writing. Among these are:
i. Bills of exchange
ii. Promissory notes
iii. Contracts for the transfer of shares in a public company
iv. Contract of marine insurance
v. Hire Purchase Contracts within the Hire-Purchase Act
Failure to use the proper form renders the contract or transaction void, or in the
case of a contract of marine insurance inadmissible in evidence.
 Formalities (cont’d) 39
3. Contract Which Must be Evidenced In Writing
Certain contracts may not themselves be in writing but are required to be evidenced
in writing. This means that there must be written evidence of their terms. If there is
no such evidence, the contract will be unenforceable.
Contract in this category are:
i. Contract of guarantee
ii. Contracts for the sales or other disposition of land e.g. a contract to buy land, or
to take a mortgage or charge of land.
iii. Money lenders contracts.
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