BUSINESS LAW

DEFINITION OF LAW AND NIGERIAN LEGAL SYSTEM

MEANING OF LAW
The term “Law” has been defined by various scholars and with varying degree of
success. Indeed, no adequate or satisfactory definition of law has evolved. Simply put,
law can be defined as a body of rules and regulations by which an organized society is
governed, a breach of which carries specific sanctions. Law is therefore normative in
character in the sense that it prescribes rules and seeks to regulate human behaviour in
the society.

FUNCTIONS OF LAW IN THE SOCIETY

(i) Instrument of social change
(ii) Maintenance of law and order
(iii) Instrument of social control
(iv) Instrument of social engineering
(v) Instrument of economic development
(vi) Instrument of social justice and social equilibrium
(vii) Instrument of class abridgment, e.g. tax laws
(viii) Settlement of disputes
(ix) Instrument of stability
(x) Law confers legitimacy on a government.

LEGAL SYSTEM -DEFINITION

A legal system may be defined as the rules that guide inter relationship among
the citizens of a society as well as the administrative structure and the machinery put in
place for the establishment and enforcement of those rules. This includes the court
system, the police, the prison system, etc. simply put, it means the laws, courts,

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personnel of the law and the administration of justice system in a given state, country or
geographical entity.

FEATURES OF THE NIGERIAN LEGAL SYSTEM

(i) It is influenced and fashioned along the British legal system. This is
essentially a reflection of the colonial relationship Nigeria had with Britain.
(ii) Multiplicity of legal system: There is co-existence of various legal systems
(Islamic, Customary and English Laws) in Nigeria. This feature is essentially a
reflection of the diversity of Nigeria as a State. Nigeria is a federation of 36
States and a Federal Capital Territory. The Federal government is
empowered to make its own laws and so also is each State. Within each
State, a part from the various local government councils which are
empowered to make by laws, there are many ethnic groups and sub-groups,
each having her own indigenous customary law.

SOURCES OF NIGERIAN LAW

The sources of Nigerian law include the following:
1. THE RECEIVED ENGLISH LAW: This is a major source of Nigerian law, and it is
a reflection of the colonial relationship Nigeria had with Britain. A substantial part of the
Nigerian law is derived from the English statutes. This process is called legal
transplantation. It refers to the reception of foreign legal system into a local or
indigenous legal system. The received English law is made up of the following:

(a) The Common Law: This is the earliest system of law in England. It is common to
the whole of England. Common law is a very rigid system of law. It is not enacted but
developed by the English judges. The common law courts include the King’s Court, the
Court of Exchequer and the Court of Common Pleas. The common law remedy is
basically award of damages, i.e. financial compensation for a wrong.

(b) The Doctrines of Equity: The rigidity of common law and the inadequacy of her
remedies led to the emergence of the rules of equity. Equity came to mitigate the rigidity
of common law and also provided additional and better remedies. The court of equity
(Court of Chancery) followed no established procedure in dealing with cases before it.
Its intervention was based primarily on the ground of conscience.

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 The introduction of equity into English law led to some unhealthy rivalry between
the Common Law Courts and the Court of Chancery. The Common Law Courts alleged
that the Court of Chancery was frustrating their decisions and that equity came to
replace common law. This conflict was referred to King James I, who ruled that
whenever there is conflict between common law and equity, the rules of equity should
prevail. In 1873, the Judicature Act was enacted, which amalgamated or merged the
administration of common law and equity. Thus, this led to the emergence of a single
court with power to administer both the common law and equity.
(c) Statutes of General Application: These were statutes made in England on or
before January 1, 1900 which were applicable in Nigeria as status of general application
e.g., Sale of Goods Act (1873), Infants Relief Act (1874), Partnership Act (1890), Wills
Act (1837), Status of Fraud (1677) The reception of these laws into the country has
always been by local statutes. The first of which was the Ordinance No. 3 of 1863.

(2) CUSTOMARY LAW: This refers to native law and customs. Customary law is a
body of rules and norms by which the indigenous communities are governed. It consists
of customs accepted by members of a local community as binding on them.

Features of Customary Law

(i) It must have been in existence at a relevant point in time and enjoy
popular acceptance of the community.
(ii) Flexibility: Customary law is flexible and changes with time.
The flexibility of customary law was also demonstrated in the case of Damole Vs.
Dawodu (1958) 4 FCS 46, where the court had to determine whether idi igi (equal
share by mothers) system of distribution of the estate of a person that died intestate
under the Yoruba native law and custom has given way to Ori-Ojori (equal share by the
children).
(iii) Customary law is largely unwritten. Its source is essentially the
recollection of elders and others whose traditional roles enable them to
have good knowledge of the customs and tradition of their place.
However, efforts are being made in recent time to document customary
laws.
(iv) It must enjoy general acceptability among the people as binding on them
or as a binding custom. Invariably the practice of a custom should not be
such that it can be observed at will.

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 (3) NIGERIAN LEGISLATION: This refers to laws made by the law-making organs
in the state. It comprises of the followings:
a. Ordinances: These are laws passed by the Nigerian central legislature before
October 1954. Then there was only one legislative council in Nigerian and the laws for
the whole country were uniform.
b. Acts: These are the legislations made by the Federal Legislature in a civilian
regime; i.e. the Act of the National Assembly.
c. Laws: are enactments made by the legislature of a region (now state) in a
civilian regime. For example, Laws passed by the Abia State House of Assembly
d. Decrees: These are laws made by the various Federal Military
Governments in exercise of its legislative powers.
e. Edicts: These are enactments made by the Military Governor of a
state.
f. Bye Laws: These are laws made by the various Local Government
Councils in the country whether in a military or civilian dispensation.
g. Subsidiary or Delegated Legislation: These are laws made by administrative
bodies or parastatals, ministries or agency in accordance with enabling law. Subsidiary
legislation has been held to have the force of laws.
(4) ISLAMIC LAW: This is sometimes referred to as Sharia Law. Islamic law is a
source of Nigerian law, though its operation is limited to Northern Nigeria; and
applicable to the adherents of the Muslim faith.
The sources of Islamic law include the Holy Quran, the sayings of Prophet
Mohammed (Sunna), the consensus of Islamic Scholars (Ijima) and reasoning by
analogy (Kiyas). It is made applicable by the High Court Laws of Northern States of
Nigeria (See Section 28 of Cap. 49, Laws of Northern Nigeria 1963).
The version of Islamic law in Nigeria in force is the Moslem law of the Maliki
school of thought. Islamic law governs matters relating to inheritance, marriage, divorce,
custody of children, etc.
Features of Islamic Law
(i) It is foreign and based on Islamic faith.
(ii) It is a written law.
(iii) It applies only to members of Islamic faith.

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 (iv) There are different schools of Islamic law. In Nigeria, the application of
Sharia law varies from one community to another. Thus, in the case of
Tapa v. Kuka (1946) 18 NLR 5, the court held that the applicable Islamic
law was that of a Nupe Mohammedian.
(5) CASE LAW/JUDICIAL PRECEDENT: The doctrine of judicial precedent
(otherwise called STARE DECISIS) is an old common law doctrine by which the lower
courts are obliged to follow or adopt the reasoning of higher courts when faced with
similar facts. Case laws are therefore laws found on judicial reasoning. This doctrine
forms part of the common law adopted in Nigeria. By the application of this doctrine, the
decisions of superior or higher courts are binding on the lower courts when faced with
similar facts except the case at hand can be distinguished. Note that a Judge’s decision
is made up of Ratio Decidendi or an Obiter dictum.
Ratio Decidendi: This is the reason for the decision. It is a rule of law upon which a
decision is founded or with which a judge rationalizes his decision. It is only a ratio
decidendi in a decision that constitutes a binding precedent. This implies that it is not
everything said by a judge in his judgement that constitutes a precedent. A good law-
making reporting system is a sine quo non (indispensable) to the operation of the
doctrine of judicial precedent.
Obiter Dictum: This simply means for Statement made by the way. It is usually a
personal opinion of the judge upon which no decision is founded. Obiter dictum does
not constitute a precedent and are therefore not binding. They may however, be of
persuasive authority. Obiter dicta are usually made for the purpose of analogy.

(6) INTERNATIONAL LAW: International law can be defined as a body of rules that
govern the international community. It governs the relationship between sovereign
States. The sources of international law include treaties, (conventions) customary
international law, case law, etc. When Nigeria is a signatory to any treaty or convention,
the provision of such treaty becomes a part of Nigeria law once it has been ratified by
the National Assembly. See section 12 of the 1999 Constitution.

COURTS IN NIGERIA
The court system is responsible for the administration of justice in Nigeria.
The diagram below shows the hierarchy of courts in Nigeria

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HIERARCHY OF COURTS
Supreme Court

Court of Appeal

Sharia Court State High Federal High Customary National Industrial

Of Appeal Court Court Court of Appeal Court

Magistrate Court/

District Court
Upper Court Tax Appeal Customary Court
Tribunal

Area Court
SUPREME COURT
This is the apex court in the hierarchy of courts in Nigeria. The Court was first
established by the 1963 Constitution as the Federal Supreme Court. The Court
exercises both civil and criminal jurisdiction. The decision of the Court is final. Without
prejudice to the exercise of power of prerogative of mercy by the President of Nigeria
and State Governors, no appeal shall lie to any other body, person or authority from the
determination of the Supreme Court (Section 235 of the 1999 Constitution).
Composition: The Supreme Court consists of the Chief Justice of Nigeria (CJN) and
such number of justices of the Supreme Court, not exceeding twenty-one. The Supreme
Court shall be properly constituted if not less than 5 justices of the court sit. However,
where the issue before the court relates to the interpretation of the Constitution,
determination of civil disputes between States and Federal Government or decisions in
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any civil or criminal proceedings on questions as to whether any of the provisions of
Chapter IV of the Constitution (dealing with fundamental human rights) has been, is
being or is likely to be contravened in relation to any person, the Supreme Court shall
be properly constituted when at least 7 Justices of the Court sit. See Section 234 of the
1999 Constitution.
Appointment: The Chief Justice of Nigeria and other Justices of the Supreme Court
are appointed by the President of the Federal Republic of Nigeria based on the
recommendation of the National Judicial Council, subject to confirmation by the senate.
Qualification: To be qualified for appointment as the Chief Justice of Nigeria or a
Justice of the Supreme Court, one must have been a Legal Practitioner of not less than
15 years, with good character, must be above board and must be a fit and proper
person.
Jurisdiction: This is also referred to as the powers of the Supreme Court. The
Supreme Court has both original and appellate jurisdiction. The Court has original
jurisdiction in any dispute between the Federal and State governments or between
State governments on any matter in which the existence or extent of a legal right
depends. It shall also have original jurisdiction as may be conferred upon it by any Act
of the National Assembly.
Appellate Jurisdiction: The Supreme Court has exclusive jurisdiction to hear and
determine appeals from the Court of Appeal. The Supreme Court stated in the case of
Olabanji V. Olofin (1996) 2 SCNJ 243 that there is no other way of invoking her
supervisory jurisdiction except through appeals from the Court of Appeal. There are two
ways of appealing from the Court of Appeal to the Supreme Court, namely: Appeal as of
right and Appeal with leave or appeal not as of right.
COURT OF APPEAL
The Court of Appeal is next in the hierarchy of courts in Nigeria. It is provided for by
virtue of Section 237 of the Constitution of Nigeria, 1999. It presently has judicial
divisions in Abuja, the headquarters, and other divisions for administration convenience,
to reduce cost of seeking justice and to bring justice nearer to the litigants.
Composition: The Court of Appeal consists of a President and such number of
Justices, not less than 49, of which not less than 3 shall be learned in Islamic personal
law and not less than 3 also learned in customary law.
Appointment: The President and the Justices of the Court of Appeal are appointed by
the President of the Federal Republic of Nigeria based on the recommendation of the
National Judicial Council. While the appointment of the President of the court is subject
to the confirmation of the Senate, the appointment of the Justices of the Court is not.
S.238 (1) & (2) of the Constitution of Nigeria, 1999.

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Qualification: To be qualified for appointment as a President or Justice of the Court of
Appeal, one must be a Legal Practitioner of not less than 12 years standing, with good
character and must be above board and must be a fit and proper person.
JURISDICTION: The Court of Appeal has both original and appellate jurisdiction under
the 1999 Constitution.
Original Jurisdiction: Unlike under the previous Constitution, the Court of Appeal is
now vested with original jurisdiction under section 239 (1) of the 1999 Constitution. The
Court now has original jurisdiction to the exclusion of all other courts to hear and
determine any question relating to:
(a) The validity of election to the office of the President or Vice President.
(b) Whether the term of the office of the President or Vice President has ceased.
(c) Whether the office of the President or Vice president has become vacant. See
Chief Olu Falae v INEC & ors (1999) 4 NWLR (pt. 598) 476
In the exercise of its original and appellate jurisdiction, the Court of Appeal shall be duly
constituted if it consists of 3 Justices sitting at the same time.. -S.247 of the Constitution
of Nigeria, 1999.
Appellate Jurisdiction: The Court of Appeal has exclusive jurisdiction to hear and
determine appeals from the Federal High Court, State High Court, High Court of the
FCT, Sharia Court of Appeal, Customary Court of Appeal and decision of the Court
Martial or other tribunals as may be prescribed by an Act of the National Assembly.
FEDERAL HIGH COURT
The Federal High Court was initially known as Federal Revenue Court and created by
the Federal Revenue Court Act, No. 13 of 1973. Under the 1979 and 1999 Constitution,
the Court is renamed Federal High Court. It is established by section 249 of the 1999
Constitution.
It is a superior court of record and at the same level with the State High Courts, National
Industrial Court, Sharia Court of Appeal and Customary Court of Appeal, in the
hierarchy of Courts in Nigeria. There is only one Federal High Court but with divisions to
provide for administrative convenience and reduce the cost of justice. In the case of
Abiola v Federal Republic of Nigeria, (1995) 7 NWLR pt 409 the court held, inter alia,
that there is only one Federal High Court in Nigeria and that judicial divisions are
created for administrative convenience.
Composition: The Federal High Court consists of the Chief Judge and such number of
judges of the Federal High Court as may be prescribed by an Act of the National
Assembly.

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Appointment: The Chief Judge of the Federal High Court is appointed by the President
on the recommendation of the National Judicial Council, subject to the confirmation of
the Senate. The Justices of the Federal High Court are also appointed by the President,
but with no requirement for confirmation by the Senate.
Qualification: To be qualified for appointment as a Chief Judge or a Judge of the
Federal High Court, one must have been qualified as a Legal Practitioner for a period of
not less than 10 years, must be of good character and must be a fit and proper person.
Jurisdiction: The Federal High Court has both civil and criminal jurisdiction. The extent
of jurisdiction of the Federal High Court, until recently was a subject of controversy. This
is because the court was initially conceived as a federal revenue court to deal with
issues affecting the revenue of the Federal Government. As noted earlier, the court
came into existence initially under the Federal Revenue Act (1973). Section 7 of the Act
purported to vest the court with exclusive jurisdiction over the items listed thereunder.
The exclusive jurisdiction of the Federal High Court is as provided under Section
251 (1) (a) – (s) of the 1999 Constitution. The Federal High Court exercises exclusive
jurisdiction on matters relating to revenue of the federal government, taxation of
companies, customs and excise, banking, banks and other financial institutions,
coinage, legal tender, bills of exchange, letters of credit, companies and allied matters,
copyright, patent, designs, trademarks, passing off, industrial designs, admiralty,
citizenship, naturalization, aliens, deportation, bankruptcy, insolvency, aviation, arms,
ammunition and explosives, drugs and poisons, mines, minerals, weights and
measures, etc. in the case of University of Abuja v Prof. K. O. Ologe (1996) 4NWLR
(pt 445) 706 the court held that the jurisdiction of the Federal High Court was to the
exclusion of other courts.
The Federal High Court shall be duly constituted if it consists of at least one
Judge of that Court.
THE NATIONAL INDUSTRIAL COURT OF NIGERIA
The National Industrial Court of Nigeria (NICN) is an offshoot of the National
Industrial Court (NIC), which was established pursuant to the Trade Disputes Decree
No. 7, 1976 (later enacted as the Trade Disputes Act). The Court, as presently
constituted, was re-established as the National Industrial Court of Nigeria (NICN) by the
Constitution of the Federal Republic of Nigeria (Third Alteration) Act, 2010. See Section
254C (3) of the 1999 Constitution (as amended). President Olusegun Obasanjo signed
into law the National Industrial Court Act 2006 on the 14th day of June 2006.
Section 6 of the 1999 Constitution was altered to include the NICN in the list of superior
courts of record, which means that it can now exercise all the powers of a superior court
of record. See Section 6 (5) (c) (c) of the 1999 Constitution (as amended).

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The main functions of the Court are to prevent and settle employment, industrial
relations, and trade disputes in Nigeria in order to enable the economy run smoothly.
STATE HIGH COURT
There exists a State High Court for each State of the Federation of Nigeria. It is
established by section 270 (1) of the 1999 Constitution. The State High Court shall
consist of a Chief Judge and such number of Judges of the High Court as may be
prescribed by any Law of the State House of Assembly. There is only one State High
Court in each state of the Federation, but there are divisions for administrative
convenience and to improve access to justice.
The Chief Judge of a State High Court is appointed by the Governor of the State
on the recommendation of the National Judicial Council (NJC), subject to the
confirmation of that State House of Assembly. A Judge of the High Court is appointed
by the Governor of the State on the recommendation of the National Judicial Council but
with no requirement for confirmation by the State House of Assembly. See section 271
of the 1999 Constitution. To be eligible as a Judge of the State High Court, one must
have spent 10 years at the bar, must be of good character and must be a fit and proper
person.
The State High Court has original, appellate and supervisory jurisdiction. It hears
and determines appeals from the Magistrate Court and Upper Area Court, as the case
may be and also supervise these inferior courts. It follows from this provision that the
State High Court cannot entertain matters in respect of which the Federal High Court or
National Industrial Court are respectively vested with exclusive jurisdiction under
sections 251 and 254C (1) of the 1999 Constitution or in respect of which any other
court is vested with exclusive jurisdiction under the Constitution.
By virtue of section 273 of the 1999 Constitution, a High Court of a State shall be
duly constituted if it consists of at least one judge at a sitting.
SHARIA COURT OF APPEAL
The Sharia Court of Appeal is a specialized court and it is only found in the Northern
States of Nigeria. The 1999 Constitution provides that the establishment of the Sharia
Court of Appeal shall be at the discretion of each state.- Section 275(1) of the 1999
Constitution. The Sharia Court of Appeal shall consist of a Grand Kadi and such number
of Kadis of the Court as may be prescribed by a Law of the State House of Assembly.
See section 275 (2) of the 1999 Constitution.
The Grand Kadi and Kadis are appointed by the Governor of the state on the
recommendation of the National Judicial Council and subject to the confirmation of that
State House of Assembly in the case of the Grand Kadi. Other Kadis of the court are
appointed by the Governor on the recommendation of the National Judicial Council with
no requirement for confirmation by the State House of Assembly.
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The qualification for the appointment as a Grand Kadi or Kadi of the Sharia Court of
Appeal is 10 years post call experience, in addition to a qualification in Islamic law from
a recognized institution and acceptable to the National Judicial Council. A person who
either has a considerable experience in the practice of Islamic law or a distinguished
Islamic law scholar is also eligible.
The Sharia Court of Appeal has original, appellate and supervisory jurisdiction over
matters of Islamic law including marriage, validity or dissolution of marriage,
guardianship of infants, will and succession to intestate property where the deceased is
a Muslim. The Court can also determine questions of Islamic personal law regarding an
infant, a prodigal or a person of unsound mind who is a Muslim, and also maintenance
and guardianship of a physical or mentally challenged Muslim. See section 277 (2) of
the 1999 Constitution.
The Sharia Court of Appeal shall be duly constituted when at least 3 Kadis of the Court
sit at the same time.
CUSTOMARY COURT OF APPEAL
Any state of the federation that desires a Customary Court of Appeal may establish it. -
See section 280 (1) of the 1999 Constitution. The Customary Court of Appeal shall
consist of a President and such number of Customary Court of Appeal judges as may
be prescribed by the House of Assembly of a State. The President of the Customary
Court of Appeal is appointed by the Governor of a State on the recommendation of the
National Judicial Council, subject to the confirmation of the House of Assembly. Judges
of the court are appointed by the Governor on the recommendation of the National
Judicial Council with no requirement for confirmation by the House of Assembly.
Subject to whatever additional requirement the House of Assembly may impose,
a person shall be qualified to be appointed President of the Customary Court of Appeal
if he has been qualified as a legal practitioner in Nigeria for not less than 10 years and
in the opinion of the National Judicial Council, has considerable knowledge and
experience in the practice of customary law in addition to being of good character and
must be a fit and proper person. The court shall exercise appellate and supervisory
jurisdiction in civil proceedings involving questions of customary law. See section 282
(1) of the 1999 Constitution. See also Usman V Umar (1992) NWLR (Pt. 254) 377 at
400.
The Customary Court of Appeal shall be duly constituted if it consists of 3 judges
of the Court sitting at the time.
ELECTION TRIBUNALS
These are specialized courts with jurisdiction over electoral matters. The Constitution of
the Federal Republic of Nigeria (1999) makes provision for the establishment of one or
more election tribunals. There are two of them, namely: the National Assembly Election
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Tribunal, which has original and exclusive jurisdiction to hear and determine election
petitions as to whether any person has been validly elected as a member of the
National Assembly or whether the term of office of such a person has ceased or
whether the seat of any member of the National Assembly has become vacant. See
section 285 (1) of the 1999 Constitution.
There is also in each state of the federation, one or more election tribunals called
the Governorship and Legislative Houses Election Tribunals. This tribunal shall, to the
exclusion of any other court or tribunal, have original jurisdiction to hear and determine
petitions as to whether any person has been validly elected to the office of a Governor
or Deputy Governor or as a member of any legislative house.
Composition of the Tribunals: The National Assembly and the Governorship and
Legislative Houses Elections Tribunals shall consist of a chairman and four other
members. The Chairman shall be a Judge of the High Court and the four other
members shall be appointed from among judges of the High Courts, Kadis of the Sharia
Court of Appeal, Judges of the Customary Court of Appeal and other members of the
judiciary, not below the rank of a Chief Magistrate. The Chairman of the tribunal and
other members of the tribunals shall be appointed by the President of the Court of
Appeal in consultation with the Chief Judge of a State, Grand Kadi of the Sharia Court
of Appeal of a State and the President of the Customary Court of Appeal, as the case
may be.
An election tribunal shall be properly constituted when a Chairman and 2 other
members are sitting at the same time.- See section 285 (4) of the 1999 Constitution.
It should be noted that the Court of Appeal under section 239 of the 1999 Constitution
shall exercise original jurisdiction to the exclusion of any other court in Nigeria to hear
and determine any question as to whether:
1. a. any person has been validity elected to the office of President or Vice-President
under this Constitution; or
b. the term of office of the President or Vice-President has ceased; or
c. the office of President or Vice-President has become vacant.
2. In the hearing and determine of an election petition under paragraph (a) of
subsection (1) of this section, the Court of Appeal shall be duly constituted if it consists
of at least three Justices of the Court Appeal.
See Chief Olu Falae v INEC & ors (1999) 4 NWLR (pt. 598) 476
MAGISTRATES/DISRICT COURT
Magistrate/District Courts are not directly created by the Constitution. They are
creations of laws enacted by the House of Assembly of a State. This explains why they
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are often referred to as inferior courts. Magistrate courts have both civil and criminal
jurisdiction. Their jurisdiction can be found in the various magistrate courts law of the
various States of the Federation. In Lagos State for instance, the Magistrate Court
System is governed by the Magistrate Court Law 2009. Magistrate Courts are
usually of grades and this varies from State to State. In the Northern States of Nigeria, it
is called Magistrate Court when it is sitting over criminal cases and District Court when it
is sitting over a civil matter. In the Southern States of Nigeria, it remains Magistrate
Court whether it is sitting over a civil or criminal matter.
CUSTOMARY/AREA COURTS
The Customary Courts are successors to the old Native Courts, which existed during
the colonial days in Nigeria. They are the lowest court in the judicial hierarchy. They are
often classified into grades. Customary courts exercise jurisdiction over persons subject
to customary law. They are often manned by people who are versed or skilled in native
law and customs. They are always drawn from local Chiefs, Elders and Traditional
Rulers. However, today, it is now common to find customary courts (especially those of
high grades) been manned by qualified legal practitioners.
Customary Courts exercise jurisdiction on matters relating to native law and
customs, especially on issues such as marriages, inheritance, etc. Some also handle
very minor offences and grassroots misdemeanours. Appeals from the decisions of the
Customary Courts go to the Magistrate Courts.
Area Courts exist only in some parts of Northern Nigeria. The Area Courts were
until the promulgation of the Area Courts Edicts in 1978 generally referred to as Alkali
Courts. Area Courts exercise both civil and criminal jurisdiction on matters relating to
Islamic personal law, especially on issues such as marriage, divorce and inheritance.
They are also classified into grades, i.e Upper Area Court, Area Court Grade I, Area
Court Grade II, and Area Court Grade III. The Area Court judges would normally be
knowledgeable in Islamic personal law.
An Area Court shall consist of either an Area Court Judge sitting alone or an
Area Court Judge sitting with one or more members. The court may also sit with
Assessors.

JUVENILE COURTS
Juvenile Court tries only cases where children are involved except in cases of homicide
or where the juvenile is charged jointly with an adult. Juvenile Court is provided for by
the Children and Young Persons Law, in Lagos State for example it is provided for by
the Children and Young Persons Law Cap 10 Laws of Lagos State 2003.

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 The primary purpose of Juvenile Courts is not to punish the child offender.
Instead, it aims at the welfare and rehabilitation of the young offender. A child offender
may be put on probation, fined, given corporal punishment or committed to an approved
institution by the court. Proceedings are held in camera (behind closed doors) while
undue publicity is not permitted.
A Juvenile Court is usually composed of a magistrate and other lay members,
including a woman, usually a social worker.
CORONER’S COURT
A Coroner Court is a special court established by the Coroner Law of the different
States of the Federation. In Lagos State, the Coroner Court is established by the
Coroner Law Cap C16 Laws of Lagos State 2003. A coroner inquest is usually
constituted to carry out investigations into cases of mysterious, sudden, violent or
unnatural death. Coroner inquest may also be carried out where a prison or an accused
person suddenly dies in questionable circumstances or in police custody. It is a
Magistrate that is usually appointed a Coroner.
COURTS MARTIAL
These are military courts established by the Armed Forces Decree No. 105 of
1993, as amended. The Decree consolidates pre-existing legislations on Courts Martial,
i.e., The Nigerian Army Act, Cap 294 LFN 1990, The Air Force Act Cap 15 LFN 1990
and the Navy Act, Cap 288 LFN 1990.
Members of the armed forces are subject to the jurisdiction of the Court Martial
for service related offences such as barracks revolt, insubordination, desertion,
drunkenness, looting and aiding the enemy.
A Judge Advocate is usually appointed to sit with the military officers presiding
over the proceedings in the court.
The rank of the presiding officers for a particular case would be determined by
the rank or status of the accused officer (s). In line with military tradition, a junior officer
does not sit over a case involving a senior officer.
Appeals against the decisions of a Court Martial shall lie to the Armed Forces
Disciplinary Appeal Committee. Further appeals from the decision of the Appeal
Committee shall lie to the Court of Appeal and finally to the Supreme Court.
TAX APPEAL TRIBUNAL
Section 59 (1) of the Federal Inland Revenue (Establishment) Act, 2010 provides for the
establishment of Tax Appeal Tribunal. It abolished the Body of Appeal Commissioners
(BAC) and the Value Added Tax Tribunal (VAT-T) established under the Companies
Income Tax Act and Value Added Tax respectively. The Fifth Schedule to the Federal
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Inland Revenue (Establishment) Act contains provisions on the establishment,
jurisdiction, authority and procedure with regards to the Tax Appeal Tribunal. Appeals
from this tribunal lie with the Federal High Court.

BUSINESS LAW
LAW OF CONTRACT
A. Nature & Definition of Contract
The essence of a contract is to establish the agreement that the parties have made and
to fix their rights and obligations in accordance with such agreement. The court is duty
bound to enforce a valid contract as it is made, except where there are grounds that bar
its enforcement.
Definition
Contract has been defined as follows:
 As an agreement which is legally binding on the parties to it and which, if broken,
may be enforced by action in Court against the defaulting party
 As an agreement which the law recognizes as binding on the parties and which is
enforceable in law
 A contract can also be defined as an agreement between two parties which is
enforceable.
The court is not expected to create a contract for the parties, so, when the parties have
no express or implied agreement on the essential terms of a contract, there is no
contract. Courts are only empowered to enforce contracts, not to write them for them
parties. In order for a contract to be enforceable, same must be valid.
One element which is common to the various definitions is the need for prior agreement
between the contracting parties, which will give rise to enforceable rights and
obligations.
There must be a consensus ad idem, that is, the coming together of two minds with a
common intention to create a legal relation.

It should be noted that while every contract is an agreement, every agreement is

not a contract. This is because, to constitute a contract, the agreement must be one by
which the parties intend to create legally enforceable rights and obligations. For
instance, where a father fails to pay his son the promised pocket money, it is obvious
that the son cannot sue the father; such an agreement is a mere social agreement
15 | P a g e
which is not enforceable in law. Also, where A agrees to lend his car to B, his friend, but
later refuses to let him have it, an action for damages will not lie against A, because
both parties did not envisage when entering into the agreement, that it should be
enforceable in law.
B. Formation of Contract of Valid Contract
Contracts may be classified as follows namely;
i. Simple Contract: it is a written or oral contract, or partly oral and partly
written, which is not under seal. It could be expressly stated or implied
from the conduct of the parties. It is also referred to as informal contracts.
This type of contract was originally called "parol contract”, but parol now
refers to oral contract.
To make such a contract a binding i.e. enforceable in law, the party seeking to enforce it
must show that the agreement is supported by consideration. Consideration means, the
price paid or detriment suffered in reciprocation for the other party’s promise.
The law requires that certain contracts to be enforceable, it must be in writing, this
includes i) bills of exchange or promissory notes, ii) contracts of marine insurance, iii) a
hire purchase agreement iv) a contract of loan by a moneylender and v) contracts for
the transfer of shares in a public company. Certain contracts must be evidenced in
writing, although the contract itself may be oral. Such contracts are contract for the
transfer of interest in land and contracts of guarantee
Formal contract: This is also known as a deed, it is a covenant in a written form,
which must be signed, sealed and delivered by the person to be liable under the
document. Such a contract was previously characterized by formalism to be liable under
the document would append his signature, which was later modified and allowed
impression which might be identified as his; and secondly, affixing of wax or an ordinary
wafer by the maker was made mandatory i.e. the party. However in modern times, this
procedure has been dispensed with, a document intended to be executed as a deed
frequently bears no wax or wafer seal but bears a printed circle sometimes inscribed
with the letters “L.S” (i.e locus sigilli). Formal contract is otherwise known as contract
under seal. Thirdly, the contract must be delivered by the signor to the other party to the
contract. Delivery in this context connotes actual handing over of the document to the
other party. This formality is also now outdated, a delivery of the document by a mere
overt act indicative of the intention to deliver is sufficient. i.e the deed is regarded as
delivered if the grantor intends unconditionally to be bound by it; even if he retains the
document in his actual possession (physical delivery is no longer required). Examples of
such are deeds and bonds. Certain contracts such as conveyances or grants of land,
including mortgage are required by law to be under seal.

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The benefit of this type of contract is in two forms, vis, they derive their binding force
independently of agreement & secondly, they are binding whether, whether or not
consideration is furnished or not. This is an exception to the law of contract which is
to the effect that a contract is not binding unless consideration is given.
It should however be noted that not every document that bears a seal is a deed or a
contract under seal. e.g. the use of corporate seal on a document and affixing seal to a
certificate given/awarded by an institution etc.
The effect of non-compliance with the above means that the contract is void, therefore
any money paid or property transferred can be recovered.
EXPRESS AND IMPLIED CONTRACT:
i. Express Contract: In this type of contract, the parties state the terms,
either orally or in writing at the time of its formation. There is a definite,
written or oral offer that is accepted by the offeree (i.e. the person to
whom the offer is made) in a manner that explicitly demonstrates consent
to its terms.
ii. Implied Contract: This is a type of contract which consists of obligations
arising from mutual agreement and intent to promise, which have not been
expressed in words. Implied contracts are binding as express contracts.
Such contract depends on substance for its existence, therefore, for an
implied contract to arise, there must be some act or conduct of a party in
order for them to be bound. A contract implied in fact is not expressed by
the parties but, rather, suggested from facts and circumstances that
indicate a mutual intention to contract. Thus, in Brogden v Metropolitan
Railway Co., (1877) 2 AC 666, the defendant was held bound by a
contract between it and the plaintiff, despite the fact that the defendant
failed to sign the document containing the contract. It was established in
evidence that both parties had been acting on the terms of the unsigned
contract over a reasonable period of time.
BILATERAL AND UNILATERAL CONTRACT
Bilateral Contract: The exchange of mutual, reciprocal promises between entities that
entails the performance of an act, or forbearance from performance of an act, with
respect to each party. This type of contract is sometimes called a two-sided contract
because of the two promises that constitute it.
Unilateral Contract: This involves a promise made by only one party. The offeror (i.e.,
a person who makes a proposal) promises to do a certain thing if the offeree performs a
requested act that he or she knows is the basis of a legally enforceable contract. It is
one-sided type contract because only the offeror, who makes the promise, will be legally
bound. The offeree may act as requested, or may refrain from acting, but may not be
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sued for failing to perform, or even for abandoning performance once it has begun,
because he or she did not make any promise. Unilateral contracts are well illustrated in
reward cases.
C. FORMATION OF A VALID CONTRACT
Below are the elements/ requirements which must be satisfied for any contract to be
enforceable at law:
a. Offer and acceptance
b. Consideration
c. Intention to create legal relations.
d. Contractual capacity of the parties.
Each requirement is briefly explained hereunder:
i. Offer and Acceptance: Offer is a definite promise to be bound on specific
terms. It has also been 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 is addressed.
Also, it has been defined as a definite statement or proposition made by
one party called the offerror to another party, called the offeree, clearly
and precisely indicating terms under which the offeror is willing to enter
into a contract with the offeree.
While acceptance of an offer is an expression of an assent to its terms. It must be
made by the offeree in a manner requested or authorized by the offeror.
For such to be qualified as an offer it must be satisfy three conditions, viz, (i) it must be
definite, certain and unequivocal, leaving no room for speculation i.e. it must not be
vague. (ii) the proposition must emanate from the person liable to be bound if the
terms are accepted. i.e from the offeror or his authorized agent; and (iii) it must be
communicated to the offeree.
An offer may be made in many ways and forms. i.e it may be made verbally- by words
of mouth either in the presence of each other or by telephone, as well as telex or
telegraphic message or by writing. An offer may also be deduced from some act or by
a conduct. e.g someone who pointed at item 3 on the food menu at the restaurant and
was served with such cuisine. Also, where a taxicab, plying for hire, picks up a
passenger, neither side utters a word, yet there is a complete offer and acceptance
implied from the parties’ conduct.
An offer may also be either specific or general. It is specific if made to a definite or
particular person, and he alone may accept it. It is general if it is addressed to the public
or world at large or to a class of persons and it can only be accepted by any person
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coming within the scope of the offer who had notice of it. General offers are often in the
form of advertisement in a newspaper, or on radio or television, in such a case, the offer
is accepted by the first person to do the act specified in the offer. See the case of Carlill
v Carbolic Smoke Ball Co. (1893) 1 QB 256
This case is a locus classicus, (Carlill v Carbolic Smoke Ball Co.) The fact is as follows:
the defendant company manufactured a patent medicine, called a “smoke ball”. In
various advertisements they offered to pay any person a sum of 100 pounds who
caught influenza after sniffing the smoke ball as prescribed for two weeks. They also
stated that they have deposited a sum of 1000 pounds at Alliance Bank on Regency
street, to show their “sincerity”. The plaintiff bought the medication, used it as prescribed
and still contacted influenza, while still on the medication. She claimed the 100 pounds
and the company refused and raised the following defences in the court.
i) The advertisement was too vague and did not state a time limit in
which the user had to contact influenza- the court held that it must
at least protect the user during the period of use.
ii) It was not possible to make an offer to the whole world or the public
at large- such offer was possible, as in reward cases.
iii) Acceptance was not communicated – not necessary in such cases,
comparison was made with reward cases.
iv) The advertisement was a mere gimmick or puff and there was no
intention to create legal relations – the deposit of 1000 ponds would
indicate to a reasonable man that there was an intention to create
legal relations.
v) The plaintiff provided no consideration. – held that the actual act of
sniffing the smoke ball was consideration (the purchase price was
not consideration for contract with the manufacturer, it was
consideration for contract with the retailer)
OFFER DISTINGISHED FROM INVITATION TO TREAT
Care must be taken not to take invitation to treat as an offer. There are circumstances
where a mere invitation to treat is mistaken as an offer. For there to be an offer, the
offeror must have completed his part in the formation of a contract by finally declaring
his readiness to undertake an obligation upon certain conditions, leaving an offeree the
option of acceptance or refusal. While an invitation to treat is a preliminary to an offer, it
is an expression or acts of a person to which no legal consequences are intended to
attach. The essence of invitation to treat is that by it, the supposed offeror is merely
initiating negotiations from which an agreement might or might not in time result.
i) Display of good in shelves in a store, shop, supermarket etc:

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In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd,
(1953) 1QB 401 where goods were sold in B’s shop under the self-service system,
customers selected their purchases from shelves on which goods were displayed, put
them into a wire basket supplied by B and took them to the cash desk where they paid
the price, it was held that “the contract was made, not when the customer put the goods
in the basket, but when the cashier accepted the offer to buy and received the price.
Therefore, the display of goods in a shop window, supermarket counters or other
market stalls, with or without price tags on them is not an offer to sell but an invitation to
the public (i.e. the customers) to make an offer to buy. See also Fisher v Bell (1961) 1
QB 394.
ii) Auctions: An auctioneer’s request for bid is not is not an offer but
an invitation to treat. The bid itself is the offer and the acceptance
occurs when the auctioneer’s hammer falls. See Adebaje v Conde
(1938) 19 NLR 57.
iii) Invitation to tender: This is merely an invitation to treat thus the
party with the lowest tender cannot sue that the contract bought to
be given to him based on his low bid.
iv) General advertising of goods: this is not an offer thus in
Grainger & Sons v Gough (1896) AC 325, it was held that the
circulation of price list by a wine merchant was only an invitation to
treat.
TERMINATION OF AN OFFER
An offer remains open for acceptance until same is being terminated by any of the
following ways:
a. Revocation: an offer can be revoked (withdrawn) at any time before it
is accepted. The offeror can exercise this right even though the time
the offer was left open has not expired. However, the offeror cannot
revoke an offer which he has agreed to leave open for a specified
period, if the offeree has purchased the option, that is, where he has
given a valuable consideration for keeping the offer open by a way of
leaving with the offeror a small deposit or some valuable things as an
earnest. By this, the offeror will be bound to keep the offer open for the
stipulated period.
i) For the revocation to be effective, it must be communicated. The
notice of revocation must reach the offeree, even through a third
party. See Dickenson v Doods (1876). Where the revocation
communicated by a third party was held to be valid.

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 ii) Where the offer consists of a promise to pay money for the
performance of an act, the offer cannot be revoked once the
performance has commenced. For instance, if A promised to pay B
#1Million for swimming across the Lagos Lagoon. A cannot
withdraw the offer when B has commenced the swim.
b) Rejection: This also terminates an offer and makes it incapable of
acceptance. For example, if X offers to sell his car to Y for N20,000,
and Y says “No, Thank you”, Y’s rejection puts X’s offer to an end, Y
cannot subsequently accept X’s offer, even if X had left his offer for a
fixed period which has not expired. It then follows that where an offer
had been rejected, it cannot be accepted subsequently unless a fresh
offer is made by the offeror. Rejection of an offer may occur in two
ways, viz,
(i) by a direct intentional refusal of the offeror, as illustrated
above; or by
(ii) by a counter offer: this refers a situation where the offeree
attempts to accept the offer in a new term, not contained in the
initial offer with regards to the consideration. e.g X offers to sell
his car to Y for N15,000 and Y accepts to pay N12,000, the
purported acceptance operates as a counter- offer as it
introduces a new and material term not contained in the initial
offer. In TOS Benson v Nigerian Agip Oil Co. Ltd.
(Unreported) High Court of Lagos State Suit No. LD/22/74
delivered on 27 October 1975; the plaintiff made an offer to the
defendant on his intention to let his house to them at a rate.
The defendant accepted the offer subject to his putting a
burglary proof and other adjustments. The defendant agreed
and effected the repairs. He thereafter communicated the
defendant, who asked for further modifications and installation
and even went further to nominate their contractor for the job at
the plaintiff’s expense. The plaintiff complied and after all the
modification had been effected that defendants informed the
plaintiff that they are no longer in need of such property. The
plaintiff brought an action for damages for breach of contract.
The defendant contended that their acceptance of the plaintiff’s
offer was conditional and made “subject to contract” and that
there was no formal agreement. The court held however that
the first and the counter offers given by the defendant were
accepted by the plaintiff, thus there was a valid contract.

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 c) Lapse of Time: If an offer is stated to be open for a fixed time, it
clearly cannot be accepted after that time. Therefore, where the time
for the acceptance of an offer is limited or fixed, the offer lapses
automatically if not accepted within the prescribed time. Where time is
not fixed within which an offer should be accepted, the offer must be
accepted within a reasonable time. What amounts to a reasonable time
is a question of fact and depends on the subject matter of the contract
and the peculiar circumstances of each case.
d) Occurrence or Non- occurrence of Condition: Offer can also be
terminated in this way if an offer is expressly or impliedly made to
terminate on the occurrence of some conditions, it ceases to exist and
becomes incapable of acceptance after that condition has occurred.
Where A offers to sell his land to B if the Governor consents, and the
Governor refuses to give consent, the offer cannot then be accepted
by B.
e) Death Before Acceptance: the exact effect of the death of both the
offeror and the offeree, or either of the parties has not been
conclusively laid to rest, however, the weight of academic and judicial
opinion seems to indicate the following positions:
 Death of both parties before acceptance terminates the offer.
 Death of the offeree before acceptance terminates the offer,
whether death is notified to the offeror or not, unless, on its true
construction, the offer was made to the offeree and his
successors in title
 Death of the offerror before acceptance terminates the offer if
the offeree knows of it before he accepts, but where he does not
know before he accepts, the effect of the offeror’s death
depends on the nature of the particular offer. e.g. if the offer
pertains to a promise which is independent of the offeror’s
personality and which can be satisfied out of his estate (e.g. an
offer to guarantee payment of money), the offeror’s death does
not, until known to the offeree, prevent acceptance.
f) Loss of Contractual Capacity by Either Party: If either of the parties
loses his contractual capacity e.g. by becoming insane before the offer
is accepted, the offer lapses.
g) Cross offers: 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. (1873) 29 LT 271; the defendant wrote to plaintiff on

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 November 28, 1871offering to sell 800 tons of iron for 69s per ton.
Oblivious of this, the plaintiff also make exactly the same offer to buy
from the defendant on the same day. The letter crossed in post. The
plaintiff contended that there was a contract but the court held that
there was no contract but merely two simultaneous offers.
h) Failure of the condition subject to which the offer is made: In
Financings Ltd. v Stimson (1962) Defendant signed a hire purchase
for on 16th of March to purchase a car. The form stated that the
agreement would only become binding on the execution of the
agreement by the finance company vide signing. On the 24 th of March
the car was stolen from the premises of the finance company and was
recovered badly damaged. The finance company signed the form on
the 25th of March. The defendant refused to take delivery of the car. It
was held that the implied condition was substantially different hence he
is not liable to take delivery.
B. ACCEPTANCE:
Meaning: An acceptance is the final expression of assent to the terms of an offer. By
this, the offeree indicates his intention and willingness to be bound by the terms of the
offer. Consequently, where an offer is being accepted, it becomes a promise and the
breach of same will give rise to an action.
Like an offer, an acceptance can be made by word of mouth, in writing, or by
conduct. It must be made while an offer is still in force, and once accepted, it is
complete and the offer becomes irrevocable. An acceptance is valid only if the offer has
not ceased to exist.
For an acceptance to be valid, it must be unqualified. It must correspond with the offer.
Any variation or modification of the offer while accepting, or any acceptance which is
dubiously expressed will be invalid. Put in another word, a reply to an offer is only
effective as an acceptance if it accepts all the terms of the offer without equivocation,
qualification or addition. Acting in the contrary operates as a counter-offer and not an
acceptance.
The introduction of a meaningless phrase while accepting the offer should not be
regarded as a qualified acceptance. An acceptance must not be conditional; therefore, a
conditional assent to the terms of an offer is not an acceptance. See Odugunade V
Ososami (1972) 2 UILR 101.
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 it.

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Where certain mode of acceptance is prescribed, an acceptance in any other method
than in the way prescribed by the offeror is ineffective.
Also, an acceptance must be made not only with full knowledge of the offer but also in
reliance on it. Therefore, a contract result from a mere coincidence of two independent
acts, for example, X advertises an offer of a reward of N200, 000 to anyone who finds
and returns his lost passport and Y, in ignorance of the offer, finds and returns it to X, Y
cannot afterwards, on becoming aware of the offer, claim to be entitled to it. See R. v
Clarke (1927) 40 CLR 227.
Acceptance by post: the general rule is that acceptance takes effect the moment the
letter of acceptance is posted, as decided in Adam v Lindsell (1818) 1 B&A. 681. See
also Household Fire Insurance Ltd v Grant (1879) 4 Ex D 216
CONSIDERATION
Definition: It is some benefit received by a party who gives a promise or performs an
act, or some detriment suffered by a party who receives a promise. It may be also be
defined as that which is actually given or accepted in return for a promise. It is what a
promisor demands and receives as the price of his promise.
Consideration has been defined in Currie v Misa (1875) L.R 10 Exch. 162 as:
a valuable consideration, in the sense of the law, may consist either in some rights,
interest, profit, or benefit accruing to the one party, or some forbearance, detriment,
loss, or responsibility given, suffered, or undertaken by the other.
For the purpose of simplicity, consideration may be described as the price paid by the
offeree for the offeror’s promise, or the price for which the other’s promise is bought, not
only with money but also by doing some act in return for it, or by offering a counter-
promise.
Consideration is either good or valuable.
Good consideration may consist of natural love and affection; but same cannot support
a simple contract. To support a simple contract, consideration must be valuable. An
example of valuable consideration is money or other property or a promise to pay or
transfer it.
To sustain an action on a promise made by the defendant, the plaintiff must show either
that the promise is contained in a document under seal, or that is supported by the
presence of consideration. By furnishing consideration, the plaintiff becomes entitled to
sue for breach of contract.
Few examples of Consideration
James receives N20 in return for which he promises to deliver goods to John. Here, the
money James receives is consideration for the promise he makes to deliver the goods.
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A promises to deliver goods to B, and B promises to pay for the goods when they are
delivered. Here, the benefit A receives is B’s promises to pay, and in return for it he
promises to deliver the goods.
Ukulele lends a book to Galibe and Galibe promises to return it. Here, the advantage is
entirely on Galibe’s side, but Ukulele suffers a detriment in parting with his book and this
is consideration to support Galibe’s promise to return it.
RULES GOVERNING CONSIDERATION
There are certain rules of consideration:
i. Consideration Must Move from the Promisee, Though Not
Necessarily to the Promisor: The fundamental principle of law is that a
person who seeks to enforce a simple contract must prove that some
consideration was furnished by him or his agent in return for the
defendant’s promise. Meaning that, no person can enforce another’s
promise, unless he himself has given consideration for that promise. In
other words, it is the person who is promised who can give consideration
and therefore enforce the contract. Absence of consideration on the part
of the promisee could be of the following variants:
a) Total failure of consideration- Gratuitous promise by defendant: in Cardoso
v The Executors of the Late J.A. Doherty, (1938) WACA 78, the plaintiff
had mortgaged his property to Doherty in his lifetime in consideration of
various loans which he was unable to redeem. The deceased sold all the
other property except the one occupied by the plaintiff, which he promised
not to sell in the plaintiff’s lifetime. The promise was reiterated by the
executors of Doherty estate after his demise. The Executors subsequently
had a re think and decided to sell the property contrary to their earlier
undertaking. The plaintiff sought a declaration that he was entitled to live in
the property for the rest of his life and injunction against the defendants from
selling it. It was held that the plaintiff furnished no consideration for the
promise that he’ll reside there for the rest of his life, hence declaration and
injunction was refused.
b) Total failure of consideration- non-performance by the plaintiff: the plaintiff
has undertaken no obligation at all or has not performed his own part of the
agreement, in such a situation in which the defendant’s liability arises only
after such performance by the plaintiff. In Bank of West Africa v
Fagboyegun (1961) WNLR 227. The defendant signed a contract
guaranteeing the debt of a third party to the plaintiff/bank. The third party
made a part payment of the debt owed and made no further payment. The
plaintiff sued the guarantor to repay the balance cum interest. Evidence
however showed that no credit was advanced the third party after the
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 contract of guarantee was executed. Held that the action must fail as the
bank furnished no consideration.
c) Total failure of consideration- where consideration is furnished by a third
party and not the plaintiff: this reiterated the doctrine of privity of contract.
Gbadamosi v Mbadiwe (1964) 2 All NLR 19, the plaintiff, the national
treasurer of Action Group party in his personal capacity sued the defendant
for the recovery of the debt advanced the defendant’s party. Held that the
plaintiff furnished no consideration hence the action must fail.
d) Claim in excess of benefit provided for in the agreement: in Egware v Shell
BP Development Company of Nigeria (Unreported) Midwest High Court
suit no MWHC/36/70, judgment delivered on April 30 1971. The plaintiffs
claimed to have allowed the defendants to use their land as a drilling
location on the condition that all minor contracts are given to the plaintiffs
only. Evidence showed that the plaintiff has paid full compensation to the
plaintiff for the use of their land. Held since the defendant has acquired full
right to drill the land, the plaintiff has furnished no further consideration for
the defendant’s promise.
ii. Consideration Must not be past, but may be Executed or Executory:
Sufficient or valuable consideration may be of two kinds: viz, it may be
Executed or Executory.
Consideration is said to be executed when the plaintiff, who claims to have furnished it
can show that he has actually performed his part of the bargain. In other words, where
the promise of one party is given in return for the act of the other, the consideration is
said to be executed. An example of executed consideration is the offer of a reward for
an act. Thus, where A pays N20M to B, to deliver truckloads of fertilizer in a
fortnight, the consideration is executed.
Executory Consideration: This is a consideration which the plaintiff has promised to
furnish, and is ready and willing to furnish, if the defendant will perform his part. In other
words, where two persons exchange promises, the consideration is executory. For
example, A promise to pay N20M to B on the delivery of a truckload of fertilizer.
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. In other words, where a
party to a contract makes another promise which is after and independent of the
transaction between him and the other party, the subsequent promise is said not to
attach to the transaction, nor can it affect the legal position between the parties. The
subsequent promise is called past consideration. A past consideration is, therefore, a
promise given after the act and is independent of it. See Oba Akenzua v Benin
Divisional Council (1959) WRNLR 1

26 | P a g e
 iii. Consideration need not be Adequate but must have a Legal Value:
This means that consideration need not be adequate or equivalent to the
promise, but it must be real or have some value in the eye of the law.
Thus, a man may choose to sell a house for a bag of rice- in so far as
that was not a loss of value to him at the time of purchase. In other
words, it must comprise some element which can be regarded as the
price of the defendant’s promise. If consideration is too tenuous, vague,
unascertainable, useless or meaningless, then it is insufficient and is,
therefore, no consideration.
Court will not assist a party to a contract, if he has made a bad bargain (unless he is an
infant, insane or fraud, mistakes, misrepresentation, duress or undue influence is
alleged), because as long as the consideration has some value in the eye of the law, its
inadequacy to the promise is irrelevant. Therefore, the court is normally concerned with
the amount of consideration. If, in a contract, a person gives up much more than he
stands to gain, the court will not interfere since the adequacy of consideration is for the
parties to consider as at the time of making the agreement, not for the court when it is
sought to be enforced. See Thomas v Thomas (1842) 2 QB 851.
Can the contractual rights be varied? In Pinnel’s case (1602) 5 co. rep117a; the
plaintiff sued for the balance of the debt owed him by the defendant (Cole); the
defendants claimed that at the plaintiff’s (Pinnel) request, he paid a lesser sum in full
settlement of the debt owed. The court held that the payment of a lesser sum could not
discharge a debtor from the obligation to pay the full amount of the debt, the consent of
the creditor notwithstanding.
Also in DC Builders v Rees (1965) 3 All ER 837, it was held that it was inequitable for
the defendant to offer to pay a lesser sum in full settlement of his debt, by taking
advantage of the financial predicament of the plaintiff. Hence the lesser sum is not
sufficient consideration. The position would have been different if it was the plaintiff that
approached the defendant with the proposal. This is a shift from the decision in Pinnel’s
case.

Exception to the Rule of Consideration

1. Contract under seal: This is an exception to the rule of consideration
in that there is no need for consideration before a contract under seal
can be enforced.
2. Doctrine of Equitable/Promisory Estoppel: This is to the effect that
where one person has by his words or conduct made to another a
promise which is intended to be binding and to be acted upon, which in
fact is so acted upon, then the person making the promise would be

27 | P a g e
 bound by his promise. The principle was established in Central
London Property Trust Limited v High Tree Houses (1947) 1 KB
130
iv. INTENTION TO ENTER INTO LEGAL RELATIONS: It is a rule that an
agreement will not constitute a binding contract, unless it is intended by
the parties to it that it should give rise to legal relations. Therefore, in
addition to the need to show the existence of an agreement (i.e. offer &
acceptance) between the parties, consideration, which clothes the
agreement with the notion of enforceability. The next requirement is the
parties to the agreement had the intention of creating legal relations.
The importance of this element in contract is that, an agreement would be actionable in
court where is found that there is an intention to create a legal relationship, on the other
hand, the agreement will not be actionable where an answer to the poser is in the
negative, and in that case, the existence of a contract is negated.
In considering the presence or absence of the contractual intention in agreements, the
following shall be considered:
A. COMMERCIAL AGREEMENT: The law presumes the presence of the
contractual intention in commercial agreements unless the contrary is
proved. In Carlill V Carbolic Smoke Ball: The fact of the case was
that the defendants advertised their anti-influenza capsules by offering
to pay £1,000 to any purchaser who bought and used it and yet caught
influenza within a giving period, and by declaring that they had
deposited £1,000 with their bankers’ show their sincerity. The plaintiff
bought the capsule and sued it and caught influenza. Among the many
defences raised to her action was the plea that no legal intention
relations were ever contemplated. That the advertisement was a
“promise in honour”. The court rejected this plea and held that the
defendants were contractually bound.
Certain agreements though commercial are mere ‘puff’ or advertisement gimmicks e.g.
that anyone who drinks Milo’ll become football player or that a user of Maclean
toothpaste shall be attractive to the female gender. Agreements that are binding in
‘honour’ only or those that specifically excludes contractual intention, such as in games
of chance like football pools agreements. See Amadi v Pool House Group and
Nigerian Pools Co. (1966) 2 All NLR 254; Lee v Sherman’s Pools (1951) WN 70.
Appleton v Littlewoods Ltd (1939) 1 All ER 464; Jones v Vernon’s Pools Ltd (1938)
2 All ER 626.
B. DOMESTIC AGREEMENT: Where the agreement relates to purely
domestic, family or social matters the courts presume that there is no
intention to create legal relations, unless the circumstances point to a
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 contrary conclusion. In other words, in social and family agreement, it
is generally implied that the parties do not intend to create legal
relations. In the course of family life, many agreements are made,
which could never be supposed to be the subject of litigation. e.g.
where a husband arranges to make a monthly allowance to his wife for
her personal enjoyment, it cannot be said that intention to create legal
relations had been contemplated. This was the decision reached in
Balfour v Balfour (1919) 2 KB 571. See also Spellman v Spellman
(1961) 1WLR 921
v. CONTRACTUAL CAPACITY: For a contract to be valid in the eye of the
law, the parties making it must have full legal capacity to do so. Capacity
in the sense means the ability to incur legal liability or to acquire legal
rights. In Nigeria, the requirement of contractual capacity is important in
relation to infants, persons of unsound mind, drunken persons, married
women, illiterates and corporations. In capacity with respect to those
enumerated above, may affect their rights and obligations created by
contract. Each has been summarily expatiated as follows:
A. Infants: In Nigeria, an infant is a person of either sex, who is below the
age of 21 years. The concern of the law in the matter involving an
infant is in two folds, viz, to protect the unwary and the youthful
exuberance of the infant against the machinations of unscrupulous
traders, and to avoid allowing an infant undue advantage because of
infancy against honest business dealings. Therefore, some categories
of persons have a limited capacity to contract. By Infants Relief Act,
1874 which is made applicable in parts of Nigeria as a statute of
general application, introduced some changes under categories:
i. Contract of goods supplied or to be supplied other than
necessaries.
ii. Contract of money lent or to be lent.
iii. Account stated or I.O.U.
Thus, if a merchant supplied goods to a hawker who is an infant with the understanding
that he should sell and account back to the merchant, the contract will not be
enforceable in law. And if an infant, fails to account for the proceeds of sale the
merchant cannot maintain an action for breach of contract. But if the goods are still in
the possession of the infant, he can be made to return them to the merchant.
Similarly, where a person loans money to an infant, he cannot recover the loan from the
infant. However, if the infant had used the money to buy what is necessary for his
station in life and for which he is not oversupplied, the lender can, through the equitable

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process of subrogation, place himself in a position of an unpaid supplier of necessary
goods to the infant and obtain relief. This right of a lender entitles him to recover a
reasonable, but not necessarily the contract price for the goods.
Two types of contract, however, bind an infant, these are
i. Contract for the supply of necessaries: Such necessaries
must be suited to the infant’s status in life and he must not have
been oversupplied with them. Thus, in Nash v. Inman (1908)
2KB 1, an action by a tailor against a Cambridge undergraduate
who ordered expensive suits and eleven fancy waistcoats, who
failed to pay and was sued failed on the ground that suiting
were not necessaries for the boy.
ii. Beneficial Contract of Service: This happens where a child is
put into a training programme, occupation, apprenticeship or
profession, because such training contracts prepare the child for
a future career, they are binding on him provided the terms are
not onerous or exploitative. See De Franscisco v Barnum
(1890) 43 Ch.D 165; Robert v Gray (1913) 1 KB 520- held that
an executory contract (to be performed in the future) is binding
on an infant once it was shown to be reasonable and for the
infant benefit.
It should be noted that under the Infant Relief Act 1874 which is still applicable in
Nigeria, an infant is anybody below the age 21 years. By the Nigerian constitution, age
18 is declared as the voting age.
An infant however is not liable for contracts on goods supplied to him for trading
purposes, irrespective of the fact that it was for his benefit. In Mercantile Union
Guarantee Corporation Ltd. v Ball (1937) 2 KB 498 it was held that an infant
contractor who had agreed to buy a lorry on hire purchase terms for purposes of his
business, was not liable for installments due. In Cowern v Nield, (1912) 2 KB 419 it
was held that an infant produce buyer, who had been paid in advance for his goods,
was not liable to refund the money when he failed to supply the goods. Also in the
Nigerian case of Labinjoh v Abake (1924) 5 NLR 33; an infant trader who refused to
pay the balance on the goods advanced to her on credit was held not liable, and the
contract void.
B. Lunatic or Persons of Unsound Mind: Persons of unsound mind can
contract during their lucid moments. Any other contract is avoidable at
the option of the lunatic. The lunatic can avoid the contract if he can
show that his mental incapacity was known or ought to have been
known to the other contracting party.

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Where necessaries are supplied to a person of unsound mind or to his wife, he will,
however, be under an obligation to pay a reasonable price whether or not the other
party knew of his condition. Leslie v Sheill (1914) 3KB 607
C. A Drunk: A drunk can also avoid a contract entered into in his moment
of drunken stupor. But persons contracting with him may enforce the
contract if they can prove that they had no knowledge and took no
advantage of the drunkenness.
D. Illiterates: An illiterate cannot enter into a written contract unless an
illiterate jurat is made part of the contract document by virtue Illiterate
Protection Act Cap 83 LFN (1958) and Land Instrument Registration
Law Cap 56 Laws of Western (1959). The jurat is special attestation
clause stating that all the contents of the document had been
explained to the illiterate person by a sworn interpreter or attorney. See
PZ & Co Ltd v Gusau & ors (1961) NRNLR 1; UAC V Edem & Ajayi
(1958) NRNLR 33 held in both cases that failure to comply with
Illiterate Protection Act render any otherwise valid contract of
guarantee unenforceable.
E. Corporations and Un-Incorporated Associations: A corporation is
an artificial person created by law, separate and distinct from the
persons that make it up. Therefore, every company incorporated under
the provisions of the law enjoys a legal personality and has a separate
legal existence and perpetual succession different from those of the
individual shareholders who compose it. A corporation being an
artificial legal entity enjoys the capacity to contract and be bound in
contract. However, due to the artificial nature of its existence, a
corporation can only act through agents. To determine the contractual
capacity of a corporation, one has to look at the instrument creating it.
Any contract not authorized by a corporation’s constituting organ, nor
incidental to those authorized, are ultra vires (i.e. beyond the powers of
the corporation) and, therefore, void and unenforceable. Consequently,
it will not bind the corporation even if all its members ratify it, but this
position has been modified by Section 71 and 72 of CAMA.
However, a company can enter into a contract through its authorized officers if the
contract is executed in the same way as would by law be done if the contract was being
executed by a private individual. Therefore, directors/managers of a company can enter
into contracts on behalf of the company by word of mouth, in writing or under seal,
depending on the nature of the contract, just as in the case of natural persons.
Unincorporated Associations: Unincorporated associations with the exception of
trade unions, have no contractual capacity and, therefore, cannot enter into a contract

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nor be bound contractually. The general principle is that such associations can only be
sued or sue under the representative action made through its principal officials.
However, trade unions can enter into contracts, and actions can be maintained against
them like other legal entities (Sec. 13 (1) of the Trade Unions Act makes it mandatory
for trade unions to be registered).
THE FORM OF A CONTRACT:
The general rule is that a contract may be in writing, oral or inferred from conduct or a
combination of these. Although writing makes it easier to prove the contents of a
contract but it is not necessary except in the following cases which constitutes an
exception.
1. Contracts which must be by deed
i) A conveyance or transfer of legal estate in land or a grant of a lease for
three or more years must be by deed
ii) Consideration is not necessary for a deed. Thus, a binding gratuitous
promise must be made by a deed. The essentials of a deed are writing,
signature, seal and delivery.
iii) the effect of non-compliance means that the contract is void.
2. Contracts which must be in writing:
These are
i) The transfer of shares in a limited company
ii) bills of exchange and cheques
iii) Consumer credit contract- eg Hire Purchase
iv) Policies of marine insurance.
v) Legal assignments of choses in action- (refers to the right to bring lawsuit to
recover debt, money or chattel.)
b) The effect of non-compliance varies, depending on the type of agreement. Usually
the contract will be void.
3. Contract which must be evidenced in writing: there are two types of contract that
must be evidenced in writing although the contract itself may be oral.
a) Contracts of guarantee: if A contract to buy goods from B and C promises to pay
if A does not a contract of guarantee is made.
b) Contracts for the sale of land: This includes an interest in land such as tenancy,
easement or a restrictive covenant. See sec 40 Law of Property Act 1925.
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 c) Non-compliance with the requirement of written evidence renders the agreement
unenforceable. See The Statute of Fraud Act 1677.
THE CONTENTS OF A CONTRACT: a contract may consist of three types of clauses,
namely, express, implied and exemption clauses.
Express Terms: a statement may be an express term of contract or a representation
inducing its formation. The importance of this distinction is that different remedies are
available if a term is broken or a representation is untrue. There are two basic types of
express terms:
a) A condition is a vital term, going to the root of the contract, breach of which
normally entitles the innocent party to repudiate the contract and claim damages-
Section 11(1)(b) of the Sale of Goods Act 1893. It may be categorized as
condition precedent and condition subsequent. In Pym v Campbell (1856) E&B
370; the defendant’s promise to purchase shares in the plaintiff’s invention
subject to the approval of his engineer was held to be unenforceable in the
absence of the said approval. (Condition precedent). An example of the condition
subsequent was presented in ACB v Okonkwo (unreported High Court of
Bendel State Suit No A/20/80) the defendant applied for a loan from the plaintiff-
bank and offered his house as collateral. The plaintiff invited a valuer to assess
the property and with the defendant’s consent debit his account with the valuer’s
fee. The application was eventually refused and the defendant refused to pay the
fee. The plaintiff contested this. Held the defendant was right in repudiating
liability.
b) A warranty is a subsidiary term, breach of which only entitles the innocent party
to damages. – Section 62 of the Sale of Goods Act 1893. It is difficult in practice
to distinguish between condition and warranty. In Bettinni v Gye (1876) 1QBD
183, it was held that a stipulation that an opera singer should be in London at
least six days before the commencement of his performance for rehearsals was
a mere warranty as the engagement was for 15 weeks and not for a particular
opera or concert. However, in Poussard v Spiers (1876) 1QBD 410, a promise
by an actress to attend rehearsals and appear on the first night of an operetta
was held to be a condition.
Finally, conditions and warranty must be distinguished from a mere representation
which forms no part of the contract itself but only induces a party to enter into the
contract. Such representation if innocent will entitle the representee neither to rescind
the contract nor to claim damages. Thus, in Oscar Chess v Williams (1957) 1WLR
370, a second-hand car which was represented to the defendant as a 1948 model was
sold to the plaintiff a such at 290 pounds. The plaintiff eventually found that it was a
1939 model worth only 175 pounds. He sued for damages for breach of warranty. It was
held that the statement that it was a 1948 model was not a warranty but only a mere

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innocent misrepresentation. However, in Dick Bentley Production Ltd. v Harold
Smith Motors (1965) 1WLR 625, a dealer misrepresented the mileage of a car to the
buyer. The court held this to be a warranty since the dealer was a skilled man in the
business.
Implied Terms: terms are implied by custom, the courts and statutes.
a) Custom: the parties are presumed to have contracted by reference to the
customs prevailing in the trade or locality in question, unless a contrary intention
is shown. In British Crane Hire Corporation v Ipswich Plant Hire Ltd. (1975)
QB 303; both parties were in the business of hiring earth moving equipment.
Although the fees were agreed on phone, nothing was said about the condition of
hire and the hire agreement had not been signed. The crane due to no nobody’s
fault sank and the defendant denied liability. The court held unanimously that
since it was the custom in the trade that the hirer is liable for such expense it is
deemed to have been incorporated into the contract.
b) Court: the court will imply two types of terms into contracts. First, terms that are
so obvious that the parties must have intended them to be included. These are
terms implied in fact. Second, terms which are implied to maintain a standard of
behaviour, even though the parties may not have intended them to be included.
These are called terms implied by law.
Terms Implied in Fact: These are terms that are both obvious and necessary to give
business efficacy to the contract. The test used here is that of an “officious bystander”
i.e. when the contract was being made, and an officious bystander had asked ‘is X a
term of this contract’, the reply he would have received would be in the affirmative. In
the Moorcock (1889) 14PD 64, the defendants were wharf owners that allowed the
plaintiff to unload their ship at their wharf. The ship grounded at low water and damaged
the ship. Defendant was held to be in breach of an implied term that the wharf was safe.
Terms Implied in Law:
This covers many classes of contract; in a contract of employment for instance, the
employee implied that he is reasonably skilled and that he will serve his employer
faithfully. Similarly, in a tenancy agreement the landlord impliedly covenants that his
tenant shall have quiet possession and the tenant impliedly agrees not to destroy the
property. In Liverpool City Council v Irwin (1977) AC 239; it was held that where parts
of a building have been let to different tenants and where the landlord retains rights of
access to certain parts like the staircase, then a term could be implied that the landlord
would keep these parts reasonably safe. Similarly, in Okotete v ECN (Unreported High
Court of Midwest per Atake J, 29 May 1970) the plaintiffs were engaged by the
defendant, Electricity Corporation to clear bush in order to erect electricity poles and
cables. After which the plaintiff asked for extra money for felling of trees. The court held

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that there is an implied term that bush clearing in that circumstance include the felling of
trees.
Statutes:
The well-known examples are terms implied by the Sales of Goods Act, for instance:
a) That the seller has a right to sell
b) That the goods supplied are of merchantable quality and fit for the
purpose for which they are required.
c) That where the goods are sold by sample the bulk will correspond to
the sample.
This shall be treated in detail under Sales of Goods.
Exemption Clauses:
This is a term in a contract which seeks to exempt one of the parties from liability or
seeks to limit the liability to a specific sum on the occurrence of certain event, such as a
breach of warranty, negligence, or theft.
An exemption may become a term of contract by notice.
a) If a person signs a document, he is bound by it, even if he failed to read it. In
L’Estrange v Graucob Ltd. (1934) 2KB 395; the plaintiff bought a cigarette
vending machine from the defendant and signed without reading the attached
sales agreement which contained in very small print an exemption clause. The
machine was defective but the vendors were held to be protected by the
exemption clause contained in the small print.
b) Where a document not signed, the exemption clause will apply only if:
1) The party know of the clause or if
2) Reasonable steps are taken to bring it to the notice of the affected party
before the contract is made.
In Olley v Marlborough Court (1949 1 KB 532); plaintiff booked a room at the
reception desk of the defendant’s hotel. On getting to the room she saw a notice on the
wall exempting the hotel for liability for lost or stolen valuables, unless those deposited
with the management for safe keeping. Notwithstanding, the plaintiff left her fur in the
room and it was stolen. It was held that the contract was completed at the reception
desk and the notice, could not have form part of the contract.
An exemption clause cannot be unilaterally introduced into a contract after its
completion. Thus, an attempt to introduce an exemption clause in a receipt, which is
generally not regarded as a contractual document, would not make it a term of the
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contract. In Chapelton v Barry UDC (1940) 1 KB 532; it was held that an exemption
clause introduced for the first time in a receipt is not binding on the affected party.
Inoperative Exemption Clauses:
In considering the validity of exemption clauses the court had to strike a balance
between the principle that the parties should be free to contract on whatever term they
wish and the need to protect the public from unfair exemption clauses, especially the
standard form contracts used by large corporations. Thus, an exemption clause even if
it forms part of a contract may, nevertheless be ineffective:
a) If the contractual document containing the clause was signed as a result of the
other party’s fraud or misrepresentation. In Curtis v Chemical Cleaning &
Drying Co. Ltd (1951)1KB 805; the plaintiff (P) took her dress for laundry and
was requested to sign a clause which contain among other things, a clause
excluding defendants (D) from liability from any damage. She signed upon being
told on enquiry that the clause only exempted D from liability for damages to
beads and sequins on the dress. The dress was returned stained. It was held
that the D couldn’t avail itself of the exemption clause as it was induced by
misrepresentation, albeit, innocent.
b) If the party seeking to take advantage of the clause acted outside the ambit of
the contract. In Davies v Collins (1945) 1All ER 247; a cleaner accepted at
owner’s risk, a uniform for cleaning. He sent the uniform to a sub-contractor for
cleaning and the latter could not find it. It was held that the exemption clause not
avail D as such loss was never contemplated by the contract.
c) If the party seeking to take advantage of the clause commits a breach of a
fundamental term of the contract. In Ogwu v Leventis Motors Ltd. (1963)
NNLR 115; P, a trader contracted to buy on hire purchase a used vehicle from D.
the vehicle delivered was much older than the one contracted for but it bore the
same plate number. The vehicle was defective and had to return to D on a few
occasions for repair. It was finally returned to D and his deposit refunded. P sued
for general and special damages; and the company in defence, sought to avail
itself of the provision of an exemption clause in the hire purchase agreement.
The court held that by delivering a lorry different from the one contracted for the
D has committed a fundamental breach of the contract thus could not be
protected by the exemption clause.
d) If the exemption clause is unfair: in Sze Hai Tong Bank Ltd. v Rambler Cycle
Co. Ltd. (1959) AC 576; shipowners who covenanted to deliver goods to the
person that produces the bill of laden, delivered same to a wrong person who did
not produce any bill of laden, was held incapable of availing themselves of the
provision of an exhaustive exemption clause.

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PRIVITY OF CONTRACT:
A contract cannot confer enforceable rights or impose obligations arising from the
contract on any person except parties to such contract. Thus, a stranger to a contract
cannot sue or be sued on it. This rule was established in Dunlop Pneumatic Tyre Co.
Ltd. v Selfridge Ltd. (1915) AC 847; and earlier cases Dutton v Poole (1677) 2 Lev
210 and Price v Easton (1833) 4 B& Ad 393; and in the Nigerian case of Chuba
Ikpeazu v ACB (1965) NMLR 374. In Etco Nig. Ltd. v Western Nigeria Development
Corporation (WNDC) (Unreported, Suit No I/30/69, judgment delivered on June 8,
1970). The plaintiff company claimed from the defendant corporation a certain sum
being the cost of work done on the defendant’s Premier Hotel. The fact of the case
disclosed that the plaintiff was a sub-contractor to the company that WNDC awarded
the contract at Premier Hotel to. Held that it was only the main contract that could sue
WNDC, the plaintiff could only sue the former and not the latter as there was no privity
of contract between it and WNDC.
There are however a number of exceptions to prevent the injustice and untold hardship
that a strict application of the rule could result in:
a) Covenants running with the land: At common law the assignee of a lease
takes it along with the benefit and subject to the burdens of the assignor.
Although there is no privity of contract between the lessor and the assignee,
there is “privity of estate” and the assignee may sue or be sued by the lessor. In
Tulk v Moxhay (1848) 2Ch. 774 established that restrictive covenants run with
the land i.e. a purchaser is bound by the covenant entered into by the previous
owner.
b) Contract for the hire of a chattel: A, the ship owner charters it to B for a time
certain and during the currency of the charterparty, sells the ship to C, who buys
with notice of B’s interest. Notwithstanding, C attempts to use the ship in a way
contrary to the charterparty, B could sue C for an injunction despite not being a
party to the contract between A and C. see de Mattos v Gibson (18858) 4 De G
& J 276; Lord Strathcona Steamship Co. v Dominion Coal Co. (19260 AC
108.
c) Interfering with the contractual rights: at common law it is a legal wrong to
knowingly interfere with the contractual rights of others. In British Motor Trade
Association v Salvador (1949) Ch. 556 A bought a car from and covenanted
with B that he will not resell it within a year without first offering it to B. C bought
the car from A within a year with notice of B’s interest. He was held liable for
wrongfully interfering with B’s contractual right against A. see also Lumley v Gye
(1853)2 E & B. 216
d) Insurance contract: if a spouse insures his/her life for the benefit of the spouse
and children. On the death of the insured, the spouse may sue to recover the
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 sum insured despite not being a party to the insurance contract. - see section 11
of the Married Women’s Act 1882. See Akene v British American Insurance
Co. Nig. Ltd (Unreported) High Court of Mid Western State, Ughelli suit no
UHC/37/71 delivered 26 May 1972. The plaintiff was the beneficiary of the life
insurance of his father who died in a car accident and the defendant offered him
less that the insured sum. He sued and the defence of privity of contract by the
defendant was rejected, and judgment entered for the full insurable sum. Also, an
injured party may sue an insurance company directly in motor traffic accident
under the Motor Vehicle (Third Party) Insurance Act section 6 (3). In Sule v
Norwich Fire Insurance Society Ltd (unreported) High Court of Western
Region suit no W/74/70 judgment delivered 11 March 1971. Held that plaintiff did
not have to be a party to a contract of insurance in order to enforce it against the
defendant.
e) Trust: rights arising from a contract may be transferred to a third party under a
trust. In Gregory and Parker v Williams (1817) 3Mer 582 Parker (P) owed
money to Gregory (G) and Williams (W), agreed with the latter to transfer his
property to him if Williams will pay his debt to Parker. After the property was duly
transferred Williams refused to pay Parker. Although there is privity of contract
between G and W but it was held that there is an ‘implied trust’ P was regarded
as a trustee for G, thus G could bring an action with P against W.
f) Banker’s Commercial Credit: this is a commercial devise that allows a
manufacturer selling his wares in another country to a customer whose credit
worthiness he wasn’t sure of to demand an irrevocable letter of credit be opened
in his (manufacturer’s) favour. The manufacturer could demand that the banker
redeem the importer’s debt, in case of default despite not being a party to the
contract between the importer and his bankers.
g) Assignment of choses in action: in certain circumstances, the owner of a
contractual right can transfer it to a third party without the consent of the debtor,
thereby enabling the third party to enforce the right against the debtor or obligor.
Choses in action are all personal rights of property which can only be claimed or
enforce by an action and not by taking physical possession. These include debts,
shares, negotiable instruments, insurance policies, bills of lading, patents,
copyrights, legacies etc.
VITIATING FACTORS:
These are factors that affect the validity of an otherwise effective contract. These are
mistake, misrepresentation, duress and undue influence.
MISTAKE:

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Mistake in the law of contract has a narrower meaning than in its colloquial use. It refers
to the conditions under which the law would permit the parties to repudiate or vary their
obligations under a contract should it be entered into under misunderstanding or
misapprehension. There are two types of mistakes.
a) Common mistake: this means that both parties to the contract conclude it under
the same mistake or misapprehension. Both parties acted in the erroneous belief
that a certain state of fact were in existence at the time the agreement was
reached. They are of these subdivisions:
I) Res exctincta- non-existence of the subject matter of the contract: a
mistake as to the existence of the subject matter. In Couturier v Hastie
(1856) 5HCL 673; a cargo of corn was sold on board a ship, but unknown
to both parties the cargo had fermented and the ship captain had sold it
en- route. Held there was no contract between the parties. See also
Galloway v Galloway (1914) 30 TLR 531.
II) Res sua- absence of title in seller of subject matter: when the seller has
no title, and the property unknown to both parties belongs to the buyer, the
contract would be void for mistake. In Abraham v Chief Oluwa (17 NLR
123), P thinking that his conveyance was defective purchased the property
from D. On discovery of his valid title sued the D for a refund. Held he was
entitled to a refund. See also Cooper v Phibbs (1867) LR 2 HL 149.
III) Where each party is mistaken as to the other’s intention, though each
does not know that their respective promises have been misunderstood.
This could only be resolved by the use of a reasonable man’s test. In
Raffles v Wichelaus (1864) 2 H &C 906. P agreed to sell cotton to D on a
ship Peerless to arrive from Bombay, unbeknownst to both parties, two
ships by that name leaves Bombay, one in October and the other in
December. P and D were thinking of separate ones. Held there was no
contract.
b) Unilateral Mistake:
This is a case where one of the parties is mistaken and the other knows. They are of
these variants
I) Cases of mistaken identity: the law presumes that a person intends to
contracts with the person with whom he has apparently contracted, and
the burden is on the party alleging mistake to establish that there was a
mistake of such a nature as to nullify the contract. When the contract is
made in face to face dealing the position of the person alleging mistake is
very precarious. In Cundy v Lindsay (1878) 3 App. Cas. 459; a crook
imitated the signature of a reputable firm and had goods delivered to his

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 address on the same street with the reputable firm and sold immediately
to an innocent party without notice. P sued the innocent buyer to recover
the goods as the crook was at large. Held P was entitled to recover from
D, as it never intends to enter into contract with the crook, so the latter had
no title hence he cannot pass valid title- Nemo dat quod non habet.
However, in Lewis v Averay (1972) 1QB 198, a rogue posing as a well-
known actor, called on P who had advertised his car for sale. He offered to
buy the car at the stated price; signed the actor name on a checkbook and
using a fake ID card, was allowed to take the car away. The cheque
bounced and he sold the car to D, who bought in good faith. P sued D for
the recovery of the car. Held that P’s contract with the crook was valid, he
could not recover the car from D as the crook passed a good title to D.
II) Mistake as to documents: there are cases where a person is made to
append his signature to a document by fraud, thus the contract contained
in the document is different from what he had in mind or was told he was
appending his signature to. The general rule is that anyone who signs a
document is bound by its contents, even if he did not read it, (Gracoub v
L’Estrange (supra) however a signed contract will be regarded as void if a
party can successfully plead the defence of non-est factum. To be
successful three conditions must be satisfied.
* the signature must be induced by fraud
* the document must be fundamentally different from that thought to be signed.
* the party seeking to avoid liability must be able to prove that he acted with reasonable
care.
In Lewis v Clay (1897) D was induced to sign two promissory notes by fraudulent
misrepresentation that his signature was needed as a witness to a confidential
document. The rest of the document apart from the space was signature was covered
by blotting paper. Held that the defence of non est factum avails D. However, in
Howartson v Webb (1907) 1 Ch. 537; D knew he was signing some deeds relating to
the Edmonton property, but did not read it. He later discovered that it was a deed
mortgaging the property. Held the defence of non est factum was unavailable to D.
2. MISREPRESENTATION
A misrepresentation is an untrue statement of fact which is one of the causes that
induces the contract. It must be:
- A statement (written, spoken or by conduct) of fact and not a statement of law,
intention or opinion.

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 - Silence is not usually misrepresentation except when a statement made in the
course of negotiation subsequently becomes false and is not corrected, or when
silence distorts a literally true statement. In R v Kylsant (1931) a company in its
prospectus stated that it paid dividend throughout the depression period, which
implied that it was making profit then. However, it was paying profit from its
accumulated profit. Held that the silence as to the source of the profit was
misrepresentation.
- Where contract is of utmost good faith (uberrimae fidei)
The misrepresentation must have induced the contract. The plaintiff could not avoid the
contract if:
- He knew the statement was false or
- He would have made the contract despite the misrepresentation, or
- He did not know or care whether there is a misrepresentation or not
In Horsfall v Thomas (1862) the vendor of a gun concealed a defect in the gun
(misrepresentation by conduct). The buyer purchased the gun without examining it.
Therefore, the concealment could not have affected his decision. His action failed.
Misrepresentation could be innocent or fraudulent.
Fraudulent Misrepresentation: a statement which is known to be false or made
without belief in its truth or recklessly, not caring whether it is true or false. In Sule v
Aromire (1951) 20 NLR 20; the defendant advertised a plot of land for sale, claiming
that he had a court judgment in his favour. Actually, he had no title to the advertised
land, which was in possession of a third party and the court judgment was for an
adjourning land. The plaintiff bought an action for the setting aside of an invalid
conveyance based on fraudulent misrepresentation and a refund of the purchase price.
The defendant rested his case on caveat emptor, that the plaintiff was not diligent. Held
that P acted on the false representation of D. the agreement was set aside for
fraudulent misrepresentation and D was ordered to refund purchase price to P.
Innocent Misrepresentation: this is a false statement made by a person who honestly
believes it to be true. The remedy is a claim of rescission which must be made within a
reasonable time, hence no damages are awarded to the parties.
3. DURESS:
Duress means actual or threat of violence to the person, his near relatives or his
personal freedom. The common law spectrum has been widened by case law
generally, in Occidental Worldwide Investment Corp v Skib A/S Avanti (1976)
Lloyd’s Rep.293; held that a plea of compulsion would be available to a person forced to
enter into a contract under an imminent threat of having his house burnt down or a
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valuable picture slashed. Likewise, in Cumming v Ince (1847) an old lady was
threatened by one of her relatives with confinement in a mental home if she did not
transfer certain property rights to him. The subsequent transfer was set aside as the
threat of unlawful imprisonment amounted to duress.
It has been expanded to include economic duress. In North Ocean Shipping Co Ltd v
Hyundai Construction Co Ltd. (1979) QB 705 D shipbuilders forced P to pay 10%
more on a ship they were building for him, by threatening to abandon the construction of
the ship midway, knowing that P had already concluded a lucrative contract to lease the
said ship to a third party on completion. The act of D constituted economic duress, and
the contract is voidable.
4. UNDUE INFLUENCE:
This refers to cases of subtle coercion, domination, pressure and bargain obtained in an
unfair manner. It applies where influence is acquired and abused, and confidences are
reposed and betrayed. Denning, MR christened it ‘inequality in bargaining power’ in
Lloyd’s Bank v Bund (1975) QB 326. The burden of proof depends on the relationship
between the parties.
a) When there is no special relationship, the person seeking to avoid, must prove that
he was subjected to influence which excluded free consent. In Williams v Bayley
(1866) LR 1HL 200; a father agreed to mortgage his property in return for the
promissory notes on which his son had forged his signature. The bank had hinted on
prosecution and permanent deportment of the son to Australia from England. The
agreement executed was set aside because of undue influence.
b) When there is a special relationship, equity will presume the existence of an undue
influence and set aside any contract advantageous to the party in a superior position to
the other. In Tate v Williamson (1866) L.R. 2 Ch. App.55; D, a financial adviser to an
extravagant wealthy Oxford undergraduate, bought his client’s property at half its value.
The undergraduate died at aged 24 of alcoholism. His executors successfully set aside
the sale. In Powell v Powell (1900)1Ch. 243; a settlement undertaken by a young
woman by which she shared her property with her step mother’s children from another
father was set aside. In Taylor v Brew 8 WACA 201; Mrs. Taylor inherited a
considerable fortune from her grandmother. Her father who was also her solicitor
persuaded her to make a settlement of her property by a trust deed. The father inserted
a clause vesting the whole property in him should the daughter die intestate. The trust
deed was declared null. Delay however defeats equity, in Allcard V Skinner (1887) 36
Ch. D 145; the claim for relief was barred by laches.
The relationships in which undue influence is inferred include: guardian/ward- Itylton v
Itylton (1754) 2 Ves. Sen 547; doctor/ patient- Radcliff v Price (1902) 18 TLR 466;
religious adviser/ disciple- Allcard v Skinner (supra); solicitor/client- Wright v Carter

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(1903) 1 Ch. 27; Williams v Franklin (1961) 1 All NLR 218; the rule does not apply to
husband and his wife – Howes v Bishop (1909) 2 KB 390.
DISCHARGE OF A CONTRACT:
A contract is discharged when its obligations are no longer binding on the promisor. It
may be discharged in the following ways:
1. By Performance:
When both parties have performed their obligations, the contract is extinguished.
Generally, performance must be complete and exact. In cases, where there is
substantial performance, the courts currently decree the payment of quantum meruit,
being payment for the work done. In Dakin & Co. Ltd v Lee and Hoenig v Isaacs
(1952) 2 All ER 176; it was held that contractors who had substantially completed the
work was entitled to quantum meruit, less the amount required to complete or/ and
remedy the defect on the sub-standard work. However, in Bolton v Mahadeva (1972) 2
All ER 1322; the plaintiff contractor did a substandard work with 25-33 % defect was
held not to be substantive performance hence not entitled to any claim.
In instances involving part performance and unilateral variation of contract, the following
case is instructive. In Omoleye v Okeowo (1973) 3 UILR 180; P entered into an
agreement to supply 6,000 yards of textile material to D at an agreed rate and D
deposited 2,500 pounds. P unable to obtain the specified material unilaterally supplied
2,910.5 yards at a higher rate. P accepted delivery and re sold them. It was held that D
could reject the consignment on three grounds- difference in material, price and
quantity; but since D has taken delivery P was entitled to payment at the agreed rate for
the accepted quantity.
2. By Agreement:
Contract came into existence vide agreement and could be terminated by an agreement
as well. The legal position depends on whether it is bilateral or unilateral discharge.
a) Bilateral Discharge: the contract is executory or partly executory on both sides
i.e. both parties have outstanding obligations, thus each party will surrender
something of value. There could be a waiver, voluntary concession or
forbearance as in The High Trees Case (1947)
b) Unilateral Discharge: where only one side has completely performed his side of
the contract, any release by him of the other party must be by seal or be
supported by fresh consideration. When the release is supported by fresh
consideration there is said to be ‘accord’ and ‘satisfaction’. The ‘accord’ is the
agreement by which the obligation is discharged and ‘satisfaction’ is the
consideration which makes the agreement effective. The latter may be executory.
c) There are two other ways in which a contract may be discharged by agreement.
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 I) Novation: for instance, A owes B N1M and B owes C N 1M. A agrees to
pay C if B will release B from his obligation to pay him. All the three parties
must agree to this arrangement.
II) Condition Subsequent: sometimes a clause in the contract will provide
for its discharge if a particular event occurs in the future, i.e. subsequent
to the formation of the contract.
3. FRUSTRATION:
The general principle at common law is that if a person contracts to do something, he is
not discharged even if performance proves impossible. In Paradine v Jane (1647) 82
ER 897; a tenant who was sued for rent pleaded that he had been dispossessed of the
land for the last three years by King’s enemies. His pleas failed. This severe rule is
mitigated by the doctrine of frustration, which if it applies automatically discharges the
contract.
In general, if an event is to frustrate a contract, it must be:
I) Not contemplated by the parties when the contract was formed.
II) One which make the contract different from the original one.
III) One for which neither party was responsible.
IV) One which results in a situation which the parties do not wish originally to be
bound.
Frustration occurs:
I) If the whole basis of the contract is the continued existence of something
which is destroyed. In Taylor v Caldwell (1863) 3 B&S 826D contracted to let
a hall to P for four days. The hall was accidentally burnt down before the
contract date. P claim of damages failed, as the contract was discharge for
frustration.
II) If either party to a contract of personal service dies, is seriously ill or is called
up for military service. In Condour v Barron Knights (1966) P was the
drummer of a pop group. Owning to illness he was forbidden from performing
more than a few nights in a week. His contract which required that he should
be present every night in a week was held to be frustrated.
III) Non-occurrence of an event: Non-occurrence of a vital event will discharge
the contract. In Krell V Henry (1903) 2KB 740 P hired a flat to view the
coronation procession of Edward VII. The procession was cancelled due to
the King’s illness. Held that the cancellation discharges the contract.

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 IV) Subsequent illegality: a subsequent change of law which renders the whole
performance of a contract illegal will cause the contract to be discharged.
Metropolitan Water Board V Dick, Kerr & Co. (1918) AC 119 D undertook
to build a water reservoir for P within 6 years; but the British government,
after the outbreak of the war prohibits under statutory authority the
continuance of the work. Held the contract was frustrated.
However, a contract is not frustrated merely because its performance has become more
onerous or less profitable than was anticipated. – Blackburn Bobbin Co. v Allen &
Sons (1918) 2 KB 467. A party could not rely on a self-induced frustration- The
Eugenia (1964), a ship charterer ordered a ship into a war zone and it was detained. It
was held that the charterer could not rely on the detention as a ground for frustration.
4. BREACH:
This occurs if a party fails to perform one of his obligations under a contract (such as
failure to perform on the agreed date or delivery of inferior quality goods) or the party
before the date fixed for performance indicates his inability to perform, the latter is
known as anticipatory breach.
Breach does not automatically discharge a contract. Breach of warranty and condition
entitles the innocent party to damages; and damages and repudiation respectively. In
G.A. Tewogbade v Funsho Adeolu, (Unreported, HC of Oyo State, Suit No I/64/80
delivered on June 25 1981) D agreed to supply steel water tanks to P and P has paid
half of the contracted sum. D failed to supply at the agreed date and proposed in the
alternative to obtain it from another source at almost three times the contract price. P
rejected and asked for a refund. P instituted an action on D failing to refund of the part
payment. The defendant has repudiated the contract and P is entitled to a refund and
damages

SALES OF GOODS

NATURE OF A CONTRACT OF SALE OF GOODS

Sale of goods as a form of contract is part of the general law of contract and it is therefore governed
primarily by the general principle of the law of contract. It is important to say that a contract of sale of
goods must equally be subject to the general principle of the law of contract. i.e. offer, acceptance,
consideration, intention to create legal relation and legal capacity. It is in addition to all these basic

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elements that we look for special ingredients to determine a contract of sale of goods as distinct from
other forms of contract.

APPLICABLE LAWS

The law regulating sale of goods in Nigeria is the Sale of Goods Act, 1893 (hereinafter referred to as
SOGA) It is a statute of general application in force in Nigeria- the rules of common law, including the
Law Merchant, which are not inconsistent with the express provisions of the Act (i.e. SOGA), some
provisions of the Factors Act, 1889 and the Sale of Goods Law, 1959, of the former Western Nigeria.

ELEMENTS OF A CONTRACT OF SALE OF GOODS

The elements of a contract of sale of goods basically are as follows: The Goods/chattel & the price.

1. THE PRICE: The price is the money consideration which is exchanged for the goods or the article
which is the subject matter of the contract of sale of goods. It is central to the contract of sale of
goods, it is one of the major distinction of a contract of sale and other forms of contract. Such
price is often fixed by the parties and may also be left for the circumstances between the
parties. It could be based on a custom of a particular trade. The price is also determined
sometimes by a course of dealings between the parties. However, a contract of sale of goods
may consist in its price money consideration and exchange of goods.

2. GOODS/CHATTEL: Section 62(1) SOGA, describes goods as including all chattels other than
things in action or money; emblements, industrial growing crops and things attached to or
forming part of the land which are agreed to be severed before sale also described as goods in
this context.

It is important to note that chattels or goods do not include choses in action such as bill of exchange,
cheques etc. also land and any interest on land is not part of the definition of the term goods or article.
In other words, land is not chattel or goods.

TYPES OF SALE OF GOODS

1. SPECIFIC GOODS: These are goods that can be identified or seen and agreed upon at the time of
making the contract of sale. e.g. a 1998 Volkswagen Saloon Car with a given chassis and engine
numbers.

2. FUTURE GOODS: These include goods yet to be acquired or manufactured by the seller after the
contract has been made.

3. UNASCERTAINED GOODS: These are goods sold by description, but which are not identified or
agreed upon as at the time of a contract but they are included in a particular class of goods. e.g.
12 tons of grade one cocoa.

4. EXISTING GOODS: These are goods which are available with or to a seller at the time of making
the contract of sale. These are, goods which are owned and possessed by the seller at the time
of contract of sale. In other words, they are goods actually in existence when the contract is
made. Such existing goods may either be specific or unascertained.

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DISTINCTION BETWEEN SALE OF GOODS AND OTHER SIMILAR TRANSACTIONS:

1. Barter: here consideration is not in monetary term but exchange of goods for goods.

2. Hire Purchase: this is a contract of hire, with an option to buy, which may be exercised or not. It
resembles a sale of goods as the ultimate may be sale of good.

3. Contract of skill and labour: this is when someone offers his skill for a fee. A different law
governs this type of contract even when the ultimate aim is the production of goods; e.g the
commissioning of an artist to paint or produce a portrait.

4. Mortgage: is the transfer of the general property in the goods from the mortgagor to the
mortgagee to secure a debt.

TRANSFER OF TITLE:

The basic rule is Nemo dat quod non habet – no one can give what he does not have or what does not
belong to him. Section 21 (1) of SOGA affirm this basic principle but went to make exceptions to this
rule:

a) Estoppel: this refers to a situation where the owner by his conduct or statement leads an
innocent purchaser to believe that the seller has the right to sell the goods. If this occurs, the
owner is stopped from denying the authority of the seller to sell. Thus, the buyer acquires good
title to the goods.

b) Agency: an agent may pass good title even when he exceeded his real authority once he is
within the scope of his apparent authority.

c) Sale by Mercantile Agent: a mercantile agent who is in possession can validly sell, pledge or
dispose if he acts in the ordinary course of business and the purchaser who takes act in good
faith and without notice of the lack of authority to dispose at the time of disposition.

d) Sale in market overt: market overt is an open, public and legally constituted market, subject to
the usage of the market. Sale in such market passes good title, once it is done in good faith and
without notice of any defect or want of title on the part of the seller.

e) Sale under a voidable title: a voidable title is obtained as a result of fraudulent representation.
Whoever buys in good faith and without notice of the seller’s defective title before a voidable
title is avoided acquires a good title. In Car Universal Finance Co Ltd. v Cadwell (1965) 1 QB 525
D sold his car to a third party in return for a cheque which was dishonoured on presentation. D
promptly informed the police and Automobile Association on the fraudulent transaction. Held
that D has done all he could to rescind the contract and whoever bought the good acquires no
title.

f) Seller in possession: where a seller of goods retain possession of them or of the documents of
title to the goods the delivery or transfer by him of such good or documents under a sale, pledge
or other disposition to another person receiving in good faith and without notice of any defect
or want of title on the part of the seller or a previous sale,; such sale shall be binding and the

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 new buyer will obtain a valid title to the goods.-s 25 of SOGA & 26(1) of Western and Mid
Western Sale of Goods Law.

g) Sale under statutory powers or common law: this includes sale of the goods of a judgment
debtor by order of court under a fieri facias (fifa) order. Under s 26 of SOGA, the Sherriff is
empowered to seize judgment debtor’s goods and causes them to be auctioned. Also,
pawnbrokers and innkeepers are empowered to sell, confer title on goods over which they have
lien to a third party. - S 1 Innkeepers Act, 1878.

PASSING OF PROPERTY AND RISK

Meaning of Property in Goods: The purpose of a contract of sale of goods is the transfer of property
(ownership) from the seller to the buyer. It is important to note at what time/moment property passes
in a transaction of sale.

1. Passing of Property in Specific (Ascertained Goods): Ordinarily, the property of ascertained

goods ought to pass as the time a contract of sale is made. However, such passing is subject to
the overriding provision laid down by section 17(1) of SOGA which is to the effect that property
is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
In other words, the property in the goods passes from the seller to the buyer at such time (if
any) as the parties expressly or impliedly stipulated in the contract of sale.

2. Passing of Property in Unascertained or Future Goods: The fundamental rule as laid down by
Section 16 of SOGA is that “where there is a contract for the sale of unascertained goods, no
property in the goods is transferred to the buyer unless and until the goods are ascertained. See
the case of Healey v Howlett & Sons (1917) 1 KB 337. Although, the property in unascertained
goods can only pass when the goods become ascertained, it must be noted that whether the
property in the goods will pass at the particular moment is dependent upon the intention of the
parties as provided under section 17 of SOGA. Although, this section dealing with ascertainment
of intention deal with ascertained goods, it is well settled that is also applies generally to
unascertained goods. However, subject to the qualification laid down in section 16.

CONDITIONS AND WARRANTIES IN SALES OF GOODS

It is usual for both seller and buyer to make representations to each other at the time of entering into a
contract of sale. Some of these representations are mere opinions which do not form a part of contract
of sale; whereas, some of them may become part of contract of sale. Representations which become
part of contract of sale are termed as stipulations which may rank as condition and warranty. e.g. a mere
commendation of his goods by the seller does not become stipulation and gives no right of action to the
buyer against the seller as such representations are mere opinion on the part of the seller. But where
the seller assumes to assert a fact of which the buyer is ignorant, it will amount to a stipulation forming
an essential part of the contract of sale.

Meaning of Condition

A condition is a stipulation which is essential to the main purpose of the contract and the breach of
which gives the aggrieved party a right to terminate/repudiate the contract. However, the innocent

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party may choose to treat the breach of the conditions as if it were a breach of a warranty. In essence,
he/she may choose not to repudiate the contract but to ask for the payment of damages for the breach
that has occurred.

Meaning of Warranty

A warranty is stipulation which is collateral or ancillary to the main purpose of the contract, and the
breach of which gives the aggrieved party a right to claim damages but not right to reject goods and to
terminate contract. It is minor term in a contract of sale of goods which is subsidiary to the main
purpose of the contract

IMPLIED CONDITIONS AND WARRANTIES

Implied conditions and warranties are those implied by law in every contract of sale of goods unless a
contrary intention appears from the terms of the contract. These will be main focus of this discourse.

1. IMPLIED CONDITIONS

At common law, before the enactment of SOGA, the guiding principle was caveat emptor (buyer
beware). This principle like some other principles of common law was strictly applied until it began to
work injustice especially where the buyer has had opportunity of inspecting the article he is thus
prevented from complaining about the goods. This principle soon became an instrument of oppression
and deceit in the hands of the seller. This prompted the intervention of the legislature which resulted
into the passage of SOGA, 1893.

With the passage of SOGA, the principle of caveat emptor had been altered to the extent that some
experts are of the opinion that there is virtually nothing of the principle of caveat emptor. With the
passage of SOGA, so many conditions are now implied into a contract of sale of goods to give
cover/protection to the innocent buyer.

A. Implied Condition as to Title (Section 12 (1) SOGA): There is an implied condition on the part of
the seller that in the case of a sale, he has a right to sell the goods and in the case of an
agreement to sell, he will have a right to sell the goods at the time when the property is to pass.
It also implies that anybody who puts anything up for sale has a right to transfer the title when
the need arises. Hence, when title is absent, the seller is under obligation to compensate the
innocent buyer. In Akosile v Ogidan (1950) 19 NLR, 87, the Defendant bought a stolen car from
a thief who was subsequently convicted, the defendant was unaware of the fact that the car
was stolen and therefore, the seller has no title. The defendant subsequently sold the car to the
plaintiff, the police later recovered the car from the plaintiff. The reason for this is that
defendant who sold the car to the plaintiff lacks title, the plaintiff brought an action against the
defendant to recover the purchase price. The case of the plaintiff was built around the relevant
provisions of SOGA to the effect that a seller in a contract of sale of goods has implied by putting
up anything for sale that he has title.

B. Implied condition as to Sale by Description (Section 13): Where there is contract of sale by
description, there is an implied condition that the goods shall correspond with description. The

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 main idea is that the goods supplied must be same as were described by the seller when the
goods are eventually delivered.

C. Implied Condition as to Fitness of Purpose: This is to the effect that where a buyer expressly or
impliedly make known to the seller the purpose for which he requires the goods or the article in
order to indicate that he the buyer relies on the seller’s skill or judgment that the goods are of
such description as to be in the course of the seller’s business, the law implies a condition that
such goods or articles shall reasonably be fit for the purpose for which they are meant.

D. Implied Condition as to Merchantable Quality (Section 14 (2) SOGA): Where the goods are
bought by description from a seller who deals in goods of that description (whether he is the
manufacturer or producer or not), there is an implied condition that the goods shall be of
merchantable quality. The expression “merchantable quality” means that the quality and
conditions of the goods must be such that a man of ordinary prudence would accept them as
the goods of that description. Goods must be free from any latent or hidden defects. See the
case of British Overseas Ltd. V. Animashawun (1961) 1 All NLR 343.

E. Implied Condition in Sales by Sample: This is to the effect that when a product is negotiated or
sold by sample, it is implied that the goods when eventually supplied will correspond with the
sample and that the goods shall be compared by the buyer with the sample, and when they are
of lesser quality, the buyer shall have a right to return them or be compensated at his option.

2. IMPLIED WARRANTIES

A. Warranty as to Quiet Possession: There is an implied warranty that the buyer shall have and
enjoy quiet possession of the goods. The breach of this warranty gives buyer a right to claim
damages from the seller.

B. Warranty of Freedom from Encumbrances: There is an implied warranty that the goods are free
from any charge or encumbrance in favour of any third person if the buyer is not aware of such
charge or encumbrance. The breach of this warranty gives buyer a right to claim damages from
the seller.

C. Warranty as to Valid Transfer of Right of Title.

DUTIES AND RIGHTS OF PARTIES

1. SELLER’S DUTIES/OBLIGATIONS

i. Duty as to the Existence of the Goods: The law imposes a duty on the seller as to the
existence of the goods, the subject matter of the contract of sale, especially where the
contract of sale involves specific goods, it is the duty of the seller to ensure the existence of
the goods at the time of sale. This duty is collateral to his overall duty of title.

ii. Duty to Deliver: Section 10 (1) of SOGA implies that the time of payment and delivery may
not be essence in a typical contract of sale. However, parties to a contract may expressly or
impliedly prescribe a particular time for delivery and payment. Section 10 (2) is in support
of the latter statement to the effect that whether stipulation as to the time of delivery is of

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 essence depends to a large extent on the terms of the contract between the parties. It has
however, been established that in ordinary commercial contract, time is prima facie of
essence in respect to delivery. Where a time for delivery is fixed, there appears to be little
difficulty in ascertaining the breach of a condition of term to delivery.

iii. Duty to Pass Good Title: The principle of caveat emptor which means buyers beware was
operational in full blown during common law days. Under this principle, a seller is not given
any special undertaken as to title except where he has expressly given that commitment.
But by Section 12 of SOGA, a duty is thereby imposed on the seller in relation to title. The
section is to the effect that a seller implies that he has a right to sell and in agreement to
sell, he will have a right to sell. It also implies that the seller has warranted that the buyer
shall enjoy quite possession and also that the goods shall be free from any encumbrance.

iv. Duty to Supply Goods of the Right Quality: This is to the effect that where goods are sold by
description, it is implied that the goods when supplied shall correspond with description.
The seller is duty bound to ensure this is done by provision of Section 13 of SOGA. The same
apply to goods sold by sample. The duty of the seller as to supply goods of the right quality
is a strict duty. Therefore, he cannot avoid liability by simply shifting responsibility to
someone, for example, an agent or any other active participant in the contract. Associated
with this duty of right quality is the issue of merchantability. This is because, for goods to be
of merchantable quality, they are assumed to be of a right quality.

RIGHTS/REMEDIES OF THE UNPAID SELLER

Generally, the innocent party in a contract where a breach of contract had occurred has a right of action
against the guilty party. Apart from this, a seller in a contract of sale of goods has a number of specific
rights which are peculiar in a contract of sale of goods. By Section 39 of SOGA, the followings are the
remedies of a seller, viz, right of a lien, right of stoppage in transit, right to resell and right to withhold
delivery. Each has been briefly explained as follows:

i. Right of a Lien: As long as the seller is in possession of the goods even though the property
has passed to the buyer, the seller may still be able to exercise the right to a lien. A lien
simply means a right of the seller to hold on to an article or goods in a contract of sale in
order to press for the purchase price from the buyer especially if he remains in possession.
In so far the seller is unpaid and he has control of the goods, his right of alien is his weapon
at pressing for the purchase price. Literally, right of a lien could be described as the right to
retain possession until the agreed price for the goods is paid. Such right can be exercised in
the following circumstances, when the goods have been sold without any stipulation as to
credit. i.e where the buyer is not expected to hold the purchase price before gaining
possession; where the goods had been sold on credit but the terms of the credit have
expired or the terms of the credits have been breached and where the buyer has been
declared insolvent by a court of competent jurisdiction.

ii. Right of Stoppage in Transitu: This right is available to the seller when the goods remain in
transit or are being transported from the seller to the buyer. By this right, the seller can stop
delivery so long as the goods have not been delivered to the buyer. This right may be
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 exercised where a buyer has either committed a breach of the contract or he become
insolvent. This right can be exercised notwithstanding the fact that the titles or property in
goods have been transmitted to the buyer.

iii. Right to resell: An unpaid seller who has exercised a right of lien or a right of stoppage in
transitu and the buyer continues his breach or has not been able to remedy the situation
leading to any of this action, may give rise to the exercise of the seller’s right to resell. The
exercise of the power of a resale is a useful tool to the seller which enables him to realize
the price of the goods which is primary to him in as contract of sale. This right could be
exercised in any of the following situations; where the seller retains the property in the
goods; where the property have passed to the buyer, but the seller still retains possession
and where the property and possession has passed to the buyer but the seller is able to
exercise his right of stoppage in transit.

iv. Right to withhold Delivery: A seller in a contract of sale has a right to withhold delivery of
the goods, the subject matter of a contract of sale of goods especially where the buyer is in
breach of the terms of the contract, particularly where they relate to payment of purchase
price or under fundamental terms to the contract of sale. By exercising this right, the seller
is able to secure and protect his financial interest in the contract where the buyer continues
in his default.

2. DUTIES AND RIGHTS OF BUYER

Generally, duties of the buyer in a typical contract of sale of goods is divided into two, these are, duty to
pay the price and duty to accept the goods.

i. Duty to Pay the Price: The price is the integral part of contract of sale of goods, it is the
primary reason for the seller to enter into the contract. As earlier noted, the price may be
agreed upon by the parties and often times the mode of paying it may equally be settled at
the negotiation of the contract. Whether or not this is agreed upon, a buyer has a primary
duty to pay the agreed price at the agreed time in the agreed mode in a contract of sale of
goods. However, payment of the price may be negotiated with a view to reviewing it by the
buyer, when this is agreed to by the seller, it becomes part of the original contract of sale.

ii. Duty to Accept the Goods: Section 27 of SOGA is to the effect that it is the primary duty of a
buyer to accept and pay a good price for the goods in accordance with the contract of sale.
In other words, the other side or the corresponding duty of a buyer to the duty of delivery of
a seller is to accept and pay the agreed price for the goods. The buyer is not entitled
possession unless he has paid or agrees to pay the price or is willing to enter into a
commitment in this regard in accordance with the terms of a contract of sale

RIGHTS/REMEDIES OF A BUYER

Generally, in a typical contract of sale of goods, a buyer has a numbers of remedies where the seller is in
breach of contract of sale of goods, they are, right to recover the purchase price, right to reject the
goods, right to ask for an order of specific performance and right to ask for damages (i.e. damages for

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breach of condition, damages for non-delivery, damages for breach of warranty, damages for late
delivery and damages in tort). These are briefly explained as follows:

i. Right to Recover the Purchase Price: where the buyer has paid the price and the goods are
not delivered to him, he can sue to recover the amount paid.

ii. Right to Reject the Goods: if the seller is in breach of contract, the buyer can repudiate the
contract if the breach goes to the root of the agreement, in the sense that the breach
amounts to a breach of condition as opposed to being a breach of warranty. But usually, the
main problem that arises with regards to buyer is with respect to the sale involving
instalmental delivery.

iii. The Right to ask for an order of specific performance: When the goods are ascertained or
specific, a buyer may sue the seller for specific performance of the contract and compel him
to deliver the same goods. The court usually orders for specific performance only when the
goods are specific or ascertained.

iv. Right to ask for damages: This can arise in any of the following damages for breach of
condition, damages for non-delivery, damages for breach of warranty, damages for late
delivery and damages in tort (damages in tort arises where the property in the goods has
passed to the buyer, and the immediate right of possession is in the buyer, aright of action
in tort for detinue or conversion).

AGENCY

AGENCY: It can be described as a relationship which exists between two parties wherein one of them is
expressly or impliedly authorized to act on behalf of another in any dealing with third parties. It is a

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relationship arising out of the use of one person by another for the performance of certain tasks on his
behalf.

Therefore, an agent is said to be a person who is employed by another for the purpose of putting his
principal into legal relationship with third party. In modern times and in the light of the complexity in the
area of business, the appointment of agent becomes almost imperative. Agent may be appointed for
various purposes, for examples an agent may be appointed to enter into a contract on behalf of the
principals, or institute a legal action or to conduct the conveyance of a price of land. The three features
of agency are service, representation and power to affect the legal position of the principal. An agent
can acquire rights for his principal and subject his principal to liabilities.

TYPES OF AGENCY

There are many ways of classifying agents. It is important to classify agent so as to know the extent to
which the principal may be made liable for the act of such agent. Generally, an agent may be broadly
classified into two, these are General and Special Agent. Although, there may be other types of agency,
but each falls under either general or special agent. The various types of agents are therefore, briefly
explained as follows:

1. General Agent: This is an agent with authority to perform a series of transactions that are
usually of a continuous nature in the ordinary course of business on behalf of his principal. Such
agent may act on behalf of his principal in all matters. e.g. the manager of a business or a sale
representative is a general agent. A general agent is one that has wide powers and ostensible
authority.

2. Special Agent: This is a type of agent is one with authority to do or carry out a special
assignment on behalf of his principal. For example, an agent may be appointed to sell a car or
any other properties of his principal. This often time is a once and for all affair. A special agent
may also be required where a technical nature of the assignment will not permit the principal to
carry out such assignment by himself. For instance, a lawyer appointed to institute an action
may be regarded as special agent.

3. Universal Agent: An agent who has “unlimited” authority. He could perform any act that his
principal could have performed, including the execution of a deed on his behalf. He is appointed
by a deed known as a power of attorney.

TYPES OF AGENT BASED ON FUNCTION

4. A factor: This is an agent entrusted with possession of goods or of the documents of title. He
normally sells in his own name without disclosing his principal.

5. A broker: This agent acts as a go between, a negotiator. He makes contracts for the purchase or
sale of property or goods which he is not entrusted with the possession or document of title.

6. An Auctioneer: He is an agent who is employed to sell at a public auction. He is an agent for

both the seller and the buyer. He may not be entrusted with the possession of the goods to be
sold or the documents thereon.

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 7. A Del Credere Agent: He is an agent who usually for extra remuneration undertakes to
indemnify his employer against loss arising from the failure of persons with whom he contracts
to carry out their contracts. He is an agent charging additional commission for risk.

CREATION OF AGENCY

As a general rule, there is no formality as to how agency relationship can be created. i.e. no particular
format is required by law to create principal and agent relationship. An agent can be appointed orally, or
in writing or by implication.

When an agent is appointed orally, such appointment is effective even though the agent enters into
another contract on behalf of his principal and this other contract is in writing. In other words, an agent
appointed orally can enter another contract on behalf of his principal in writing.

In practice, the principal and agent relationship may arise in any of the following ways, viz:

1. Express or Implied Appointment (i.e. by Agreement): This can happen either expressly or
impliedly. An express appointment is the commonest way in which the agency relationship
arises. Such appointment may be made orally or by an informal writing. In some cases, such
appointment is expected to be in writing as in the case of an appointment by a corporation.
Also, an agent who is required to execute a deed on behalf of the principal must be appointed
under seal. An implied appointment may arise in two situations; first, it may arise from the
express authority conferred. Thus, an agent appointed to conduct a particular trade or business
can do all such things that are necessarily incidental to the conduct of such trade or business.
Secondly, an agreement to create an agency may also be implied from the conduct of the
parties.

2. By Estoppel: Although, a person cannot be bound as principal by a contract made without his
written or oral authority, yet if the natural consequence of his conduct is to portray another as
his agent and, on that portrayal, an innocent third person enters into a contract with that other,
he will be estopped (i.e. prevented) from denying the existence of the agency. Estoppel is
therefore, a principle of law which prevents a person from asserting the reverse of what he has
previously represented, if an innocent representee has materially changed his position in
reasonable reliance on the previous representation.

3. By Ratification: This refer to adoption by a person of an act done professedly on his behalf by
another person who either was not his agent at the time when the act was done or who,
although his agent, had no authority at the time to do the particular act. In order to create a
valid ratification, the agent must profess to act on behalf of a principal when making the
contract and that the principal must be in existence.

4. By Implication of the law or necessity: It is now generally accepted that in time of emergency, a
person may be bound to make a contract on behalf of another without any prior authority to do
so. e.g. a shipmaster who finds it practically difficult to contact the owners of perishable goods
that cannot be delivered at the destination in good condition is entitled to sell the goods for
what they can fetch.

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 5. By Cohabitation: Agency presumed from cohabitation may arise where a husband and wife live
together and maintain a household establishment, a presumption arises that the wife has
authority to pledge the husband’s credit for necessaries suitable to the style in which they live,
in respect of those matters usually entrusted to the management of the wife.

OBLIGATIONS/ DUTIES OF PARTIES

1. DUTIES OF THE PRINCIPAL: the duties of the principal include:

i. Duty to pay agent for his service in terms of the commission or other remuneration as
agreed by both parties.

ii. Duty to indemnify the agent for all acts lawfully done and liabilities legitimately incurred
in the performance of his service.

2. DUTIES OF THE AGENT.

i. He must follow and obey the principal’s lawful instructions: As a general rule, an agent
is duty bound to obey and follow the instructions of his principal, provided of course,
that such instructions are lawful. So, where an agent fails to follow the principal’s lawful
instruction and this resulted in a loss to the principal, the agent will be liable for the loss
thereby sustained.

ii. He must perform his duty to his Principal Personally: He is not to delegate his
authority. The relationship between the principal and his agent is a personal and
confidential one, he must therefore, not assign such responsibility to others. The legal
maxim for this is Delegatus non potest delegare (i.e. a delegate must not further
delegate). However, there are exceptions to this rule to the effect that, first, where the
duty of an agent is merely supervisory or ministerial; secondly, where the nature of the
assignment given to the agent is the one that he is incapable of doing it all alone.

iii. An agent that is not gratuitous agent must exercise some skills and due Diligence as it
is normal and usual for the proper performance of his duties. The skills and diligence
expected of an agent depends on the circumstances in each case. A principal who
appoints an agent knowing his skill and experience should not require from him, a
higher measure of skills and knowledge than somebody of his position could reasonably
be expected to possess, this is the position held in Omotayo v Ojikutu (1961) All NLR
901

iv. He is expected to perform his duty in good faith and without letting his interest
conflict with his duty (i.e. absolute loyalty): He owns his principal undivided loyalty, he
must therefore, avoid anything that is likely to put him in a position where his personal
interest will conflict with that of his principal. This could happen for instance where an
agent is appointed to buy shares and such agent decides to sell his personal shares to
the principal without his (principal) knowledge and consent.

v. An Agent must not Make Secret Profit beyond the commission or other remuneration
paid by his principal: It is a breach of duty on the part of the agent if he makes secret
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 profits in the course of his agency except where such profit is to the knowledge and
consent of the principal. The agent is therefore accountable to his principal for any
profit which he makes without the principal’s consent. It is not an excuse or a defence
for the agent to say that his principal did not suffer as a result of the secret profit he (the
agent) has made.

vi. An Agent has the Duty to Render Account when required: The agent is expected to
keep the financial records of the transactions on behalf of the principal. The standard is
that the agent must keep his own money and property different from that of his
principal.

vii. He must Comply with his obligations under the contract or perform the undertaking
according to instructions.

viii. He must relate to his Principal in Utmost Confidentiality: Agency relationship is

confidential and therefore, the agent is not expected to disclose information in his
possession by virtue of his agency to a third party without the principal’s knowledge. i.e.
duty of non-disclosure.

REMEDIES/RIGHTS AVAILABLE TO THE PRINCIPAL: In situations where the agent by some misconduct or
otherwise commits a breach of a term of his agency relationship with the principal, the latter may avail
himself of one or more of a number of remedies available below:

i. Dismissal: The Principal may determine or bring the agency relationship to an end or
otherwise dismiss the agent from his employment without notice.

ii. Rescission and Damages: The Principal may also rescind any contract made on his behalf by
the agent without authority or in breach of his duty and this may include claims for
damages.

iii. Action for Account: The Principal may take an action to compel the agent to render an
account for all his dealings on his behalf, in respect of their agency relationship. This may
also include an account for all the money or property of the Principal in his possession.

iv. Action in Tort: The Principal may in addition sue the agent for conversion where the latter
received property on his behalf and has misappropriated or misused it. He may also institute
an action for negligence where such is in contravention of the agency agreement.

v. Private Prosecution: He may be entitled to and may take out private summons against the
agent where the latter’s conduct, act or omission is criminal.

REMEDIES AVAILABLE TO THE AGENT

Where the agency relationship is established by contract and the principal commits a breach of a term
of his agency contract, the agent has most of the remedies ordinarily available to a contracting party
under the general law of contract.

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The law may imply certain remedies from the facts and circumstances of a particular agency case in
some cases. Generally, in a case of a breach of an agency contract or a term thereof, both the Principal
and the agent are entitled to and may claim one or more of the following remedies:

1. Damages: The agent may sue the principal to recover any loss or injury he may have suffered as
a result of the principal’s failure to perform any of his duties under the agency arrangement.
This may include his right to indemnity or reimbursement and damages unless the parties
agreed otherwise or the agent has waived or otherwise lost his right to sue.

2. Right of Set-off: Whenever the principal institutes an action in a court of law against the agent,
the latter may claim a right of set-off or counter-claim of engagement due to him from the
principal by way of remuneration, indemnity or reimbursement. This he must specifically do in
his defence to the claims by the principal.

3. Right of Lien: The agent also has a right of lien on the property, goods or chattels of his principal
in his lawful possession or custody in respect of and up to the amount of his claim for
remuneration, losses, liabilities and expenses incurred lawfully and for advances made in favour
of the principal. This is however subject to any agreement between the parties. The law
recognizes only two types of lien, viz, the general and particular lien.

a. General Lien: This enables the agent to retain his principal’s property, chattel, or goods until
any sum due to him from the principal is paid.

b. Particular Lien: This only enables the agent to retain such property, chattel or goods
pending payment of any sums due in respect of that property, chattel of goods.

4. Right of Stoppage in Transitu: The agent may exercise this right against the goods of the
principal where the agent stands towards his principal in the position of an unpaid seller of
goods.

AGENT AUTHORITY AND TERMINATION OF AGENCY

A. AGENT’S AUTHORITY: Authority of an agent simply means the basis and power granted to
the agent by his principal either expressly, impliedly or ostensibly. The agent may be
conferred by the method through which the agency was created. In other words, an express
agency is given express authority. An agent appointed orally has his authority conferred
orally and so on. Merely appointing an agent is of less significant unless it is coupled with
the quantum of authority thereby granted to such agent.

B. TERMINATION OF AGENCY

Agency relationship may be terminated by the act of the parties or by operation of law.

1. Act of the Parties: This can either be done mutually or unilaterally. The parties can bring the
contract of agency to an end by mutual agreement between them. This occurs when both
parties agree with the termination, and it is one of the commonest way by which agency is
terminated. In other instances, the termination comes from only one of the parties. This
type of termination is usually referred to as unilateral termination. It may either originate

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 from the principal or from the agent. The termination may be through revocation by the
principal by notice or summarily. It may also be through renunciation of the agency by the
agent.

2. Operation of Law: An agency becomes terminated at the expiration of the time agreed upon
for the duration of the agency, or on the complete performance of the undertaking. It may
also be due to the frustration of the contract or the happening of an event rendering the
continuance of the agency unlawful.

An agency may also be brought to an end where either party becomes incapable of continuing the
contract by reason of death, Insanity or bankruptcy. The death of either party automatically puts an
end to agency; Insanity- except in those cases where the authority of the agent is irrevocable, the
insanity of the principal puts an end to contract of agency as between the principal and the agent. But
the principal may still be liable to third parties who dealt with the agent in ignorance of the principal’s
condition, he is still liable on the ground of estoppel); or Bankruptcy of the principal or its liquidation
terminates the agency.

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HIRE PURCHASE

Hire Purchase transaction is a bailment of goods but with a provision for the option of sale or transfer of
the property in the goods bailed from the bailor to the bailee. Whether a particular transaction is a hire
purchase or not will, as shall be seen later, depend on the wording and meaning of the transaction and
not merely on the appearance of the term Hire-Purchase on the document evidencing the agreement.
The contract of hire purchase is mostly governed by the Hire Purchase Act, 1965 (as amended) Law of
the Federation, 2004 and common law.

A Hire Purchase agreement may either be oral or written under the common law rule. It is however
pertinent to note that a detailed Hire Purchase agreement is usually in writing and indeed should be in
writing.

The common law rule does not specify a prescribed pattern or form for hire-purchase agreements. Note
that hire-purchase agreements are characterized by three main essentials which are:

 a clause by which the owner agrees to let, and the hirer agrees to hire the goods.
 a clause which empowers the hirer to determine the hiring and return the goods.
 a clause giving the hirer the right or option to purchase the goods for a nominal sum at
the end of the hiring.

Aside the above mentioned essentials, other terms may be included in the agreement, like period of
hire, hire-purchase price, number of instalments, insurance of goods and the right of the owner to
retake.

Definitions of Hire Purchase

There have been several scholarly definitions of the phrase, hire purchase offered by authors and the
statute books. There are judicial definitions which have suggested definitions of the term. In Halsbury’s
Laws of England Vol. 1st Edition, a contract of hire purchase has been defined as “a contract of hire with
option to purchase under which the owner of the chattel undertakes to sell it to, or that it shall become
the property of the hirer conditionally on his making a certain number of payments. Until the making of
the last payment, however, no property in the chattel passes.” In Scammell v. Austin (1941) 1All E.R 14,
it was defined as a complex transaction, not a contract of sale but a bailment. This is a judicial definition.

A statutory flavor is given to this definition in Section 1 of the English Hire-Purchase Act, 1965 as: “an
agreement for the bailment of goods under which the bailee may buy the goods, or under which the
property in the goods will or may pass to the bailee.” From the foregoing, it is clear that it is an
agreement concluded between a bailor, that is, the owner, and a bailee that is the hirer, in respect of
some particular goods.

Hire Purchase Distinguished from Other Similar Legal Transactions

The term hire purchase is always loosely employed by many people as synonymous with credit purchase
or such similar transactions. Here the Hire Purchase transaction will be distinguished from other legal
transactions.

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Hire Purchase Distinguished From Hire

Hire is a kind of contract that does not pass title of the goods at a future date. The definition of Hire
Purchase as seen above is different from the concept of hire. Hire only enables a person to use the
goods for his immediate use and does not want to own the property. The hirer will return the chattel to
the owner after its use. It is also a kind of bailment in which the hirer is given possession of an article
during the period of the particular hiring agreement.

Hire Purchase Distinguished From Loan and Mortgage

Loans and Mortgages is a kind of arrangement where one person who desire some fund borrows money
from a person or a financial institution for his use in order to satisfy some needs.

Hire Purchase Distinguished From Credit Sale

This is a situation where a person wants to make an outright purchase of goods but may find out that he
does not have sufficient money to make full payment for them. In this instance, the person may pay in
installment, while the goods pass to the buyer on credit. In this instance, the seller loses his seller’s right
of lien on the property and where the buyer resells the goods, the third party will be an innocent
purchaser for value without notice and will have a good title.

In J. Allen and Co. v. Sanni Adewale and Bello Lateju (1929) 9 NLR 111, the Plaintiff sued the defendant
and his surety to recover the balance of what was called the hire-purchase price on a car given to the
first defendant. After reading the agreement, the court held that it was a contract of sale rather than a
hire purchase contract.

Reason for the Adoption of the Hire Purchase System

There are mainly three reasons for the Hire Purchase system of commercial transactions

1) One of the most important reasons and the first is that it enables credit to someone, who is unable to
pay cash for the goods he wants and who would be happy to pay some deposit and therefore pay the
balance in installments at a stipulated rate of interest.

2) The other reason for this system is that the dealer or the manufacturer of the goods cannot always
provide credit and yet the goods must be bought to enable the dealer in business.

3) The third option for the adoption of the hire purchase system is the possible evasion of the Money
Lenders Act 1939 Cap 124 LFN, 1958, which regulates the conduct of the business of money lending.

Obligation of the Owner

1. The first obligation of the owner under the common law is to deliver the goods which are the subject
matter of the hire purchase agreement to the hirer. It is therefore a fundamental duty and its breach will
entitle the hirer to repudiate the contract. Delivery in this sense might not be physical transfer but
voluntary transfer of possession from one person to another.

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2. In addition to the above duty of the owner, there should be some conditions implied in the contract.
The first is that the owner should possess a good title to the goods. If his title is impeached this will
amount to a total failure of consideration as between the purported owner and the hirer.

3. Another implied condition is the fitness for the purpose for which the goods are hired. In Stephen
Anoka v. S.C.O.A Warri (1955/56) W.N.L.R 113, the plaintiff bought a lorry on hire -purchase from the
defendant. The engine was defective and the plaintiff replaced it with another engine. When the plaintiff
subsequently defaulted in the periodical instalments, the defendant seized and sold the lorry. The
plaintiff sued for conversion and in addition for breach of warranty. The court held that in the absence
of an express term in the agreement excluding any warranty of fitness or limiting the defendant’s
liability, the defendant was under a duty to ensure that the lorry was reasonably fit for the purpose for
which the defendant must have known the lorry to be used for. Exemption clauses will not avail an
owner, where there is a fundamental breach of the terms of the contract.If the owner fails to make
delivery of the goods the hirer can sue for specific performance.

Obligation of the Hirer

1. This is the fundamental obligation of the hirer to accept delivery of the goods, the subject
matter of the hire purchase. Such Hirer will be liable in damages if he fails to take delivery within
a reasonable time after he had been requested to do so.

2. It is also the primary duty of the hirer to pay, punctually the various sums provided for in the
agreement in accordance with the provisions of the agreement. The payment of instalments as
specified in the hire-purchase agreement is mandatory and must be strictly complied with.
There are certain circumstances where the instalmental payment may be suspended or waived.
In Offodile and Sons Enterprises v. S.C.O.A (Nig.) Ltd (1969) CCHCJ 1333, there was a hire
purchase agreement between the parties in respect of a motor vehicle during the civil war, and
understandably the rentals were not paid, but the hirer enjoyed the undisturbed use of the
motor vehicle. After the civil war the owners sued for arrears of rentals. The court held that the
owners were entitled to the rentals, and that the hirer’s strict liability to pay rentals during the
war period was only waived or suspended during the civil unrest that should not be regarded as
destroying the right to recover the rentals.

Hire Purchase Act, 1965 as amended

The first comprehensive legislation on Hire Purchase in Nigeria was the Hire Purchase Act, 1965 and was
brought into operation in 1968. This Act has been reviewed severally with the present one as the Hire
Purchase Act in the Laws of the Federation of Nigeria.

The main purpose of the Act is to regulate hire-purchase transactions, which have been operated in the
past under the ordinary law of contract, and under which some owners have exploited the ignorance of
the people to enforce oppressive agreements. Before the advent of the Act, recovery of goods by the
owner under a hire-purchase agreement could be effected with or without proceedings in court. Such
act had serious pitfalls. One problem in this instance was that under common law, even after the owner
had retaken possession of the goods from the hirer and invariably had sold it, it was common practice

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for the owner and the hirer to stipulate in the agreement that the termination did not relieve the hirer
from the liability to make further payments to the owner under the notorious minimum payment clause.

The Essential Provisions of Hire-Purchase Act, 1965

The Act seeks to absolve the hirer of the liabilities under common law. With a view to strictly following
the rules contained therein. It also appears to remove the harsh conditions of the common law rule and
while providing more friendly ways under the Act along with the obligations of the owner and that of
the Hirer under the Act as against the ones under the common law procedure.

Under the Act, Hire Purchase means the bailment of goods in pursuance of an agreement under which
the bailee may buy the goods or under which the property in the goods will or may pass to the bailee
Hire-purchase agreement is where, by virtue of two or more agreements, none of them by itself
constitutes a hire-purchase agreement, there is a bailment of goods and either the bailee may buy the
goods, or the property therein will or may pass to the bailee. The agreements shall be treated for the
purposes of this Act as a single agreement made at the time when the last agreements was made.

The hire-purchase agreement, unlike the position under the common law, all hire-purchase agreements
which are intended to operate or fall within the provisions of the Act must comply with certain
provisions or procedural requirements as to form and content stipulated under the Act. They are as
follows:

1. Written Information on Cash Price of Goods

Before any hire-purchase agreement is concluded, the owner shall state in writing to the prospective
hirer, otherwise than in the note or memorandum of the agreement, a price at which the goods may be
purchased by him in cash.

2. The Note or Memorandum

Section 2 (2) (a) of the Act states that: “there must be a note or memorandum of the agreement made
and signed by the hirer and by or on behalf of all other parties to the agreement.”

In this instance, what is required is that a note or memorandum must be in writing evidencing the
agreement, and that it is not necessary for the hire-purchase agreement to be in writing. In commercial
practice, hire-purchase is usually evidenced by a standard form agreement which is required to be
signed by the hirer, and any other party. Initially, the agreement may be made orally, but within 14days
it must be followed by a signed memorandum.

3. Signature

The hirer must sign personally the memorandum or note must be signed not only by the hirer but also
by the other parties to the agreement while the other party may sign through their agents.

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Obligations of the Owner

The implied terms have been described as warranty and condition. They bear the same meaning
ascribed to them under the Sale of Goods Act. Distinction is however provided in the definition under
Section 20(1) where –warranty is defined as a non-essential term, the breach of which entitles the hirer
to sue for damages only. Condition is not given a statutory definition – but by implication, the difference
lies in the breach – the hirer is entitled to reject the goods and treat the contract as repudiated.

1. Warranties

A· Quiet Enjoyment: the act provides that in every hire-purchase agreement there must be:

a) An implied warranty that the hirer shall have and enjoy quiet possession of the goods. The general
rule is that the owner must ensure that he remains in peaceful and undisturbed possession, note that
interference from an interested third party would constitute a disturbance.

b) An implied warranty that the goods shall be free from any charge or encumbrance in favour of a third
party at the time when the property is to pass. A charge or encumbrance in favour of a third party on
goods which are subject of a hire-purchase agreement would remain perfectly good at the time of the
hire because the ownership only passes when the hirer elects to exercise the option to purchase.

2. Conditions

There are three implied conditions under the Act.

Title: An implied condition on the part of the owner that he shall have a right to sell the goods at the
time when the property is to pass. This provision is aimed at assuring the buyer that the seller is an
absolute owner of the goods. In addition, the right to sell arises at the time of the delivery of the hired
goods and not when the agreement was signed. See Akoshile v. Ogidan (Supra).

Merchantable Quality: In hire-purchase agreement there is an implied condition that the goods are of
merchantable quality. However, no such condition will be implied where the hirer has examined the
goods or a sample of them and the examination ought to have revealed the defects of which the owner
could not reasonably have been aware at the time when the agreement was made.

Fitness for Purpose: Where the hirer expressly or by implication makes known the particular purpose for
which the goods are required, an implied condition that the goods shall be reasonably fit for that
purpose.

Exemption Clauses

The implied conditions and warranties set out under the Act, all set out above shall be implied
notwithstanding any agreement to the contrary. The Act also provides that the owner may rely on any
provision in the hire-purchase agreement to modify or exclude any condition implied expressly under
the Act.

The Hirer’s Obligation

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The hirer’s right of termination is set out in section 8 of the Act. It provides that a hirer shall, at any time,
before the final payment under a hire-purchase agreement, be entitled to determine the agreement by
giving notice of termination in writing to any person entitled or authorized to recover any sum payable
under the agreement.

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