What Constitutes a Legally Binding Contract

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What constitutes a legally binding contract

Nigeria is a common law jurisdiction by virtue of which a legally binding contract in Nigeria must contain the four elements of contract under common law.

Below are the four elements of a legally binding contract under common law:

Offer

In the case of N.R.M.A. & F.C. v. Johnson (2019) 2 NWLR (Pt. 1656), the Nigerian Supreme Court defined an offer as an undertaking or promise made by one party with the intention that it shall be binding when accepted by the party to whom it is made.

Acceptance

In the case of Ashakacem PLC v Asharatul Mubashshurun Investment Ltd 2019 LPELR-56541(SC), the Supreme Court of Nigeria emphasized that for there to be a valid contract, there must be an unqualified acceptance of the offer by the person to whom the offer was made. See also the case of Omega Bank (Nig) PLC v O.B.C Ltd 2005 LPELR-2636(SC).

Consideration

Consideration means something of value in the eyes of the law. An example could be an agreement to pay a sum of money or a promise to perform some action. In the case of Fidelity v Marcity Chemical Industry Ltd v Ors 2022 LPELR-56866(SC), the Supreme Court of Nigeria held that 'consideration is an essential feature of a valid contract and failure of consideration is a ground for repudiation of contract'.

Intention to create legal relations

In the case of Sapara v UCH Board of Management 1988 LPELR-3014 (SC), the Supreme Court of Nigeria held that the presence of a consideration implies the existence of an intention to create legal relations. The Court held further that '[t]o make a bargain is to assume liability and to invite the sanctions of the courts.'. In family life, however, most agreements are usually not intended to create legal relations. See the cases of Balfour v. Balfour (1919) 2 K.B. 571 and Pettitt v. Pettitt (1970) A.C. 777, and Jones v. Padavatton (1969) 2 All E.R. 616.

Does a contract have to be in writing for it to be legally binding?

A contract does not have to be written for it to be legally binding. An agreement made orally could constitute a legally binding contract if the four elements highlighted above are present. A legally binding contract can also be implied through the conduct of parties if the elements of a binding contract are established.

Cited Nigerian Supreme Court cases on elements of a legally binding contract:

  1. N.R.M.A. & F.C. v. Johnson (2019) 2 NWLR (Pt. 1656).
  2. Ashakacem PLC v Asharatul Mubashshurun Investment Ltd 2019 LPELR-56541(SC).
  3. Omega Bank (Nig) PLC v O.B.C Ltd 2005 LPELR-2636(SC)
  4. Fidelity v Marcity Chemical Industry Ltd v Ors 2022 LPELR-56866(SC).
  5. Sapara v UCH Board of Management 1988 LPELR-3014 (SC).