ENGINEERING LAW

GENERAL PRINCIPLES OF THE LAW OF CONTRACT

INTRODUCTION

According to Merriam-Webster Dictionary the word law means, “a rule of conduct or

action made by authority for the proper regulation of a community or society for correct
conduct in life”. It is a legal document setting forth rules governing a particular kind of
activity.

The law of contract is the branch of law which determines the circumstances in which
promise made by the parties to a contract shall be legally binding on them. We all enter
into a number of contracts everyday knowingly or unknowingly. Each contract creates
some right and duties upon the contracting parties

DEFINITION OF CONTRACT:

A contract may be defined as an agreement which is binding on the parties thereto and
which may be enforced by the court against the defaulting party. It is the result of the
mutual assent of two parties to certain terms, and there is no concluded, binding
agreement unless and until the terms are ascertained either expressly or by necessary
implication (Okoebor V. Eyobo Eng. Services Ltd. (1991) 4 NWLR (Pt.187)553, held
no. 1)

A contract may be made wholly by word of mouth or wholly in writing, or partly by word
of mouth and partly in writing, thus, as a general rule which is subject to a number of
exceptions (Kirham V. Marter (1819) 2 B & Ald. 613), a contract need to be in writing.

TYPES OF CONTRACT
There are many types of contract. Here, we shall group them on three headings which
are: (i) By formation, (ii) By performance and (iii) By validity.

By Formation:

1. Express Contract:This type of contract results from express agreements. Express

agreements are formed by making offer and giving acceptance in the words spoken
or in writing. An express promise leads to the formation of express contract. This
type of contract may also be called simple or parol.
2. Implied Contract: Implied contracts are formed on the basis of implied promises on
the part of parties. Implied promises are those which are not made by the parties in
writing or by the word of mouth. Rather these promises are inferred from the
conduct of the parties or from the circumstances. In an implied contract, one of the
party conduct himself or does some act which is being accepted by the other party
either by his conduct or course of his dealing or circumstance, e.g. payment of
quantum meruit for part performance or part delivery. Thus in an implied contract,
making of an offer and giving acceptance to it is manifested by the Act on the part
of party.
3. Quasi Contract: Quasi contracts are based on the principle of justice and equity.
Inspite of not having any contract between parties, the rights and obligations are
created. These are resembling to rights and obligations as created by a formal
contract. In such contracts, obligations between parties are created by operation of
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 law rather than offer and acceptance, e.g., if a plaintiff, on an erroneous
interpretation of the fact, pays to the defendant a sum of money which he does not
really owe, law and justice would require the defendant to restore it i.e. return the
benefits unjustly obtained (unjust enrichment). Quasi contracts often lead to
quantum meruit claims. Thus, where a contract is terminated or thwarted by one of
the parties to the contract, the injured party has a right, in such circumstances, to
sue for damages or, treating the contract as an end and sue in quantum meruit for
reasonable consideration for the work he has done under the contract, being that
the initial contract between the parties have been dislodged. A typical example is a
case where an agent employed to sell land finds a purchaser but the owner then
refuses to sell and revokes his authority. The agent is entitled to remuneration for
his labour. Indeed, every man is entitled to reasonable remuneration for his labour.
It is in the light of this that the law recognizes the right of action in a party to a
contract to claim remuneration for work done in certain circumstances, not
necessarily in the terms agreed in the contract. However, in suing for quantum
meruit, it must be shown that the work done or services rendered was not done
gratuitously.

By Performance:

1. Executed Contract: Contract consists of legal obligations. On the complete

discharge of these obligations, the contract is said to have been executed. In other
words, both the parties have fulfilled their respective promises, which they have
made in the contract.
2. Executory Contract: This contract is one that has not been yet performed. In other
words, parties having made promises for doing or not doing anything have not
fulfilled their respective promises.

By Validity:

1. Valid contract: Contract is said to be valid if it satisfies all conditions required for its
enforceability.In other words, valid contract is enforceable in the court of law.
2. Void contract: A contract ceases to be enforceable by law when it becomes void.
Literally the word void means not binding in law. It implies a useless contract which
has no legal effect at all.
3. Void agreement: Agreement which is not enforceable by law is void agreement. In
other words, if an agreement lacks any one of essentials of a valid contract it
becomes void. Void agreements do not have any legal consequence and it is null
and void in the eyes of the law.
4. Voidable contract: An agreement which is enforceable by law at the option of one
or more parties, but not at the option of other or others is a voidable contract.
5. Illegal contract: Every contract is formed on the basis of promise made by the
parties in that contract. The contract is said to be illegal if its object is illegal.
6. Unenforceable contract: Sometimes, a contract maybe good in the eyes of the
law. But due to some technical reason(s) it may not be allowed to be enforced in
the court. Technical reasons such as contract is not made in writing or is not
registered or has no adequate stamp duty on it. Due to non‐fulfillment of prescribed
legal formalities these cannot be claimed in the court, once these reasons are
rectified contracts may be allowed to be reinforced.

INGREDIENTS OF A VALID CONTRACT:

The formation of contract is governed by flexible rules, namely, that there must be a
definite offer by one party called the offeror, and communicated to the other party
called the offeree who accepts the offer. The court of law recognizes five vital
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ingredients in a valid contract: offer, acceptance, consideration, capability to contract
and the intention to create legal relation.

1.) OFFER
An offer is a proposal for concluding a contract. It may be addressed to one or more
specific persons, to a group of persons, or even to the world at large. In any case, it is
important that the proposal indicates the definite intention of the offeror to be bound by
the terms of the offer should the offeree agree thereto. The locus calssicus on this
point is the very popular case of Carlill v. Carbolic Smoke Bail Co (1892) 2 QB 484,
(1893) 1 QB 256. In that case, the defendants who were the proprietors of a medical
preparation called ‘the Carbolic Smoke Ball’ issued an advertisement in which they
offered to pay £100 to any person who succumbed to influenza after having used one
of their smoke balls in a specified manner and for a specified period. They added that
they had deposited the sum £1,000 with their bankers to show their sincerity.

The Plaintiff, on the strength of the advertisement bought and used the ball as
prescribed, but succeeded in catching the disease (influenza). She sued for the £100.
The court held that though the offer was made to the whole world, it opened into a
contract with anybody who came forward and performed the condition on the faith of
the advertisement. So the plaintiff was entitled to the claim.

An important requisite of an offer is that it must not be vague. It must consist of a

definite promise to be bound provided that certain specified terms are accepted. The
offeror must have completed his share in the formation of the contract by finally
declaring his readiness to undertake an obligation upon certain conditions, leaving the
offeree the option of acceptance or refusal. He must not be merely initiating
negotiations from which might or might not in time result to contract. For this reason, a
distinction is often made between a firm and definite ‘offer’ and a mere ‘invitation to
treat’.

Unlike an offer which may be accepted and thus result in a contract, an invitation to
treat is an offer to negotiate, like when you issue an advertisement that you have a
stock of books to sell or houses to let, in which case there is no offer that may result in
a binding contract. Such advertisements are mere offers to negotiate or, as they are
often described, offers to receive offers, offers to chaffer.

The following transactions illustrate an invitation treat:

a) Auctions: The request of an auctioneer for a bid is not an offer but an invitation to a
treat.

b) Display of Goods in a shop: When a shop owner displays goods in a self-service

shop, a supermarket, or shop window, he does not thereby offer the goods for sale,
but inviting the public to come and offers. It is when you are interested in buying
that you make an offer to the buyer.

c) Advertisement of Goods in Catalogue: Goods that are showcased in catalogues

for buyers to see is an invitation to treat.

d) Invitation to tender: This is a mere invitation of offers, and the tender that is
submitted is the offer that the advertiser is free to accept or reject.

e) Buses, taxi and trains: The passenger’s entry into a bus is the acceptance of the
offer that the bus or taxi driver made when he stopped at the bus stop.
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f) Invitation to subscribe shares in a public company: The potential subscriber
makes the offer that the issuer is free to accept or reject. Otherwise the issuer
would be bound to sell to everyone who had applied for shares in the company,
irrespective of the number of shares available for sale or subscription.

Classical examples
InPayne v. cave (1789) 100 ER 502, the court held that the auctioneer’s bid to a
prospective buyer is not an offer but an invitation for offers and that it is the bidder at
the auction who makes the offer. The court held further that the fall of the hammer
marks the acceptance by the auctioneer and that the bidder could withdraw (i.e. revoke
his offer) anytime before the hammer falls, but not after.

Again, where goods are displayed in a self-service shop with price tags on them, this
does not amount to an offer to sell or an offer to sell at that price. It is merely an
invitation to treat. For this reason, the fact that a customer picks up the goods from the
shelf does not constitute an acceptance of an offer, rather, it is an offer by the
customer to buy, and the offer is not accepted until the seller accepts the price
(Pharmaceutical of Great Britain v. Boots Cash Chemists Ltd (1953) 1 QB 401. In
fisher v. Bell (1961) 11 QB 394, the defendant was charged with offering a knife put in
a shop window for sale. The court held that the display of an article with a price on it in
a shop window is merely an invitation to treat; that it is in no sense an offer, where the
acceptance of which constitutes a contract. In the same vein, a circular or catalogue
advertising goods for sale is a mere attempt to induce offers rather than constitute an
offer itself (Spencer v. Harding (1870) LR 5 CP 561).

An interesting question arose in the case of announcement of an examination for

scholarship, whether it constitutes an offer to the highest scorer. The answer is that it
does not (Rooke v. Dawsosn (1895) 1 Ch. 480). Another area is where reward for
information is promised to the public, and the information is given by different persons
in succession. Was the promise an offer, and if so who is deemed to have accepted it
and therefore is entitled to the reward? Lancaster and Walsh decided that it is an offer
and the first person to give the information is entitled to the reward.

CLASSIFICATION OF OFFER:
1.) Specific offer: Sometimes an offer is made to a particular person, or organization.
Such offer is knownas a specific offer. This specific offer can be accepted only by
that particular person or org.
2.) General offer: It is an offer which is made to a group of people or public at large.
Such offer can be accepted by any member of that group or public.
3.) Cross offer: Two parties exchange identical offers with each other. They are
ignorant about eachother’s offers.
4.) Counter offer: Incomplete and conditional acceptance of an offer is known as a
counter offer. Inother words, the acceptor, instead of accepting the offer as such
along with all its terms and conditionsdeviates from it. Such acceptance becomes a
counter offer.

ESSENTIALS OF VALID OFFER:

1.) Offer must create a legal relationship and consequence: The whole concept of
contract is based onlegal relationships or obligations of legal consequences .Thus
the formation of contract which starts with anoffer, its acceptance, followed by the
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 legal relationships and its consequences means the party making anoffer must
have clear intention to establish the legal relationship with other party.
2.) Offer may be express or implied: The offer may be made either by the word of
mouth or in writing. Such an offer is known as an express offer. On the other hand if
the offer is inferred, or indirectly understood either from the conduct of parties or
from the circumstances, such offer is known as implied offer.
3.) Offer may be specific or general: The offer being made to a particular individual
or organization is known as specific offer. On the other hand, if an offer has been
made to a group of people or public at large is known as general offer.
4.) Offer must be communicated: An offer is made with a view to create legal
relationships, so it must be communicated to the person to whom it is made.
Without communications the offer is incomplete and cannot be accepted.
5.) Offer must be distinguished from a mere expression of intention or invitation:
Sometimes one party merely shows his intention for making an offer or invites other
party for making it. Such intention or invitation for making an offer will not be
considered as a valid offer.
6.) Offer maybe conditional: While making an offer the offeror may impose conditions
for the acceptor, such conditional offer is valid subject to the following conditions:

a.) Offeror cannot impose any such condition where the non‐fulfillment would lead to
acceptance of that offer.
b.) The terms and conditions imposed by the offeror must be mentioned in the offer in
such a way that a person of a reasonable prudence may find indication for those
conditions and those conditions must be of reasonable eyesight.

REVOCATION OF OFFER:
Revocation of offer means withdrawal, cancellation or lapse of offer. Offer can be
revoked under the following circumstances:
a) By notice at any time before acceptance
b) By lapse of time fixed by the offeroror, where no particular time fixed, lapse of a
reasonable time.
c) Death or insanity of offeror
d) Non‐fulfillment of prerequisite conditions
e) By counter offer

2.) ACCEPTANCE
Acceptance of an offer by the offeree is the expression of final agreement to the terms
of the offer. Such acceptance may be express or implied. However, the offeree cannot
accept some of the terms of an offer and reject the others. He must take it or leave it. If
he rejects some of the terms and accepts others, he would be deemed to have rejected
the entire offer. This principle is often expressed by the fact that an acceptance must
not be unqualified and must not attempt to vary the terms of the offer. In other words,
the acceptance must be a mirror image of the offer, otherwise it would be regarded as
a counter offer. On this respect, a counter offer should be distinguished from a mere
request for information, such as an enquiry as to whether the goods offered could be
delivered (or paid for) in instalments. A counter offer constitutes a rejection and
destroys the offer, so that the offeree cannot afterwards change his mind and accept it,
but a request for information does not destroy the offer (Stavenson v. Mclean (1880) 5
QBD 345), thus the offer is still open to the offeree for acceptance. In Hyde v. Wrench
(1840) 49 ER 132, the defendant on June 6th offered to sell an estate to the plaintiff for
the sum of £1,000. On June 8 th, in reply, the plaintiff made an offer of £950, which was
refused by the defendant on June 27 th. Finally. On June 29th, the plaintiff wrote that he
was now prepared to pay £1000. The court held that no contract existed because by

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his letter of June 8th the plaintiff had rejected the original offer and so he was no longer
able to revive it by changing his mind and tendering a subsequent acceptance.

The phenomenon of invitation to treat, offer, counter offer and acceptance by

implication/conduct, is illustrated in the case of The Council of Yaba College of
technology v. Nigerlec Contractors Ltd (1989) 1 BWLR (Pt. 95) 99, in that case, the
defendant/appellant advertised for tender for the design, supply and erection of certain
machinery. The plaintiff/respondent tender for the project for N943,201.00. The tender
was submitted through Messrs Edison Group and Partners – a firm of consultants
retained by the defendant/appellant and who, for this purpose, were the defendants’
agent. On receipt of the tender, the defendants awarded the plaintiff in the sum of
N937,350.00. The plaintiff wrote 'Exhibit 6’ accepting this offer but added thus: ‘we wish
a few points to be included in this contract, following the austerity measures taken by
the Federal Government after our was made to you. Namely,...’

On receipt of this letter of ‘acceptance’ from the plaintiff the consultants, acting on
behalf of the defendant, wrote to the plaintiff to provide a bank guarantee for payment
of mobilization fee. The defendant subsequently terminated the contract on the ground
of dissatisfaction with the equipments supplied by the plaintiff, whereupon the plaintiff
sued for wrongful termination of contract.

The main question for determination by the trial court was whether the ‘wish’ of the
plaintiff in Exhibit 6 that ‘a few points’ referred to in the letter be included in the contract
converted Exhibit 6 into a counter offer, or whether such desire or wish did not affect
the full acceptance of the offer made to them by the defendant. The learned trial judge
held that the wish expressed in exhibit 6 does not detract from the acceptance of the
offer by the defendant. According to the trial court, ‘it would of course have been
different if in Exhibit 6 the plaintiff had stated that the offer made was accepted on
condition that the few point raised by it were included in the said contract’.

The Court of Appeal held that the trial court was in error, and that Exhibit 6 was not an
acceptance but a counter offer. It held further that in order to have a valid acceptance,
that intention to accept must be conclusive: it must not treat the negotiation between
the parties as still open to the process of bargaining. The offeree must unreservedly
assent to the exact terms proposed by the offeror. If while purporting to accept the offer
as a whole he introduces a new term which the offeror has not had the chance of
examining, he is in fact making a counter offer. However, the Court of Appeal held that
in this particular case there was acceptance of the counter offer by conduct, and so
there was a valid contract and the defendant was in breach by terminating it.

It is worth emphasis that the acceptance must correspond with the offer and must be
clear and will fail to make effect if it attempts to vary the terms of the offer or to add
new terms. On the other hand, statements which are not intended to vary the offer, or
to add new terms, do not vitiate the acceptance even where they do not precisely
match the words of the offer, and if the new term merely makes express what would
otherwise be implied(Lark &Ors v. OuthwaiteOrs. (1991) 2 Lloyd’s Rep. 132; Chitty on
Contract, 26thedn, vol. 1para 56.).

The requirement that the acceptance should not vary the terms of the offer also implies
that a conditional acceptance (Nigeria Bank of Commerce and Industry v. Integrated
Gas (Nigeria) Ltd &Anor. (1999) 8 NWLR (Pt. 313) 119 at 127) does not have the
finality required. The popular example is where an offeree makes an acceptance

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subject to or conditional upon the assent by his/her lawyer. The phrase often used to
show conditionally is ‘subject to contract’.

ESSENTIALS OF VALID ACCEPTANCE:

1.) Acceptance must be absolute and unconditional: Offer may be made for a
specific quantity, volume and price. It may also contain terms and conditions. It is
necessary for the acceptor that he must give his acceptance for the entire quantity
and volume offered.
2.) Acceptance must be given in a prescribed mode or manner: While making an
offer, the offeror may prescribe a particular mode or manner of acceptance and the
acceptor must abide by it. If the acceptordoes not follow that particular mode for
sending his acceptance, the offeror may further insist that the acceptor abide by it.
But if it is still not followed the offeror can reject the acceptance. On the other hand,
if no mode is prescribed by the offeror, then the acceptor can follow the usual mode
of acceptance.
3.) Time of acceptance: To make it valid acceptance, it must be given within
stipulated period of time ifany. When no time is specified, acceptance must be
given within reasonable period of time.
4.) Acceptance must be communicated: As the offer needs to be communicated, so
does the acceptance.Acceptance to be legally effective must be communicated and
brought to the knowledge of the offeror.Even if the acceptor has accepted the offer
but if it is not communicated properly it would not result intoan agreement.
5.) Acceptance may be expressed or implied: The acceptor may give his assent for
the proposed act bythe word of mouth or in writing. Such acceptance is known as
express acceptance. If the acceptance isdirectly understood either from conduct of
the party or from circumstance, it is known as impliedacceptance.
6.) Acceptance must be made before offer is revoked: Acceptance implies mental
readiness of the personfor proposed act or abstinence. Therefore, it must be given
before the offer lapses or is withdrawn orcancelled. Once the offer is dead due to
any reason, it is dead for ever, and to revive it, such offer is tobe made afresh.
7.) Acceptance is not implied from silence of the party: Acceptance of offer is not
implied from silence.The offeror cannot impose condition on the offeree that his
silence will amount to acceptance. Silence on thepart of offeree regarding the offer
in no case may amount to acceptance.

REVOCATION OF ACCEPTANCE:
1) Failure of acceptor
2) Death or insanity of acceptor
3) No reasonable time and manner
4) By rejection
5) By supervising impossibility

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Illustrative examples on communication of offer and cross offer
It is noteworthy that an offer may only be accepted if it is communicated to the offeree.
One cannot ‘accept’ an offer which has not been made to him or the existence of which
he does not know at the time of his ‘acceptance’. In Ajayi-Obe v. Executive Secretary,
Family Planning Council (1975) 3 SC 11, the plaintiff applied for a job and was invited
for an interview. After the interview the chairman of the interview panel wrote a letter
with a copy to the plaintiff. The letter was addressed to the secretary directing him to
make an appointment to the plaintiff to the post of National Clinic Administrator.

The secretary refused to do so because he was not satisfied to send a letter as

directed. Nevertheless, the plaintiff, on the strength of the letter which was copied to
her, wrote accepting the ‘offer’ which she contended was contained in the letter of the
chairman. Later, she saw a new advertisement about employment to the very post for
which she had earlier been interviewed. She thus brought this action to restrain the
Family Planning Council from re-advertising the job for which she had been appointed.
The court held, per Elias, CJN, that neither on the constitution by which the council was
set up nor other provision authorized the chairman to communicate an offer of
appointment, and that, it isonly the secretary to the Panel could do so. In this case,
since there was no letter of appointment from the secretary, there was therefore no
offer to the plaintiff.

Since an offer must be communicated, it follows that a man can only accept if he
knows of its existence. This is particularly so in the case of offers made to the whole
world. An instructive case is R. Clarke. The Government of Western Australia offered a
reward of ₤1000 for such information as shall lead to the arrest and conviction of the
murderers of two police officers, and added that if the information should be given by
an accomplice, not being himself the murderer, he would have a free pardon. Clarke
saw the offer and sometime later he gave the necessary information. He claimed the
reward from the Crown by Petition of Right. He admitted not only that he had acted
solely to save his own skin but that, at the time he gave the information the question of
reward had passed out of his mind. The court held that the claim must fail because he
was in the same position as if he had never heard the reward. This case illustrates that
there cannot be an acceptance without knowledge of the offer and reliance upon it at
the time of making the acceptance.

It is noteworthy that cross offers, i.e two identical offers which cross each other in the
post, do not create a contract. The locus classicuson this point is Tinn v.Hoffman
(1873) 29 LT 271. Thus, if A by letter offers to sell his car to B for N100,000.00 and B,
by a second letter crosses the first in the post, offers to buy if for N100,000.00, these
two offers do not create a contract. The reason is that in order to have a cross offers
there is no acceptance by only offers.

3.) CONSIDERATION

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The courts only enforce bargains and not gratuitous promises. To ensure that only that
bargains are enforced, the courts have developed the doctrine of consideration.
Consideration is what a promisee gives or foregoes in return (or exchange) for the
promisor’s promise. Thus, before a person can sue on broken promise, he has to show
that he himself gave something of value in exchange for the promise. A valuable
consideration may consist either in some right, interest, profit or benefit accruing to the
one party or some forbearance, detriment loss or responsibility given, suffered or
undertaken by the other (National Bank of Nigeria Ltd. V. Savol W. A. Ltd (1994) 3
NWLR (Pt. 333) 435 at 459. Thus if a person with whom a contract not under seal has
been made, to be able to enforce it, consideration must be given by him to the
promisor. Consideration does not only consist of profit by one party but also exists
where the other party abandons some legal freedom of action in the future as an
inducement for the promise. So it is irrelevant whether one party benefits but enough
that he accepts the consideration and that the party giving it does thereby undertake
some burden or lose something which in contemplation of law may be of value.

A further point should be made here that though gratuitous promises are not
enforceable, the law has no settled policy against enforcing all gratuitous promises. It
only refuse to enforce informal gratuitous promise and the deliberate use of a nominal
consideration can be regarded as a form to make a gratuitous promise binding. Thus, it
appears that even a gratuitous promise is binding and enforceable as long as it is
supported by nominal consideration and it is not informal. For instance, in Shell
Petroleum Development Company of Nigeria Ltd. v. Allupata, a formal gratuitous
promise to donate the sum of N505,000.00 was held to be enforceable both by the
High Court and the Court of Appeal. The court held further in that case that there was
forbearance on the part of the promisee (respondent) not to renegotiate the Bony
Terminal Land agreement made in 1958, at least in the mean time, such forbearance
was consideration.

Adequacy and Sufficiency of Consideration

The basic rule is that courts will not inquire into the adequacy of consideration.
Commercial freedom, and particularly freedom of contract, entails that the court should
not interfere with the parties’ bargain. The court of law must always respect the sanctify
of the agreements reached by parties as it favours the inalienable rights of the freedom
of formation of contracts by parties and would not make a contract for them or re-write
the one they already made for themselves. It is not the responsibility of the court on its
clear wordings. Thus, so long as each party provides something of value, weather in
the nature of an act, promise or forbearance, the court will enforce the contract. It is on
this basis that the court held, in Thomas v. Thomas, that the lady’s admission to pay £1
a year and keep the house in good condition was a consideration, and that whether or
not the £1 was too normal was not the business of the court. It has also been held that
a forbearance not to take action in court even though in the long run, such an action
might have failed, would be sufficient consideration upon which to base as contract of
compromise.

However, to be sufficient, the consideration afford must not be just a discharged of

public duty already imposed by law or a pre-existing contractual duty, and must not be
illegal. Thus, while the court may not inquire into the adequacy of consideration, it, may
inquired into the sufficiency of it.

Classification of consideration

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Consideration may be executor, where the defendant’s promise is made in return for
the promise of the plaintiff and there is no performance of any action yet by any either
party it simply relates to future.

Where the defendant’s promise is made in return for an action performed or

forbearance by the plaintiff, the consideration is said to be executed. It is executed
from the mere fact that it has already been done and this applies to unilateral contracts,
whereas executor consideration applies to bilateral contracts. An example of executed
consideration is that of finding and getting one’s lost dog.

Past consideration is where,an act or forbearance alleged to be consideration is prior

to and independent of a subsequent promise by a premisor. A good illustration is the
case of Roscorla v. Thomas, where after the plaintiff had bought a horse from the
defendant at an agreed price, the defendant promised that the horse was sound and
free from vice. The promise turned out to be false and the plaintiff sued for a breach.
The court held that the defendant’s promise was made after the sale was over and was
therefore past consideration. Other cases on the point are Re McAsrdle and U.T.C v.
Haurl. Both executor and executed considerations are sufficient to support a contract,
but past consideration does not support a contract.

Essentials of valid consideration

a) Consideration must be moved or given at the desire of promisor: In
agreement, there are two parties i.e. promisor and promisee. The consideration is
generally given by thepromisee to promisor. According to this rule, any act or
promise will be valid consideration if such act has been done or promise is made at
the desire or request of the promisor.
b) Consideration must be lawful:Agreement to be enforced in the court must be
made for lawful consideration. Any act which is illegal, immoral and against public
policy will not constitute valid consideration for the contract.
c) Consideration must be real and not be illusory: Consideration given must be
real and must have some value in the eyes of law. It must not be illusory, factious,
fraudulent, uncertain and illegal.

4.) INTENTION TO CREATE LEGAL RELATIONS

The existence of an agreement and consideration does not necessarily imply that the
contract is enforceable. There are many instances where, although an agreement has
been struck and consideration has been provided, the parties never intended that their
contract would be enforced in a court of law. Thus, a person will not held to be bound
by a mere jest, a mere puff, or a word uttered in a conservation which was not
seriously meant. In weeks V. Tybald, the defendant in a conservation promised that he
would give £100 to any man who would marry his daughter with his consent. The
plaintiff having successfully married the defendant’s daughter with his consent sued on
promise. The court held that the defendant was not bound by such general words
spoken to excite suitors’.

In commercial and business agreements, the law normally presumes an intention to

create legal relation, unless such intention is otherwise expressly rebutted, for
example, by inserting a clause, as was done in Rose & Frank V. Crompton, that the
parties do not intend to create legal relations should the contract break. Such a clause
makes it clear that the contract is more or less a gentleman’s agreement, binding in
honour only.

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On the other hand, there is a presumption in law that social and family agreements, in
other words domestic agreements, are not intended to be legally binding. In Balfour v.
Balfour, the defendant, who was a British colonial civil servant went on leave in
England and left his wife there. While in England he promised the wife that he would
pay her ₤30 a month for maintenance, it was in default of this promise that the wife
brought this action. The court held that as between the husband and wife there was
only love and no legal relations: that there was no intention to create legal relations
when the husband made the promise. Similarly, in jones v. Padavation the plaintiff was
a Trinidadian daughter working in Washington. Her mother proposed to her that she
should resign her job and go to England to study for the Bar. The daughter agreed and
did so. The mother bought a house in which the daughter lived in part and the rent
recovered from the other part of the house was used by the girl for her maintenance.
With time however, both mother and child fell apart. The mother discontinued paying
her the allowance and ordered her out of the house, as a result of which the daughter
brought this action. The court held that the mother’s offer was not intended to create
legal relations.

It is however noteworthy that the general presumption of lack of intention to create

legal relations in social, family and domestic agreements is rebuttable by prima facia
circumstantial or documentary evidence as illustrated in the case of Merrill v. Merrill.

5.) CAPACITY TO CONTRACT

Parties to a contract must have capacity to enter into the contract: the ability to incur
legal liability or to acquire legal rights, and must not suffer under any of these
incapacitating infirmities which the law would regard as making it impossible for any of
them to have genuinely reached a mutual assent or a consensus ad idem. The cases
where incapacity has been recognized in law include: contract by infants, corporations,
unincorporated associations, insane and drunken persons, sovereigns and
representatives of foreign governments. Persons who are not capable for contract may
be grouped under the following:

a) Minor (a person, male or female, who has not completed the age of 18 years)
b) Person of unsound mind (e.g., Idiots, Lunatics, Drunken person, Old person)
c) Person disqualified by law (e.g., Convict, Insolvent, Alien enemies, Married
woman, Foreign Sovereign, Corporations)

Terms of a Contract
Assuming that the contract has been validly made, i.e. with the constitutive ingredients
presents, it becomes necessary to determine the nature and extent of obligations
assumed by each party, i.e. what in fact each party agreed upon, these are referred to
as the terms of contracts. In other words, the terms of a contract are what the actually
expressed as binding on them, or which are implied by law or read into the contract so
that though not expressly agreed upon, nevertheless become binding on the parties.
The terms of a contract may thus be express or implied.

Since a contract, generally, need not be written – it may be oral or part and partly
written, express terms of a contract may therefore be oral or written. Proof however
becomes difficult where the terms are oral. On the other hand, no controversy arises
where the terms are written, for that case the court will have the straight forward duty of
strictly constructing the document as presented to it, and parol evidence added to,
need not vary or contradict the written intention of the parties, except of course where
there is fraud, intimidation orillegallity.

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A distinction may be drawn between mererepresentations and contractual terms.
Mere representations are express statements which are intended to induce the other
party to enter into the contract but which are not material to nor form part of the
contract. Thus, no action for breach of contract can be founded on a mere
representation or a term of contract. The test has been whether there is “evidence of
an intention by one or both parties that there should be contractual liability in respect of
the accuracy of the statement” Everything thus turns on the presumed intention of the
parties as may be inferred by court, based on the circumstances. In getting to intention
of the parties, several considerations have weighed on the mind of the court, such as:
the importance of the truth of the statement (Bannerman v. White 31 L.J., C.P. 28;4
L.T. 740); the time which elapsed between the making of the statement and final
manifestation of consensus (Rout; edge v. Mckay [ 1954] I All ER 855); whether the
party making the statement was, vis-à-vis the other party, in a better position to
ascertain the truth of the statement (Dick Bentley Productions Ltd v. Harrold Smith
(Motors) ltd. [1965] I.W.L.R.623); and whether the statement was subsequently omitted
when the agreement was embodied in a more formal contract in writing (Helbut,
Symons & Co. v. Bucleton, op. cit.). In Hopkins v. Tanqueray, the plaintiff, who was
interested in a horse that would be sold in an auction sale the next day, visited the
stables at Tattersalls to examine the horse. While he was examining the horse the
defendant arrived and the following exchanged ensued: “You need not examine his
legs; you have nothing to look for: I assure you he is perfectly sound in every respect”,
to which the plaintiff replied: and he abandoned “if you say so, I am perfectly satisfied”,
and the auction having, according to him, relied on the defendant’s positive assurance
that the horses was sound. Mr. Tattersall, who was a called as a witness, stated that
the horses sold were nor warranted. The Appeal court held that the exchanges
between the plaintiff and defendant were mere representations of what the defendant
bona fide believed to be the fact.

Implied terms arise from the realization that it is not possible for contract, be it oral or
written, to incorporate all terms and conditions, so the gaps have to be implied by law
into the contract, so as to effectuate the intention of the parties and give the contract a
business efficacy. Terms may be implied by customs and usage or by the court, or
even statue. It is also implied by law that fundamental terms in a contract must be
performed and cannot be excluded or limited in any way, because to do so would be to
empty the contract of all its contents.

Exemption Clauses
Exemption Clauses are terms inserted into a contract to exclude the liability of a party
or free him from liability which would otherwise be his, such clauses are also called
Excluding Terms. Such exemption clauses are mostly found in mass-produced
contractual forms such as contracts for supply of electricity, water, telephone services,
hotel accommodation, dry-cleaning and carriage, whether by road, rail, sea or air.
These are standard for contracts, because the contractual forms are standardized;
they are prepared beforehand, exclusively by one party, without any input from the
other party, who has to take it as it is or leave it.

In some cases the liability may not be totally excluded; it may just be limited, so that
the defaulting party does not bear the full weight of the consequence of this default. In
such case, we talk about limiting terms, rather than excluding terms or exemption
clause. A limiting term or limitation clause is thus a specie which limits liability to a
ridiculous amount. Such a specie is as good as an exemption clause from liability. In
International Messengers (Nig.) ltd. v. Pegofor Industries ltd, the respondent, a
company engaged in the manufacture of industrial gas, had a chemical plant in Onitsha
which was installed by an Italian Company (Siad Machine Imppianti Company of
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Bergaro, Italy). A vital component of the machinery consisting of piston and rod
assembly was faulty and needed to be transmitted urgently by air to the said Italian
company in Italy for necessary repairs.

On 8th November, 1991, the respondent, through its Managing Director handed over a
package of the faulty component to the appellant, an air courier company, at its office
in Onitsha for transmission to the Italian company for repairs and return by 15 th
November, 1991, so that the machinery could resume production the next day. In
consideration of the transportation; the respondent paid the sum of N1,110.00 to the
appellant and was issued a receipt thereof and an Airway bill which was signed by the
appellant’s employee who received the package. The Airway bill which was signed by
the respondent contained an exemption or limitation clause which limited the liability of
the appellant to the sum of N500 in the event of loss or damage of the goods.

The package got lost and the appellant by its letter of 5 th December, 1991 notified the
respondent to that effect. To minimize its loss, the respondent, by telex, placed an
order for a complete new component which was delivered on 21 st December 1991 at a
cost of US28,000.00 dollars. Thereupon, it commenced an actions against the
appellant for breach of contract of bailment, claiming a total sum of N1,500,000.00.

The appellant admitted responsibility for the loss of the package but, relying on the
exemption clause contained in the Airway bill, contended that as the Airway bill formed
the contractual relationship between the parties, hence, its liability to the respondent
was limited to N500. The trail court held that the appellant was liable to indemnify the
respondent to the full of its loss and thus awarded the respondent the full value of the
component and cost of freight. This was upheld by the Court of Appeal. Further appeal
to the Supreme Court was dismissed. The apex court held that this was a case of
fundamental breach and so the exemption or limitation clause was of no vail.

Thus, a limitation clause, and for such exemption clause which limits liability to
ridiculously low amount becomes an exemption clause, and for such exemption clause
to be valid, there must be no breach of a fundamental term or fundamental obligation
under the contract. This is a common law position, which has now been given statutory
effect in many states in Nigeria. For Instance, section 190 of the Contracts Law, Cap
32 Laws of Anambra 1991 provides:

Nothing in the foregoing shall be constituted as to enable a party guilty of

fundamental breach of a contract so as to escape liability.

The frequent problem has been the need to provethat such exemption clause or
limiting term was part of the agreed terms and therefore formed part of the contract. In
Chapelton V. Barry UDC the plaintiff hired a seat at a breach maintained by the
defendants. He paid $2 US dollars and was given a ticket on which was written that the
defendants were exempted from liability arising from any accidents or damage in
respect of the hire of the chairs. The canvas of the chair which the plaintiff/appellant
used gave way and he was injured. In an action brought by him the defendants
pleaded the exclusionary terms contained in the ticket. The court held that no
reasonable person could have assumed that the ticket was anything but a receipt for
the money paid for the hire of the chairs.

The efficacy of exclusion between signed and unsigned documents was lucidly
illustrated in L’Estrange v. Graucob. The plaintiff bought an automatic machine for
retaining cigarettes from the defendant. The terms were contained in a document with
legible but small prints which stated that any express or implied condition, statement or
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warranty, statutory or otherwise, is excluded. The plaintiff signed the document. The
machine was found to be defective and the plaintiff claimed damages, arguing that he
was not liable to pay the price because he was bound by the terms of the contract
which he signed. According to Scrutton L.J.

When a document containing contractual terms is signed, then, in the absence of

fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly
immaterial whether he was read the document or not.

It is different in the case of unsigned documents. Where one party has not signed the
document relating to the contract which contains a limiting or excluding term, other
conditions apply. The commonest form of unsigned documents are the ticket cases. In
such case, it has to be shown that the excluding term is part or a term of the contract,
in the sense that it was brought to the attention of the other party prior to or at the time
of making of the contract. If the term is brought to attention after the making of the
contract, it will be void. In Olley v. Manborough Court. The notice containing the
exemption clause was displayed in the hotel room whereas the lodging contract was
concluded at the counter before entering the room. Court held that the notice of
exemption was belated and therefore ineffective. Other illustration cases are Parker V.
S. E. Roly Co., Spurling V. Bradshow andThomton v. ShoeLane Parking Ltd. Thus the
notice must be sufficient. The party relying on an exemption clause must have done all
that was reasonably necessary or sufficient in the circumstances to give notice of the
term to the other party. It may however be different if there has been a course of
dealing, e.g. if it is shown that the other party had, in the case of Olley v. Manbotogh,
been lodging in the room on previous occasions or for a considerable length of time, so
that he would have had sufficient opportunity, to where a party is blind and cannot read
or is illiterate, the position is governed by Foster v. Mackinnon where the court said:

If a blind man, or a man who cannot read, or who for some reason (not
implying negligence) forbears to read, has a written contract falsely read
over to him, the reader misreading to such a degree that the written
contract of nature pretended to be read from the paper which the blind or
illiterate man afterwards signs, the, at least there be no negligence, the
signature so obtained is of no force.

As has been mentioned before, the application of an exemption clause may be

drastically circumscribed by the innovation of the doctrine of fundamental term. The
court will not give effect to a limiting or excluding term where it operates to defeat the
performance of a fundamental or basic obligation created by the contract. A case
where this is applied is illustrated inKarsales (Harrpw) Ltd. V. Wallis.

Vitiating Factors
Vitiating factors in contract are those factors, where it existence (if any) will cripple or
invalidate the contract. These factors are:
(a) Mistake
(b) Misrepresentation
(c) Duress and undue influence
(d) Illegally

A. Mistake
“Mistake” as used here is not co-terminus with a mis-judgement or “an obvious
misunderstanding” as normally meant in popular, day-to-day usage. A mistake in the
popular sense alone has no legal significance. Thus, where Eyo buys from Okon a
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filling station which on the one side adjourns a very busy highway and on the other side
abuts a famous motor park.Eyo cannot claim that the contract is vitiated because just a
few days thereafter, Government re-locates the motor park and diverts traffic from the
road by creating a by-pass, which thus significantly reduces petrol sales. Here, Eyo
may say that he made a mistake, but this is not a vitiating mistake. To vitiate a
contract, the mistake has to be operative. It must be such a mistake as would operate
to defeat the existence of the contract because, from the circumstances, it can be said
that there was no consensus ad idem between the parties. In the words of Lord Atkin:
“If mistake operates at all, it operates so as to negative or in some cases nullify
consent”.

The effect of a legally valid mistake at common law is to make the contract void ab
initio, i.e., the contract is a total nullity conferring no right and imposing no obligations.
However, a person who has been adversely affected may still have a remedy at equity.

Mistake may be classified under two heads: Unilateral mistake and bilateral mistake. In
the first type, only one party is mistaken. In the second type, that is bilateral mistake, it
simply means that both parties to the contract are mistaken as to the subject matter of
the contract. This type of mistake and mutual mistake. We shall proceed to discuss
each of these in turn.

In the case of unilateral mistake, one party is mistaken as to the identity of the other
party or as to the subject matter of the contract. It is of great importance that only one
party is mistaken. The other party knows or is deemed to know (Hartog v. Colin and
shields (1939) 3 ALL ER 566) of the mistake. The mistaken has the burden of proving
that the other party was aware of the mistake.

This is because there is a prima facie presumption in law that the contract was validly
concluded between the parties and the party alleging mistake has the burden of
displacing this presumption. Thus, in the case of an alleged mistake as to the identity
of one of the parties, the party pleading the mistake must prove that:
(i) He intended to deal with some other person than the person with whom he
contracted.
(ii) The person with whom he contracted knew of his intension not to contract with
him.
(iii) Throughout the contract, the identity of the person with whom he intended to
contract was of cardinal importance to him.
(iv) He took reasonable steps to check and ascertain the identity of the person with
whom he contracted.

From the reported cases, it may be said that unilateral mistakes are mostly, though not
exclusively, operative when they relate mistakes as to identity rather than as to
attribute. Where the mistake is operative, the contract is vitiated and becomes void ab
initio and if the mistaken party has and at Interim passed the ownership of the goods to
a third party, the party has no title to the goods, on the principle that nemodat quod non
habet.

In Cundyv. Linsay, a rogue named Blenkarn wrote and signed an offer purporting to be
“Blenkiron& Co”, which was indeed a respectable and renowned firm. The plaintiff,
knowing the high reputation of the company purported to accept the offer by the rogue
and dispatched the goods to “MessrsBlenkiron& Co.”, which were in fact received by
the rogue.Blenkarn, who in turn sold the goods to the defendant who took them in
absolute faith. The plaintiff sued the defendant for conversion. This court held, as in the
earlier case of Hardman v. Booth, that the plaintiff intended to sell to Blenkiron& Co but
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that Blenkarn fraudulently assumed the position of the buyer; that an offer to sell to
Blenkiron& Co. was knowingly ‘accepted’ by Blenkarn and therefore no contract
ensured. This was the unanimous view of both the English Court of Appeal and the
House of Lords.

The defendants in Cundy v. Lindsay were liable because there had never been a
contract of sale between the plaintiff and Blenkarn, and Blenkarn therefore possesses
no title which he could pass to a third person. The case could be compared with kings
Norton Metal Co. Ltd. v. Edridge, Merrett& Co. Ltd. The plaintiffs, who were metal
manufacturers, received a letter purporting to come from “Hallam& Co.” asking for
quotations for metal wire. The truth was that “Hallam& Co.” consisted solely of a
fraudulent person named Wallis. The letters had been written and the writing papers
prepared by him. Wallis subsequently sold the wire so obtained to the defendants. The
plaintiffs sued the defendants for the value of the goods, contending that their
purported contract with Hallam& Co. was void since they mistakenly believed that such
a firm existed, and that therefore the property in the goods still resided in them.

The plaintiff’s contention failed. The Court of Appeal Held that the plaintiff could not
have relied on the credit of a non-existent person and therefore must have intended to
contract with the writer of the letter, though, of course, they would not have formed this
intension had they known that he was masquerading under an alias. Here, there was a
contract which was not rendered void by mistake but only avoidable for fraud.
Consequently, as the contract had not been avoided at the time of the sale by Wallis to
the defendants, title properly passed to the defendants prevailed over that of the
plaintiffs.

FREE CONSENT
Two or more persons are said to consent when they agree upon the same thing in the
same sense.” Consent is said to be free when it is not caused by:

1. Coercion: Application of physical force

2. Undue influence: Use of mental pressure
3. Misrepresentation: Innocent false representation
4. Fraud: Cheating or deceiving
5. Mistake: Wrong impression about anything

DISCHARGE/TERMINATION OF CONTRACT
Discharge of a contract implies termination of the contractual relationship between the
parties. On the termination of such relationship the parties are released from their
obligations in the contract. And in this way, the contract comes to an end.

Modes of discharge in contract:

1. By performance
2. By mutual agreement
3. By supervising impossibility
4. By operation of law
5. By lapse of time
6. By material alteration
7. By breach of contract

REMEDIES OF BREACH OF CONTRACT

Breach of contract: A formation of contract results in creating contractual obligations
between the parties. These contractual obligations are to be fulfilled by the parties on
the due date as per terms and conditions of a contract. When a party does not fulfill his
16
obligation or refuses to fulfill it or disables himself from fulfiling it, such is known as
breach of contract.

Breach of contract is of two types:

1) Actual breach: This is when the promiser fails to perform his obligation or refuses to
do so on the due date of performance.
2) Anticipatory breach: This is when thepromiser either refuses to perform or makes
himself unable to perform a promise before the due date of performance. Anticipatory
breach of contract takes place before the date of actual performance.

Remedies:
i) Rescission: When a party makes breach of contract by not fulfilling his obligation,
the aggrievedparty has a right to rescind such contract. To exercise this right, the
aggrieved has to file a suit forrescission of a contract. On granting rescission, the
aggrieved party gets released from hisobligation in that contract. He is no more
liable to perform his promise.
ii) Suit of damages: On making a breach of contract by a party, the aggrieved party
may suffermonetary loss. In the event of breach he may be put in
adisadvantageous position or in aposition of discomfort. In such case, the
aggrieved party has a right to claim for compensation.
iii) Suit for specific performance: When breach of contract takes place and
aggrieved partysuffers a loss. These losses may be of such a nature that damage
granted for these by the courtmaybe inadequate. It is because such losses cannot
be measured in terms of money. In suchcases, the aggrieved party is entitled to
claim for order of specific performance.
iv) Suit for injunction: In a contract if the party has made a promise for not doing
something,and that party takes a breach of contract by doing that thing. To prevent
such party from doingthat act an order of injunction may be claimed by an
aggrieved party. It is an order passed bycourt of law, directing upon the party and
refraining him from performing what he has promisednot to perform.An injunction is
a preventive relief, which is provided to an aggrieved party wheredamages would
not be an advocate relief, it is a negative form of order of specific performance.
v) Suit upon quantum meruit: In a contract maybe in the process of performing his
promisebefore he completes it, the promise makes a breach of contract. Quantum
Meruitis a Latin dictum, which means “as much as earned or merited”. That means
under Quantum Meruitaggrieved party can also claim for the reasonable cost of
work done by him in the contract.

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