The importance of a Contract in any commercial transaction can never be overemphasised. It can be made in any form which can either be oral or written insofar all the essential requirements of a valid contract is satisfied. These requirements are the Offer, Acceptance, Consideration, Intention to create legal relations and the capacity of the parties.
It is highly recommended that a written contract should be the preferred alternative in all circumstances no matter the significance of the agreement. A written contract provides more security, protection and minimises the risk of disputes for both parties by setting out the obligations and the procedure to be adopted at the inception of the agreement. A written contract could be as simple as an agreement for services from vendors for an event or it could be as complex as a construction agreement. A written contract is essential so far it involves a significant risk to your business or your well being. When negotiating a contractual agreement, it is expedient that you take great caution before appending your signature to the contract. This is because you are bound by whatever you sign regardless of whether it is favourable to you or not once there is no evidence of duress or fraud. Only in very limited cases will the court intervene to remediate an unfair contract term. The sanctity of the freedom of contract is sacrosanct and will be protected by the law courts in the event of disputes. The services of a seasoned commercial lawyer should be engaged at the inception of every contractual relationship to reduce the occurrence of litigation which can be long and expensive. Most contractual agreements commence in oral forms which could be physical or virtual meetings or perhaps telephone conversation. It is imperative to ensure that every statement of fact which is fundamental to your interest in the transaction is adequately provided for in the written contract. Any oral agreement made by the parties excluded in the final written agreement will not form part of the agreement and consequently non enforceable against the other party. It is also important that all expressly agreed terms in the agreement reflect the true meaning and intentions of the parties.
However, the most imperative feature in any contractual document is the terms of the contract which is the foundation upon which the whole contract is built. The terms of a contract determines the extent of the obligations and liabilities undertaken by the parties and a breach will entitle the aggrieved party to compensation. In determining the liabilities and obligations of parties in a contract, not all obligations created by the contract are of equal importance. A fundamental term in a contract is the underlying factor and building block of the agreement. If such a term is not complied with, it is equivalent to the fact that the contract was not performed at all and as such the aggrieved party will be entitled to repudiate the contract and sue for damages. In an instance where two parties agreed for a supply of a handbag, if the seller delivers a pair of shoes instead, it is tantamount to the fact that the contract was not performed at all. Whereas, a condition is a term of a contract which is equally of great importance and a breach of it will equally entitle the aggrieved party to repudiate the contract and sue for damages. Such instance is a date of delivery for a particular item. If in a contract of delivery of a lace fabric for the celebration of an occasion, the seller fails to deliver such fabric by the agreed date and the occasion passes by, the aggrieved party may repudiate the contract and sue for damages. Although the fabric was delivered, it was not on the agreed date and the whole purpose for the purchase is defeated. However, a warranty though important in a contract will just entitle the aggrieved party to sue for damages but not to repudiate the contract. In the illustration above, if the fabric was delivered on the due date as agreed but it was discovered that rather than a white fabric, a red fabric was delivered instead. It will be termed as a warranty because the fabric was delivered as scheduled but only a slight variation. The only instance where the above illustration will be treated as a condition is if it was expressly stated in the agreement that the colour of the fabric was of primary importance to the buyer.
At this juncture, it is expedient to state that apart from the express terms agreed by the parties in a contract, further obligations may be imposed on the parties by other terms known as implied terms. An implied term in a contract is a term which is not written in the contract but forms a part of it and has the same legal force of an express term. Implied terms are supplemented into agreements to promote commerce and give efficacy to agreements. Implied terms may be imported into agreements because of the custom and usage is established and prevailing in a particular industry. For instance, Mr. A enters into a written contract for the sale of a blue Mercedes car with Mr. B. When Mr. B took delivery of the car, it was discovered that the custom duty papers of the car were not included in the documents that accompanied the purchase. In response to this development, Mr. B may be able to sue Mr. A for a breach of contract regardless of the fact that his liability has ceased upon the discharge of the car. The non-inclusion of the custom duty papers which was not expressly stipulated in the agreement will not serve as a defence to Mr. A because it is apparent that it is an industry practise that all documents incidental to a sale of a car must be delivered regardless of being an express term or not. A further example is the notion of vacant possession in a tenancy agreement. A landlord who fails to deliver vacant possession to a tenant after the agreement had been concluded will be liable regardless of the fact that it was not expressly stipulated in the contract. It presumed that the whole essence of a tenancy is for the tenant to be able to occupy the property he has paid for.
Asides from industry practise and usage discussed above, terms could be implied into a contract by the law. This is established in all contract of sale of goods in Nigeria and it expedient that all sellers and consumers are aware of these provisions of the law to protect both parties. The first of these terms is the condition that a seller has the right and title to sell a particular good and that such good is free from any encumbrance or charge in favour of the consumer. The doctrine of caveat emptor will not be a defence to the seller when the issue of title of a good is in issue. So where a seller sells a car which is still under a hire purchase agreement to an unsuspecting buyer, the buyer can sue the seller for a breach of contract for defective title. A car which is under a hire purchase agreement is still the property of the company that advanced the sum for the hire purchase and title does not pass until the loan has been discharged.
Further, under the sale of goods law, when a sale is by description or by sample, there is an implied condition that the description or the sample must correspond to the goods sold. This mostly applies to goods that have not been seen by the buyer. This law is particularly relevant in this era of online and electronic sale which is gradually becoming established and more preferred to the traditional offline sales. Sellers must exercise extreme caution when sending samples or describing goods online to prospective buyers who will, in turn, rely on the description given by a seller to make a purchase. For instance, a seller advertises a certain bag on her Instagram page as being high quality, leather, red in colour and made in Italy. If on the strength of the statements contained in that advertisement, a buyer makes a purchase but on delivery of the bag, she discovers that is white and not red, then the seller will be liable for breach of contract and recovery of the contract sum. The situation will be different if the buyer regardless of the description online walked into the physical store of the seller and went ahead to pick the bag with the knowledge that it was white. The liability of the seller at that point will be discharged because she had the opportunity to see it. Further, if the seller advanced a sample to the buyer, the eventual bulk of the purchase must correspond with the sample. For instance, if a consumer walks into a store and makes an order for a large quantity of goods based on a sample that was shown to her with no request for any variation to the items, the bulk of the items delivered subsequently must correspond with the sample with no variation.
Another term implied into a contract of sale is the fitness for purpose of goods. It is pertinent to state that the law does not impose any duty on the seller in this regard because the doctrine of caveat emptor will apply. It is the duty of the buyer to be satisfied that the goods being purchased will be fit for the purpose intended. However, the exemption will be if the customer particularly stipulates the purpose for the required use to the seller. Conversely, specifying the exact required use for the purchase to the seller will be unnecessary if the item can only serve one purpose. For instance, if a consumer makes a purchase of hot water bottle, if it is discovered after the purchase that the hot water bottle was, in fact, an ordinary bottle, the seller will be liable for a breach of contract because the intended purpose for the purchase was self-evident. However, if the purchase was for a sale of a child’s pair of shoes, if the consumer does not particularly state that the intended purchase was for occasion wear, the seller will not be liable if the shoes delivered was in fact school shoes. In this particular instance, a pair of shoes can serve diverse purposes and so the consumer must state the particular reason for the purchase.
Also imposed by the law is the fact that goods sold must be of merchantable quality. The exemption will be where the consumer had inspected the goods before the purchase. Where a buyer had the opportunity to inspect an item before a purchase is made but fails to detect any patent defect in the item which such examination ought to have revealed, the seller will not be liable. This is based on the principle that the buyer made the selection himself and did not rely on the expertise or skill of the seller to inform the purchase. Conversely, if the consumer did not have the opportunity to examine the purchase, for instance, an online purchase, it is presumed that the buyer relied on the expertise and skill of the seller to make the purchase. Any defect discovered afterwards will entitle the buyer to rescind the contract and recover the contract sum.
In all the instances of transactions referred to above, the remedies available to the aggrieved party for breaches is to rescind the contract and recover the contract sum but this will only be achievable if the buyer has not done any act inconsistent with the rights of the seller. In an instance where the buyer had already worn a pair of shoes which was unfit for purpose or sewn a fabric that does not correspond to the description or where the buyer retains the items for an unreasonable length of time, it will be unrealistic to expect the buyer to accept a return of the goods. In such instances, the likely remedies will be to sue for damages. Asides from terms implied by the law, the courts sometimes will supplement some terms into an agreement to give efficacy to the contract. This is not to say that law courts rewrite contracts for parties or interfere unnecessarily to undermine the contracting capacities of the parties. It is a principle-based on the fact that such terms are so apparent and necessary that if the parties have averted their minds to it, it would have been included. For instance, where two parties enter an agreement for a sale of a car which the purchase price will be paid in instalments, if upon the delivery of the car, it is found that the engine was fundamentally defective, it will be foolhardy to expect the aggrieved party to continue paying the instalments regardless of the fact such provisions were not included in the contract.
Thus, parties may be able to exclude any inclusion of implied terms into their contracts by explicitly excluding it in the terms of the contract. No established customs or usage can override any written provision. In contracts involving the sale of goods in Nigeria, it is possible for sellers to escape any liability envisaged by the provisions of the Sale of goods law provide the expressly excludes his liability by taking active steps to bring such exclusive term to the notice of the buyer prior to the purchase. Any buyer who makes a purchase after getting notice of such exclusion terms does so at his detriment.
Senior Partner, Olamide Onifade & Associates
2nd Floor, 149, Ogudu Road, Ogudu, Lagos
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