Nigerian Labour Law: Contract Termination

• Termination of a contract of employment under Nigerian Law adheres to Section 11 of the Labour Act.
• Termination is when involved parties end the agreed performance of a responsibility.
• The party intending to terminate a contract is legally required to give notice.

Labour Act CAP 198 of the LFN Section 11(1)

• States that either party can terminate the contract upon notice to the other party.

Section 2

• Stipulates notice periods based on the contract's duration:
• One day if the employment lasted three months or less.
• One week if the employment lasted between three months and two years.
• Two weeks if the employment lasted between two and five years.
• One month if the employment lasted five years or more.
• The Labour Act Section 11 (3), mandates written notice for terminations exceeding one week, disallowing verbal notices.
• "Shall" as used in the Act implies compulsion, interpreted in Ugwu v Araurume (2007).
• The Labour Act allows parties to waive their right to notice or agree to payment in lieu of notice, provided it's done before the notice period expires.
• Employers continuously employing a worker for three or more months are not liable for payments during the worker's leave, if the leave was employer-approved.
• Employers are not defended against personal injury lawsuits caused by their employee's negligence, even if the injured and negligent persons were in common employment.
• Contract provisions limiting employer liability for personal injuries caused by negligence to employees are void.

Valid Reasons for Terminating a Contract

• Valid contract terminations include:

• Performance aligning with contract terms

• Agreement

• Breach of contract

• Delay in fulfilling obligations

• Repudiation

• Frustration.

Performance

• Contract duties must be fulfilled, and failure to perform per contract terms can terminate it.
• Performance must be exact for obligations to be validly fulfilled, except for minor defects.
• Parties fulfilling their obligations can enforce the contract.

Agreement

• Termination by agreement is broad and can occur in various ways.
• Contracts can have express or implied terms causing automatic termination or granting termination rights to one party.
• Express termination clauses explicitly detail termination procedures, like employer discretion after six months of employment.
• Courts may infer implicit termination rights without an express clause.
• Mutual agreement, or bilateral discharge, allows parties to end a contract post-commencement.
• Oral discharge of responsibilities is possible, even if the contract requires writing, but written and signed agreements are preferable for clarity and legal reasons.
• Actions indicating contract abandonment, or a waiver, deed of novation, or deed of abandonment, can lead courts to infer termination. A contract may be seen as abandoned is demonstrated by:
• Both parties indicating the contract should not be further performed
• A long period elapsing without either party attempting performance

Breach

• Termination relies on the breached term.
• Breaching a condition, (essential or fundamental term), allows the innocent party to terminate and seek damages.
• Breaching a warranty, (guarantee), does not permit termination.
• Breaching an intermediate term (not a condition or warranty) may allow termination and damages depending on the breach's severity.

Delay

• Terminating for delay requires considering how time is addressed.
• If no time is specified, completion must be reasonably timed. For non-essential time terms, termination is possible if the delay is a repudiation or serious breach of an intermediate term.

Repudiation

• Repudiation is when a party shows they cannot or will not sufficiently perform the contract.
• A party expresses intent to no longer be bound, renounces liabilities, or fulfills obligations inconsistently. If a reasonable person thinks performance is unlikely, the innocent party can end the contract and sue for damages.

Frustration

• Frustration occurs when unforeseen events radically alter the contract, through no fault of the involved parties.
• It protects against unjust adherence to contracts under new circumstances.
• Frustration examples: death, illness, imprisonment, military conscription; changes in law, government interference, subject matter destruction, or failure of specific contingencies.
• Valid contract termination hinges on the contract itself. Considerations include statutory and common law principles. Wrongful termination can lead to breach of contract and liability for damages, making legal advice essential before termination.