The Law of Contract 2024-2025 Session PDF

**THE LAW OF CONTRACT** A contract is an agreement which is legally binding on the parties to it and which, if broken, may be enforced by civil action in court against the defaulting party. Classification of Contracts 1\. Contract under Seal (Formal Contracts) 2\. Simple Contract 3\. Express Co...

**THE LAW OF CONTRACT** A contract is an agreement which is legally binding on the parties to it and which, if broken, may be enforced by civil action in court against the defaulting party. Classification of Contracts 1\. Contract under Seal (Formal Contracts) 2\. Simple Contract 3\. Express Contract 4\. Implied Contract 5\. Bilateral Contract / Multilateral Contract 6\. Severable Contract REQUIREMENTS FOR THE FORMATION OF A VALID CONTRACT The essential requirements for the formation of a legally binding contract are as follows: A firm unequivocal offer; a definite, unqualified acceptance, valuable consideration, intention to create legal relations, contractual capacity and lawful object. These requirements will now be examined in turn. OFFER: this is a proposition made by one party, called the offeror, to another party, called the offeree, clearly and precisely indicating the terms under which the offeror is willing to enter into a contract with the offeree. ================================================================================================================================================================================================================================== For a proposition to amount to an offer capable of acceptance, it must satisfy three conditions: 2. 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. A proposition made by a person having no authority to do so, purporting to be an offer, cannot create a contract if accepted 3. It must be communicated to the offeree. 4 An offer may take many forms. It may, for example, be made by word of mouth, by telephone, letter, telegram, telex or by any elaborate document with numerous clauses and sub-clauses. It may indeed be inferred from conduct. An ordinary everyday act such as a bus driver pulling up at a bus stop or a taxi driver stopping to pick a passenger are instances of an offer by conduct. May be deduced from some act or conduct of a person. Offer distinguished from Invitation to Treat It is important to distinguish a true offer from what is called an "invitation to treat". The importance of the distinction is that if a true offer is made and is then accepted the offeror is bound, whereas if what the offeror said or did is not a true offer but an invitation to treat the other party cannot by saying "I accept" bind the offeror to a contract. An offer must be a definite, certain and unequivocal proposition or promise to be bound provided that certain specified terms are accepted. For an offer to be a true 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 to the offeree the option of acceptance or refusal. "An invitation to treat", on the other hand, is preliminary to an offer. In the Carlill case, Bowne L. J., described it variously as an "offer to negotiate", an "offer to receive offers," an "offer to chaffer." Its essence is that by it the supposed offeror is merely initiating negotiations from which an agreement might or might not in time result. The negotiation crystallizes into an offer, properly so called, when one of the parties (who thus become the offeror) finally assumes a definite and unshifting position of preparedness to be bound if the other party accepts. Examples of Invitation to Treat are as follows: 1. Display of goods for sale: 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. The offer, in such a case, is made by the customer when he picks a particular article and presents it to the shop owner or cashier who then accepts by taking the cash or punching the cash register or he may refuse at that point to sell. 2. Advertisement of sales in catalogue: The issue of a circular or catalogue advertising goods for sale, or any similar advertisement of sale of listed goods, is not an offer of those goods for sale but an invitation to potential buyers to make offers to buy. A customer who, therefore, places an order for an article listed in the catalogue, circular or other advertisement will not recover in an action for breach of contract if he is disappointed and his money returned. 3. Announcement of a competitive scholarship examination: An announcement, notice or advertisement that a competitive scholarship examination will be held is not an offer of 4\. *Invitation to interview for a job*. Inviting a person to appear for interview for a job is not an offer or promise of employment to the candidate who performs best at the interview. The offer is made only when, after all processes have been completed, the employer or his duly authorised agent communicates the decision to employ to the candidate as was held in the case of Ajayi-Obe v. The Executive Secretary, Family Planning Council of Nigeria \[1975\] S.C. 1 5\. *Request for Tenders*. If 'A' asks a number of tradesmen to put in tenders for supplying him with some particular goods or services he is not, in so doing, making an offer. Therefore, 'A' is not bound to accept the lowest, or any other, tender. 6\. *Advertisement of auction sale and request for bids*. The auctioneer's advertisement that an auction sale would be held at a particular place and time is not a promise to potential bidders that the sale will actually take place. So, it was held in *Harris v. Nickerson* (\[1873\] that the plaintiff could not recover damages for loss suffered in traveling to the advertised place of an auction sale which was ultimately cancelled. Similarly, the auctioneer's request for bids is only an attempt to "set the ball rolling" and not an offer. The bidder is the offeror; his bid is the offer. The auctioneer accepts the offer by striking the table with his hammer, and until he does this any article on sale may be withdrawn and any bid may be retracted. These principles have now been recognized by statute (Sale of Goods Act 1893, S. 58(2), an English statute which applies in Nigeria as a statute of general application. See also Sale of Goods Law of each of the states. *7. Negotiations for sale of land and for other complicated contracts*. In these types of transactions, it is accepted that as there are usually many important details to be ironed out before agreement is reached, no real offer capable of acceptance can exist until all those details have been settled. Therefore, all preceding negotiations, whether oral or in writing, are merely invitation to treat. **Communication of Offer** An offer must be communicated to the offeree. Therefore a person cannot accept an offer of which he is not aware. In a decided case, the judge said that ignorance of the offer is the same thing "whether it is due to never hearing of it or to forgetting it after hearing". **Termination of Offer.** Once made, an offer remains open for acceptance until one of five events happens to terminate it. These events are as follows: 1\. *Revocation*. The basic rule is that an offer may be revoked (that is, withdrawn) at any time before it is accepted. The rule applies even if the offeror has expressly promised that he would keep the offer open for a given period. Thus, in *Routledge V. Grant* (\[1828\], the defendant, Grant, offered to buy the plaintiff's house for a certain sum and allowed the plaintiff six weeks within which to give him a definite answer accepting or otherwise. The defendant, however, withdrew his offer before the expiration of six weeks. It was held that the defendant could withdraw at any moment before acceptance, even though the time limit had not expired. But the offeror will be bound to keep the offer open for the stipulated period if the offeree has furnished consideration for that option e.g. by leaving a small deposit. 2. *Rejection*. Rejection of an offer puts an end to the offer and makes it incapable of acceptance. For example, if A offers to sell his book for N10, and B says "No, thank you," B's rejection put A's offer to an end. B cannot subsequently accept A's offer, even if A had left his offer for a fixed period which has not expired. 2b. A counter-offer occurs when the offeree attempts to accept the offer on new terms, not contained in the offer. For example, A offers to sell his car to B for N200, 000 and B "accepts" to pay N100, 000. The purported acceptance operates as a counter-offer because it introduces **a new and material term** (i.e. N100, 000) not contained in the offer. When a counter-offer occurs, it has two effects: i. **Destroys the original offer** and the offeree cannot later accept it. In *Hyde v. Wrench*, the defendant offered to sell a car to the plaintiff for £1,000 sterling. The plaintiff replied by making an offer to buy for £950 and when that was rejected, he purported to accept the defendant's original offer. It was held that there was no contract since the plaintiff had, by making a counter-offer of £950, rejected the original offer. But this effect will not occur if what the offeree did was merely to make an inquiry or request for information: *Stevenson v. Mclean.* ii. **Replaces the original offer** and itself becomes a new offer capable of acceptance. Thus, the original offeree becomes the offeror and the original offeror becomes the new offeree. If a contract is then to result, the counter-offer must be accepted by the original offeror. 3. *Lapse of time*. Lapse is where a period of time is stipulated, but the offer is not accepted within that time. If no time is stated in the offer, then the offer lapses after reasonable time. What is a reasonable time is a question of fact and depends on the circumstances of each case, e.g. the means of communication of the offer and the nature of the subject-matter. Thus, if an offer is sent by telegram, an acceptance by letter sent in the ordinary way might well be held to be too late. An offer which stipulates for acceptance by "return of post" must be accepted either by a return postal communication or by some other equally expeditious method. An offer to sell perishable goods (e.g. bananas, fish, bread, etc.), or something whose price fluctuates rapidly in the market (e.g. shares) would lapse after quite a short time. 4. *Occurrence or non-occurrence of condition.* An offer which is expressly or impliedly made to terminate on the occurrence of some condition ceases to exist, and becomes incapable of acceptance, after that condition has occurred (condition subsequent). Thus, an offer to insure the life of a person is impliedly made to terminate, if the person ceases to exist, and cannot be accepted after the person is dead. Similarly, an offer which is expressly or impliedly made subject to some prior condition cannot be accepted if the condition fails to occur (condition precedent). Thus, if A offers to sell his land to B if the Governor consents and the Governor refuses to give consent, B cannot then accept the offer. 5\. *Death before Acceptance*. 2\. **ACCEPTANCE** 3\. **CONSIDERATION** Over the years, the courts have laid down certain rules which govern the validity of consideration. These rules are as follows: 1\. Consideration Must Be Sufficient but Need Not Be Adequate i. Where a person merely performs his **public duty**, he cannot rely on performance of that duty to constitute enough consideration to sue on a promise. For example, a policeman with a public duty to protect life and property cannot, by performing that duty, say he has provided consideration to enable him recover against a promisor of a reward: Collins v Godfrey. ii. Where the thing which the plaintiff does or promises to do in consideration of the defendant's promise is something that he is already **bound by contract or law** to do for the defendant. Therefore in the case of payment of a lesser sum than the amount due under a contract, if the plaintiff had promised to forgo the balance, the plaintiff may afterwards break the promise without incurring any contractual liability, because there was no consideration for his promise, no contractual obligation exists between him and the defendant in respect of it. This is called the **Rule in Pinnel's Case**, (1602) 5 Co. Rep. 117a. The Rule states as follows: Payment of a lesser sum than the amount due does not discharge the larger sum due. 2\. *Consideration Must Move From the Promisee, Though Not Necessarily To the Promisor* 3\. *Consideration May Be Executed or Executory, But Must Not Be Past* 4\. Consideration Must Not Be Illegal, Immoral or Contrary To Public Policy 4\. ***INTENTION TO CREATE LEGAL RELATIONS*** i. Where the parties themselves expressly exclude an intention to create legal relations. \(ii) Where the agreement relates to a commercial or business transaction. \(iii) Where the agreement relates to purely domestic, family or social affairs 5\. ***LAWFUL OBJECT: ILLEGALITY*** i. the contract is void ab initio and no action can lie on it. The maxim is, ex turpi causa non oritur action ("there can be no cause of action upon a base ground"). ii. Money paid or property transferred by one guilty party to the other under the contract is irrecoverable. This being the case, the position of the guilty party to whom the money or property is transferred (i.e., the defendant) is stronger in law and he therefore keeps what he gets. The maxim which expresses this principle is stated thus: in pari delicto potior est conditio defendentis ("where the parties are equally at fault the position of the defendant is stronger"). *6. **CONTRACTUAL CAPACITY*** (1) Infants ----------- 1. An infant has **full capacity** to enter into contracts for the supply of necessaries for himself and members of his family. Such a contract is valid and mutually enforceable by the infant and the other party. Necessaries are defined in section 2 of the Sale of Goods Act 1893 as "goods suitable to the condition in life of such infant and to his actual requirements at the time of sale and delivery." A contract for education has been classified as a contract for necessaries: Roberts v. Gray. 2. An infant has a **limited** or **qualified** capacity to enter into: a. Contracts of service or of apprenticeship. But such a contract is valid only if, viewed as a whole, if it is for the substantial benefit of the infant,; b. Contracts in which the infant acquires an interest in some subject-matter of a permanent nature, such as land or shares in a company. Such a contract is valid and binds the infant, but it is voidable by him during minority or within a reasonable time after attaining majority, Edwards v. Carter \[1893\] A. C. 360, c. Trading Contracts and promises of marriage. A trading contract is not binding upon the infant however much it may be for his benefit. Thus, in Cowern v. Nield, \[1912\] 2 K. B. 419, it was held that an infant a hay and straw dealer was not liable to repay the price of a consignment of hay that he had failed to deliver. But the contract is valid against the adult with whom the infant has contracted. Accordingly, the infant may choose to enforce the contract. The same rules apply to a promise of marriage. The infant is not bound by it but the adult is bound. 3. An infant has **no contractual capacity** whatsoever in respect of the following: (a) contracts for the repayment of money lent or to be lent; (b) contracts for goods supplied or to be supplied (other than necessaries); and (c) all accounts stated, i.e., all admissions of financial indebtedness. Any such contract or transaction entered into by the infant is absolutely void. Infants Relief Act 1874 \(2) Persons of unsound mind 1. A person of unsound mind (i.e. an insane person) has a full capacity to contract during a lucid interval. Any contract entered into by him during such interval is valid and mutually enforceable by the parties. 2. A contract made by an insane person while in a state of insanity is voidable at his option if he can prove that at the time of contracting, he was suffering from such a degree of mental disability that he was incapable of understanding the nature of the contract, and that his disability was known to the other party. \(3) Drunken persons 1. If a person, when he contracts, is in such a state of drunkenness as not to know what he is doing, and if this fact is appreciated by the other party, the contract is voidable at his option. The burden is on the drunken person to prove both requirements. 2. In relation to necessaries, section 2 of the Sale of Goods Act applies to drunken persons in the same way as it does to persons with mental incapacity. \(4) Married women 1. In Nigeria, women married under customary law have the same capacity as single women and men to acquire, hold and enjoy property in their own rights, and to enter into contracts, and to sue and be sued on such contracts. They have therefore no contractual disability. 2. For women married under non-customary law, the position is as follows: \(5) Illiterates \(6) Corporations \(7) Formalities ### (1)Contracts which must be under seal #### (2)Contracts which must be in writing #### Contracts which must be evidenced in writing #### TERMS OF CONTRACT #### In the formation of contracts although parties may clearly have met all the essential requirements of contracts, it will still be necessary to determine the extent of the obligation of the parties which the contract creates. Three things are essential to determining this viz: #### 1. What are the terms which the parties have expressly agreed on? #### 2. What is the relative importance of those terms? 3\. Are there any other terms which may be implied by statute, the courts and custom? In legal language these are called (1) Express terms (2) Conditions/Warranties and (3) Implied terms respectively. #### EXPRESS TERMS The express terms of a contract are those terms that are expressly set out by the parties. Where the contract is wholly or partly oral, discovering the terms which the parties stipulate is a matter of evidence. But where the contract is wholly written, the discovery of the express terms normally presents no problem. The written terms are the express terms of the contract. In such a case, the courts always insist that the parties must be confined within the four corners of the written words in which they have chosen to express their agreement. Accordingly, the general rule is that parol evidence cannot be adduced to add to, vary or contradict the written instrument. This is called the "parol evidence rule", the word "parol" in this context meaning any "extrinsic evidence" i.e. external evidence. In order to avoid injustice and hardship, certain exceptions have however been developed to the rule: i\. Parol evidence is adduced to prove a **custom or trade usage** whose implications the parties have, or may reasonably be deemed to have, tacitly assumed. ii\. Parol evidence may be allowed to show that the operation of the written contract was iii\. Parol evidence is adduced to prove that the written agreement was not the whole contract, e.g. where the allegation is that the agreement is **partly written and partly oral**. iv\. Parol evidence may also be given to prove some **invalidating or vitiating cause**(s) outside the written contract itself, e.g. fraud, illegality, misrepresentation, mistake, incapacity or absence of consideration. ##### **CONDITIONS AND WARRANTIES** Even when it has been established what the express terms of the contract are, it invariably happens that the terms are not all of equal importance. It is, of course, primarily for the parties to set their own value on the terms that they impose upon each other. But, in practice, they rarely do so with any degree of precision. Consequently, the task of evaluating the various terms often falls on the courts. The words which the courts have usually employed in the evaluation task are called 'conditions and warranties'. A "condition" is a term of major importance which forms the main basis of the contract, the breach of which normally gives the aggrieved party a right, at his option, to repudiate the contract and treat it as at an end. The aggrieved party is not bound to treat the contract as at an end; he may instead affirm the contract. And in either event, he also has a right to claim damages. A warranty, on the other hand, is a term of minor importance, the breach of which gives the aggrieved party a right to damages only. In deciding whether a particular term is a condition or a warranty the courts look at the intention of the parties themselves as inferred from statements made and from the general tenor of the contract as a whole. In ***[Poussard v. Spiers and Pond (1876) 1 Q.B.D. 410]{.smallcaps}**,* an actress was engaged to play the leading part in a French opera as from the beginning of its run. Owing to illness she was unable to take up her role until a week after the season had started. The producers, who had been forced to engage a substitute, then refused her services. It was held that her promise to perform as from the first night amounted to a condition and that its breach entitled the producers to treat the contract as discharged. On the other hand in ***[Bettini v. Gye (1876) 1 Q.B.D. 183]{.smallcaps}*** a singer, who was engaged for the whole of the season both in theatres and at concerts, undertook to appear six days in advance for the purpose of rehearsals. He arrived only three days in advance, and the defendant sought on this ground to terminate the contract. It was held that the rehearsals clause was a term of minor importance; its breach amounted to a breach of warranty, and the defendant could not terminate the contract on that ground. There are two types of conditions: A Condition Precedent and A Condition Subsequent. "A condition precedent" is one which must occur or be fulfilled before an obligation or right created by the contract can be enforced. It thus has a suspensive effect. This was the type of condition considered in ***[Pym v. Campbell (1856) 6 E. & B. 370]{.smallcaps}*** where, under a written contract, the defendant's promise to buy a share in the plaintiff's invention was, by an unwritten understanding, made subject to the approval of a third party. It was held that, until the approval was given, the defendant was under no obligation to buy. A condition subsequent thus has a resolute effect: condition subsequent", on the other hand, is one which, after a contract (or an obligation or right created by it) has come into effect, terminates it if the condition occurs it resolves the contract after it has come into force. Thus, in ***[Head v. Tattersal (1871) L.R. 7Ex.Ch. 7]{.smallcaps}***, the plaintiff bought a horse of a particular description from the defendant, with the understanding that the plaintiff could return it up to the following Wednesday if it did not comply with the description. The description failed and the plaintiff returned the horse within time. It was held that although a contract had come into existence, the option to return operated as a condition subsequent and the plaintiff was therefore entitled to cancel the contract and return the horse. #### IMPLIED TERMS Contracts are not always constituted solely by express terms. There may be other terms which may be implied into it, and they, like express terms, may assume the character of conditions or of warranties. An implied term as the name suggests are terms which an ordinary man would reasonably assume to be part of the terms of the contract. For example a contract for the sale of tomatoes implies that the tomatoes ought to be fresh tomatoes and not rotten ones. Basically implied terms may arise by implication by the Courts, the Custom of the particular trade or business or by the various Statutes governing a particular transaction. ###### Terms Implied By the Courts The basic principle upon which the courts proceed is that a term will only be implied where such term is necessary and reasonable in order first, to reinforce the language of the parties and realize their manifest intention, and second, to give business efficacy to the contract. In effect, this means that the courts imply terms merely in order to do what the parties would have done themselves had they thought of the matter. Illustration: **[In *The Moorcock 1889, 14 P.D. 64*]{.smallcaps}***,* the plaintiff's ship was berthed at the defendant's wharf under a contract. At low tide she settled on some rock which lay under the river bed and she was badly damaged. There was nothing in the contract about the safety of the berth. It was held, however, that it must be assumed as a business proposition that the berth would be safe. In ***Read v. Dean** \[1949\] 1 K.B. 188;* the plaintiff hired the defendant's motor launch for a holiday on River Thames. Two equipment provided on the launch caught fire. The fire-fighting equipment provided on the launch was out of order, and the plaintiff suffered serious personal injuries and lost all his belongings on board. It was held that there must be implied into the contract of hire an undertaking by the defendant to make the launch as fit for the purpose of the hiring as reasonable care could make it, and that the defendant was therefore liable. ###### Terms Implied By Custom A contract may be subject to terms that are sanctioned by custom, whether commercial or otherwise. Thus, in ***[Hutton v. Warren (1836) 1 M. & W. 466, esp. at pp. 475]{.smallcaps}**-476*, it was proved that, by a local custom, a tenant was bound to farm according to a certain course of husbandry (farming) and that, on quitting his tenancy, he was entitled to a fair allowance for seed and labour expended on the arable land. The court held that the lease made by the parties must be construed in the light of this custom. ###### Terms Implied By Statute Contractual terms may also be implied by statute. Examples are the implied terms contained in section 4 of the Hire-Purchase Act 1965, (Act No. 3 of 1965) and in sections 12-15 of the Sale of Goods Act 1893 which, applies in parts of Nigeria as a Statute of General Application. For States in former Western Nigeria where the English Act does not apply, provisions corresponding to sections 12-15 above are contained in sections 13-16 of the Sale of Goods Law 1959, Cap. 150, Laws of Bendel State 1976. **DEVICES TO EASE CONTRACTUAL OBLIGATIONS** #### Some terms of contracts are legal devices employed by a party to ease his obligations under the contract. Examples of such include Exemption clauses and Limiting Clauses. An Exemption Clause (also called an Exclusion Clause) is a term in a contract which seeks to exempt one of the parties from liability in certain events. Where the term merely limits liability, it is called a Limiting Clause. The governing principles are the same in both cases. An exemption clause is recognized as a legitimate device in contracts but may cause injustice sometimes especially in ready-made, printed contracts called "Standard Form Contracts" prepared by large business organizations and given to persons who deal with them to accede to. Examples of contracts usually in standard form are Insurance contracts, Hire-purchase contracts, and Contracts of Carriage of Goods by Air, Sea or Railway. Principles Governing Exemption Clauses Over the years, the courts have developed the following principles to govern the validity of exemption clauses. 1\. The document containing the exemption clause must be an integral part of the contract between the parties These requirements may be illustrated with the following cases: 2\. Any ambiguity, or other doubt, in an exemption clause must be resolved "contra proferentem" 3\. If the plaintiff signed the document containing an exemption clause by reason of fraud or misrepresentation perpetrated by the defendant or his agent, the plaintiff is not bound. 4\. Third parties are not protected by the exemption clause. 5\. No exemption clause, however wide, can operate if it is contrary to statute 6\. A party who is guilty of a fundamental breach of contract may be disqualified from relying on an exemption clause. VITIATING ELEMENTS OF A CONTRACT The term "Vitiating factors" refers to those factors which, where proved to have featured in a contract, will lead to the contract being vitiated i.e. either void or capable of being treated as being at an end or cancelable at the option of the aggrieved party. Vitiate means to invalidate, make imperfect or mar. Vitiating factors are: Misrepresentation, Duress & Undue Influence and Mistake. A. Misrepresentation. i. Where the representation is a half truth so that what is withheld makes that which is said absolutely false, e.g. in a promise of marriage and the man represents that he is single, being silent on the fact that he is in fact married but separated. ii. Where changed circumstances affecting the accuracy of the representation are not disclosed e.g. saying correctly that a car has never been accidented but afterwards the car is involved in a head-on collision but the seller keeps silent about it. iii. Where the contract requires utmost good faith, i.e., where it is a contract *uberrimae fidei*, e.g. insurance contracts. iv. Where a fiduciary relationship exists between the contracting parties, for example that of principal and agent or partners in business. Types of Misrepresentation This is a false statement which, when made, the maker (the representor) did not honestly believe to be true. In Derry V. Peek (1889) 14 App. Cas. 337, fraudulent misrepresentation was described as false statements "made (1) Knowingly, or (2) Without belief in its truth, or (3) Recklessly, i.e. careless whether it be true or false." If the representor honestly believes that what he is saying is true, the misrepresentation is not fraudulent. *In the case of Derry v. Peek (supra) the directors of a company, believing honestly that they were correct, issued a prospectus saying that the company ha*d the right to use steam power instead of horses. The respondent bought shares on the faith of this statement, which turned out to be untrue. It was held, that the misrepresentation was not fraudulent. 2\. Innocent Misrepresentation A representation is innocent if the representor honestly believes his statements to be true and consequently has no intention to deceive: Derry v Peek, supra. 3\. Negligent Misrepresentation A misrepresentation is negligent where a special relationship exists between the representor and the representee and the representor made the statement carelessly and in breach of a duty imposed on him by that special relationship to take reasonable care that the representation is true. Any special relationship is enough; it need not be, though more often it is, fiduciary in nature. *Hedley Bryne & Co. Ltd. V. Heller & Partners Ltd (1964) A.C. 465; \[1963\] 2 All E.R. 575* *The effect of misrepresentation is to make the contract voidable at the option of the aggrieved person.* ========================================================================================================= *B. DURESS AND UNDUE INFLUENCE* =============================== **Duress** Duress is a Common Law doctrine and means actual violence or threat of violence to the person, i.e. threats calculated to produce fear of loss of life or bodily harm. A threat to the goods of a person is not duress. Thus, in *Skeate v. Beale (1849) 11 Ad. & El. 983 it was held that a landlord's threat to sell the goods of his tenant was not duress. In **[FRIEDEBEG-SEELEY V. KLASS 1957 C.L.B 1482]{.smallcaps}** the* plaintiff was alone in her flat when she heard a knock at the door. The defendants entered and physically forced her to sign a receipt for a jewel case and its contents which they took away. When they had gone she found on the table a cheque for £90. It was held that the receipt was obtained by duress. The effect of duress is to make the contract **voidable**. Thus, in the Friedeberg-Seeley case above, having held that the transaction was vitiated by duress, the court set it aside. ***Undue influence*** Undue influence is a doctrine of Equity and arose because courts of equity regarded the common law doctrine of duress as too narrow. Courts of equity granted relief wherever a person was driven into a transaction by actual or presumed pressure. The substance of an allegation of undue influence therefore is that the complainant entered into the contract (or made a gift of property) without free consent, in that the other party exerted an influence over him which prevented him from exercising an independent judgment in the matter. Where there is no special fiduciary relationship between the parties, undue influence must be proved as a fact. Consequently, in such a relationship undue influence can only arise if actual pressure is applied. For example, there is undue influence by B over A if B presses A to pay or promise him some money by a threat of criminal prosecution against A or against A's spouse or close relative, in the case of ***[Williams v. Bayley (1866) L.R. 1 H.L. 20]{.smallcaps}*** (threat of criminal prosecution against A's son), or by a threat of destruction of A's property, or leakage of A's secret. The onus of proving pressure lies on the complainant. Where, on the other hand, a special fiduciary relationship exists between the parties, the application of pressure is presumed and need not be proved as a fact. In equity, a special fiduciary relationship arises in any situation where one person occupies a position of **dominance** over the other. In such a case Equity imposes on the dominant person a duty to be faithful to the confidence that is reposed in him by the other. The list of relationships which equity recognizes as being fiduciary, and therefore as giving rise to a presumption of undue influence is never closed, but it includes such relationships such as: Parent and Child, Guardian (i.e., person in loco parentis) and Ward, Spiritual Adviser (Pastor/Imam) and Disciple, Doctor and Patient, Solicitor and Client, Trustee and Beneficiary. Note that the presumption of undue influence does not apply between husband and wife as it is not possible in all cases to determine who the dominant person is. ***C. MISTAKE*** Mistake in law is a misunderstanding as to fundamental or material facts. It applies only to facts that are fundamental. Where a legal mistake occurs, its effect at common law is to make the contract absolutely void. A mistake which produces this effect is called an operative mistake. **Kinds of mistake** 1\. **Common Mistake** 2\. **Mutual Mistake** 3\. **Unilateral mistake** a. That there was no opportunity for him to verify the true identity of the person who dealt with him or, if there was such opportunity, that he took all reasonable steps to verify the identity. ***Documents mistakenly signed: Non est factum*** The general rule is that, in the absence of fraud, misrepresentation and operative mistake, a person is bound by a document to which he has put his signature, whether he read it or not and whether he understood it or not. (**[L'Estrange v. Graucob, supra]{.smallcaps}** A document signed in blank leaving the details to be completed by the other party is in the same position as an unread document. But the obvious injustice which results from this rule in some cases has led to some exceptions to it. The exceptions were at first restricted to blind persons and illiterate persons and to documents under seal (i.e. deeds). If a blind or illiterate person executed a deed, he could escape liability if he could show that the deed was fundamentally different in character from that which he contemplated. In the course of time the principle was extended to all types of written documents where, as ***Byles J.*** stated in **[Foster v. Mackinnon]{.smallcaps}(\[1869\] L.R. 4 C.P. 704 at 711** "the mind of the signer does not accompany the signature". This is what is called the plea of ***non est factum*** (meaning "this is not my deed"). The effect of the plea, if successfully made, is to render the document absolutely void. The cases in which the plea has been successfully made illustrate its obvious importance as a means of defeating fraud and avoiding injustice. Let us consider two examples. In [**Thoroughgood's case in 1582 (\[1582\] 2 Co. Rep. 9a),**]{.smallcaps} Mr. Thoroughgood's tenant, William Chicken, was in arrears of rent. He then produced a paper to Mr. Thoroughgood who was illiterate and, after incorrectly reading it to him as a document intended to release Mr. Chicken from all the arrears of rent, got him to sign and seal it. In fact the deed was a transfer of the land to Mr. Chicken who subsequently sold it to an innocent purchaser. It was held that the deed was void and that Mr. Thoroughgood remained the owner of his land. The cases in which the plea of *non est. factum* has been made establish two principal conditions which must be satisfied before the plea can succeed. These conditions are: 1. *The signer must have signed a document fundamentally or totally different in substance or in kind from that which he had intended to sign*. 2. *The signer must have signed without negligence*. *PRIVITY OF CONTRACT* ===================== ### Definition The doctrine of privity of contract states that a person who is not party to a contract cannot enjoy the benefits or suffer the burdens of that contract. Put in a different way, the doctrine states that rights under a contract can only be enforced by, and against, the actual parties to the contract. It follows from this doctrine that a stranger (i.e. a non-party) to a contract cannot sue or be sued on the contract. The case of **[Dunlop v. Selfridge \[1915\] A.C. 847]{.smallcaps}** illustrates the operation of the doctrine. The plaintiffs who were tyre manufacturers, sold a number of their tyres to ***Dew & Co***., on the terms that Dew & Co, would not re-sell them below certain listed prices and that, in the event of a sale to their customers, they would extract from the latter a similar undertaking. Dew & Co. sold the tyres to a firm called Selfridge, who agreed to observe the restrictions and to pay Messrs. Dunlop the sum of £5 for each tyre sold in breach of this agreement. Selfridge in fact supplied tyres to two of their own customers below the listed price. It is clear that this act of Selfridge amounted to a breach of their contract with Dew & Co. However, it was not Dew & Co., but Dunlop who sued Selfridge to recover the sum of £5 each as liquidated damages and for an injunction to restrain further breaches of the agreement. It was held that Dunlop was a stranger to the contract and could not sue on it. ### Exceptions to the Rule Though the doctrine of privity is now well established, its operation often caused hardship in practice, and many attempts have been made by common law, equity and statute to evade it. The attempts are as follows: 1. *Agency* Agency is a fiduciary relationship in which one party represents another in making of contracts or disposition of property. Under the law of agency, if A has made a contract with B, it is possible for C to take A's place and enforce the contract with B, if he can show that A was throughout the contract acting as C's agent. 2. Privity of Estate (*Certain covenants concerning land)* A covenant is a promise made in a document under seal, i.e. in a deed. Covenants in a lease of land granted by A to B bind successors in title of either party on the basis of "privity of estate." Similarly, under a principle known as the rule in **[Tulk V. Moxhay (\[1842\] 2 Ph. 774]{.smallcaps}** a restrictive covenant relating to the land and accepted by the purchaser as part of the contract of sale, will bind subsequent transferees of the land, although they are not parties to the original sale. 3. *Trust* If A and B, by contract, create a trust for the benefit of C, C has a property right in the trust property and can directly enforce his right, though he was not a party to the contract. A trust is a legal relationship in which one person (**trustee**) holds property for the benefit of another (**beneficiary**). The property can be real or personal property\--money, real estate, stocks, bonds, business interests or personal possessions. A trust arises from an agreement between an owner of assets and trustees in which the trustees undertake that they will administer the trust assets with the necessary care for the benefit of the beneficiaries. 4. *Statutory exceptions* The legislature has intervened, in a rather piecemeal manner, to provide some exceptions to the doctrine of privity. This has been notably so in the field of insurance. For example, under section 2(1) of Third Parties (Right Against Insurers) Act 1956 (Cap 196, Laws of the Federation of Nigeria 1990; the rights of an insured car owner against the insurance company are automatically transferred to the injured third party if the insured car owner becomes insolvent. Under section 11 of the Married Women's Property Act 1882 which is a statute of general application in parts of Nigeria, a policy of life insurance effected by a man for the benefit of his wife, or by a woman for the benefit of her husband or children, will create a trust in favour of the beneficiaries named in the policy, who may therefore enforce the policy. **DISCHARGE OF CONTRACTS** A contract is said to be discharged when the parties are freed from their mutual obligations under the contract. Discharge may occur in either of four ways: (a) By Performance; (b) By Express Agreement; (c) By Frustration; and (d) By Breach. A. **Discharge by Performance** **Exceptions to the general rule that partial completion of a contract does not entitle a party to payment** The general rule exemplified by [Cutter v. Powell]{.smallcaps} is subject to some exceptions 1\. Severable contracts 2\. Prevention of Performance 3\. Acceptance of Partial Performance 4\. Substantial Performance B. *Discharge by Express Agreement* C. ***Discharge by Frustration*** Examples of circumstances in which frustration will be held to occur are as follows: 1. If performance of a contract becomes illegal. Thus in **[Uzomah v. Uzomah (\[1965-66\] M.N.L.R.]{.smallcaps}** 88, a contract to erect a building on a designated site was held to be frustrated when the Lagos Executive Development Board, acting under its statutory powers, prohibited the erection of any building in the locality. 2. If the subject-matter of the contract is destroyed. In **[Taylor v. Caldwell (\[1863\] 3 B. & S. 826,]{.smallcaps}** the defendant had agreed to give the plaintiff the use of a certain hall and its adjoining gardens on four named days for purposes of holding concerts there. Just before the first of these days the hall was destroyed by fire. The plaintiff sued for damages for breach of the agreement. It was held that the contract was frustrated. 3. If either party to a contract for personal service dies, or becomes ill or is imprisoned as was the case in Robinson v Davies, these will be held to have virtually frustrated the contract. 4. If the whole basis of a contract is the occurrence of an event which does not occur 5. The outbreak of war could frustrate a contract if it affects its performance e.g. if it renders illegal all contractual obligations between citizens of the warring States. In **Stevenson & Sons Ltd v Aktfur Cartonnage Industries,** it was held that the outbreak of war between England and Germany automatically ended the agency contract. Effect of Frustration at Common Law At common law, the occurrence of the frustrating event "brings the contract to an end **forthwith**, and automatically the contract is terminated as to the future only. Unlike a contract vitiated by mistake, a frustrated contract does not become void *ab initio*. It becomes void only from the time of frustration. Therefore, from the beginning to the time of frustration the contract is valid. A discussion of the common law rule as to the effect of frustration must necessarily start with the rule in **[Chandler v. Webster 1904 1 K.B.493.]{.smallcaps}** In **Chandler v. Webster**, the plaintiff agreed to let a room to the defendant for the purpose of viewing the coronation procession of King Edward VII in 1902. The rent was £141.15s. Payable immediately. The defendant paid £100, but still owed £41.15s. When the contract was frustrated owing to the abandonment of the procession due to the sudden illness of the King the defendant sued to recover his £100. It was held that he not only had no right to recover, but he was also liable to pay the balance. (The right to the contractual sum had become vested before the frustrating event occurred). **Implication of the rule**: i. Only rights that have become vested or money which has become due and payable at the time of the frustration are enforceable. ii. Money which under the contract is payable in advance ceases to be so payable if the frustrating event occurs before it is due for payment. In **[Krell v. Henry (\[1903\] 2 K.B. 740]{.smallcaps}**, the plaintiff had agreed to let a room to the defendant for the purpose of viewing the coronation procession of King Edward VII on June 25. The rent was due for payment on June 24, but before that date the procession was cancelled owing to the sudden illness of the King. It was held that the plaintiff could not recover the rent as it did not fall due until after the frustration. The obvious hardship of the rule in ***Chandler v. Webster*** led the House of Lords to modify it in 1942 in the **[Fibrosa's case]{.smallcaps}** (\[1943\] A.C. 32. The case concerned a contract for the sale and delivery of machines. The contract price was £4,800 of which £1,600 was payable in advance. The purchaser paid £1,000 towards the advance payment. The contract then got frustrated owing to war. No machinery had yet been delivered to the purchaser, but the makers had done some considerable work already toward its manufacture. The purchaser requested for the return of the £1,000 already paid, but the manufacturers refused on the ground that they had done a considerable work on the machinery. Whereupon the purchaser sued in quasi-contract for the refund of his £1,000. The House of Lords held that he was entitled to recover the money because there had been a total failure of consideration. Their lordships emphasized that in quasi-contract, unlike in contract, consideration meant *actual benefit,* not just a promise. It should be noted that under the rule in ***Chandler v. Webster*** the purchaser would not only have lost the £1,000 but would have been bound to pay an additional £600 being the balance of the total amount due and payable before the frustration occurred. He would have done this even though he got no benefit at all from the contract. Two serious injustices, however, remained unresolved even under the rule in ***Fibrosa's* case:** First, the defendant who has done some work or spent some money in execution of the contract, gets nothing for his work or expenses so long as the benefit of his work or expenses has not actually passed to the plaintiff. Second, once the plaintiff gets any benefit, however small, he can no longer recover because there will then be no total failure of consideration. ***STATUTORY MODIFICATION IN STATES IN FORMER WESTERN NIGERIA AND IN LAGOS AND BENDEL STATES.*** The position in *Fibrosa's* case represents the law today in all States in the former Northern Nigeria and Eastern Nigeria with a modification under the laws of the states of the former Western Nigeria 1. Money paid before the frustrating event is recoverable, and money payable (that is, due for payment) before the frustrating event ceases to be so payable, but if the party to whom such money was paid or payable had incurred expenses before the time of the frustrating event in performance of the contract, the court may allow him to retain or recover the money "paid or payable", not exceeding the amount of the expenses. It should be noticed that if nothing was *paid or payable* before the frustrating event, he will not be able to get any expenses at all. 2. If one party has, by reason of anything done by the other in performance of the contract, obtained a valuable benefit (other than money) before the time of frustration, he can be ordered to pay such a sum as the court thinks just, not exceeding the amount of the benefits Finally, it is provided that where parties to a contract have stipulated their own position in the event of the frustration of a contract then the provisions of the statutes will not apply. 4\. ***Discharge by Breach*** A breach of contract occurs where a party fails to perform, or shows an intention not to perform, one or more of the obligations laid upon him by the contract. Where a party fails to perform one of his obligations on the date fixed for performance, the breach is called ***actual breach***, and this may take one of three forms: (a) non-performance; (b) defective performance; and (c) non-truth of a statement (i.e. misrepresentation) which is a term of contract. Where, on the other hand, a party before the date fixed for performance shows an intention not to perform; the breach is called ***anticipatory breach***. It may take one of two form: (a) express repudiation; and (b) implied repudiation, such as by the party putting himself in a position in which he cannot possibly perform. An example can be seen in the case of **[Frost v. Knight]{.smallcaps}** where Mr. Knight promised Miss Frost that when his father died he would marry her. While his father was still alive, Mr. Knight broke off the engagement. Miss Frost sued him and won, even though the time fixed for the actual fulfillment of the promise had not come. **REMEDIES FOR BREACH OF CONTRACT.** An action for damages is the one remedy which is available in every breach of contract. But there are other remedies besides damages which can also be claimed in various circumstances. A full list of all the principal remedies adds up to five, namely: 1. Damages 2. Rescission. 3. Specific Performance, 4. Injunction and 5. Quantum meruit. ***1. Damages*** The object of awarding damages for breach of contract is to put the injured party, so far as money can do it, in the same position as if the contract had been performed. A claim for damages raises two principal questions: a. Question of remoteness of damages: which means for what kind of damage should the plaintiff be compensated? b. Question of measure of damages: which means how much monetary compensation should the plaintiff receive in respect of the damage which is not too remote? ***2. Rescission*** The right of rescission is an equitable remedy and exists in a number of circumstances the effect in the case of misrepresentation and mistake is to terminate the contract *ab initio* as if it never existed and put the parties to the position in which they stood before the contract was entered into. On the other hand, rescission in the case breach of a condition only terminates the contract from the moment of rescission. Rights and obligations that have already matured are therefore not affected. It should be noted that the right to rescission, whether it arises from breach, mistake or misrepresentation, will be lost if the innocent party has affirmed the contract, that is , opted to treat it as subsisting, and also if rescission would in the circumstances deprive a third party of a right in respect of the subject-matter of the contract which he has acquired in good faith and for value. ***3. Specific Performance*** Specific performance is also an equitable remedy. It is a decree issued by the court ordering a defendant to perform a promise that he has made. Where a plaintiff claims specific performance the court has power to award damages either in substitution for, or in addition to, ordering specific performance. Specific performance is particular appropriate in the case of contracts for the sale or leasing of land. But it will not normally be granted \(a) If damages would be an appropriate remedy; \(b) In respect of contracts for personal service, as this will amount to compelling the defendant to work for the plaintiff or starve; \(c) In respect of contracts the performance of which would require constant supervision by the court; and \(d) In respect of obligations which lack mutuality in the sense that the decree could be available to either party, if the facts so required. ***4. Injunction*** An injunction is also an equitable remedy. It is a decree by the court ordering a person to do or not to do a certain act. In the law of contract an injunction can be used to restrain a party from committing a breach of contract. It will not be granted if its effect would be to compel the defendant to do something which he could not have been ordered to do by a decree of specific performance. An injunction may, however, be granted to restrain the breach of negative undertaking in contract of personal service, if its effect is merely to encourage, and not to compel, the defendant to perform a positive service. Thus, in ***[Lumley v. Wagner (\[1852\] 1 Dc G.M. & G. 604) and Warner Brothers Pictures Inc. v. Nelson (\[1937\] 1 K.B. 209]{.smallcaps}*** it was granted to restrain breach of an undertaking by a singer and a film actress respectively not to act for a third party during the period of their engagement by the plaintiffs. 5\. ***Quantum Meruit*** A party can claim on a quantum meruit ("as much as he deserves") in variety of circumstances of which the following are examples: a. Where work is done in partial performance of a contract which is severable or divisible. b. Where work is done under a contract by the default of the defendant. c. Where work is done under a void contract. d. Where a contract has been made for the supply of goods or services, and no precise sum has been fixed by the agreement. e. Where the defendant accepts partial performance by the plaintiff. **EXTINCTION OF REMEDIES.** The right of an injured party to sue on a breach of contract may be extinguished in two main ways: a. By a discharge or release agreement between the parties. This may be achieved through accord and satisfaction as already discussed. b. By lapse of time. Either under equitable doctrine of laches or by Statute of Limitation. ####