Contract in Law: Definition and Classifications (NG)

N.B. This article is particular to Nigeria.

Definition of Contract

A contract can be defined as an agreement which the law will recognize as affecting the legal rights and duties of parties. Tobi JCA defined contract thus: “An agreement between two or more parties which creates reciprocal legal obligations to do or not to do particular things”. 

Also, in (Akinyemi v. Odu’A Investment Co. Ltd), the Supreme Court defined contract according to black’s law dictionary thus:

“An agreement between two or more parties creating obligations that are enforceable or otherwise recognizable under the law”

BARGAIN

As there is freedom of contact, there is also the freedom to bargain which involves Negotiations where both parties presents what he has to the table. Negotiation is necessary in order for both parties’ minds to meet otherwise known as Consensus ad idem. In (Bilante Nigerian Ltd v. Nigeria Deposit Insurance, the court held that: Contract between parties, there must be a meeting of the mind often referred to as consensus ad idem”

Furthermore, before a contract is made, it is always preceded by some forms of bargain by the parties. The court held thus in (Enuga Bawe v. O.B.C Limited):

“…where negotiations is in progress between the parties intending to enter into a contract, the whole of the negotiations must be considered as to determine whether or if not at all, the contract came into being”

In any given case, parties to a contract are at liberty to determine the terms of the contract. In (Nigerian Ports Authority Plc v Lotus plastic Ltd & Anor), the Supreme Court held:
“Parties are free to negotiate the term of their relationship“

However, as the law provides for freedom of contract there is also the sanctity of contract which means contracts are meant to be respected or hallowed. A breach of contract attracts punishment of specific performance or awarding of damages to be paid by the one who breaks the terms of the offer.

It is also noteworthy to mention that every contract is an agreement but not all agreements are contracts.

CLASSIFICATION OF CONTRACTS

The following are classifications of contracts:

1. FORMAL CONTRACT

A formal contract is always in writing. It is also known as contract under Seal or deed. It is executed and given full legal effect by the signing, Sealing and delivering of it by the party executing it.

The seal is the most important feature of a formal contract. It is known as authentication. Historically in Red Wax. Once this is done it become binding on the party who prepares the contract. In (Awojugbagbe light Ind. Ltd v. Chinuawe), the supreme court opined that:

“A deed is binding on the maker of it, even though the parts have not been exchanged, as long as it has been signed sealed and delivered”

A formal contract is useful on land matters.

2. SIMPLE CONTRACT

On the other hand, these are contracts other than a formal contract. The major distinguishing factor between a simple contract and a formal contract is the seal. A simple contract can be in written or oral form (parole). Only a person who has furnished consideration can enforce a simple contract.

In (Odutola v Paper Sack Nig. Ltd), the Supreme Court held that: “A party alleging an oral agreement is duty to prove such agreement to the hilt’’

3. EXPRESS AND IMPLIED CONTRACTS

An express contract is one whose terms or contents are clearly and specifically stated and agreed upon by the parties.
Implied contact on the other hand is that type of contract which its terms are not expressly stated. The court therefore determines in this case whether there is a contract or not considering the conducts of the parties.

In (Brodgen v Metropolitan Railway Co), the defendant was held bound by a contract with the plaintiff in spite of the fact that the defendant failed to sign the document containing the contract. It was established that both parties had been acting on the terms of the unsigned contract over a reasonable period of time.

4. BILATERAL AND UNILATERAL CONTRACT

Bilateral contract is simply exchange of promise between parties. The offeror promises to do something or refrain from doing something in exchange for what the offeror promises to do in return. The consideration on both sides is known as Executory consideration. In Amana Suits Hotels Ltd v. PDP:

“A Bilateral contract consists of the offeror promising to do something else in exchange for the offeree promising to do something in return”

UNILATERAL CONTRACTS on the other hand exists where the consideration consists of an actual performance in return for a promise. The offeror makes a promise and becomes bound by the promise. The offeree is at liberty whether or not to do his own part. Once he does his own part, the offeror must fulfill his promise.

In the famous and celebrated case of Carlill v Carbolic Smoke ball Co. (1892), an advertisement was
made in the newspaper by the defendant to pay 100 euros to anyone, who uses a smoke ball as prescribed
and still succumbed to influenza … The Court of Appeal held that an advertisement which promised certain reward for the performance of certain terms constituted a unilateral offer which can be accepted by anyone who performs the terms.

Contributor: Adedokun Samuel (partly edited by Inioluwa Olaposi)