LAW AND BUSINESS TIPS: ESSENTIAL ELEMENTS OF A CONTRACT

By essential elements of a contract, it means those factors which give validity to a contract. They are the features that must be present in a contract before such a contract could be valid.

In OJO V. ABT ASSOCIATES INCORPORATED & ANOR (2014) LPELR-22860 (CA) it was held that there are five important elements that must be present in a valid contract. These are offer, acceptance, consideration, intention to create legal relationship and capacity to contract. It has further been held in ORIENT BANK (NIG) PLC V BILANTE INT'L LTD (1997) 8 NWLR (PT. 515) 37 AT 76 that all the five attributes must be present for a contract to be valid in law. In other words all the five ingredients must co-exist as a contract cannot be formed if any of the ingredients is absent.

OFFER: In GTB PLC. & ANOR V. ANYANWU, ESQ. (2011) LPELR-4220(CA) it was held that an offer is a proposal that emanates from the offeror to the offeree to enter into an agreement to do or not to do a particular thing. The starting point of a contract is the offer.

A valid offer must be precise and unequivocal giving no room for speculation or conjecture as to its real content in the mind of the offeree. An offer capable of being converted into an agreement by acceptance must consist of a definite promise to be bound provided certain specific terms are accepted.

ACCEPTANCE: An acceptance is the reciprocal action of the offeree to an offer in which he indicates his agreement to the terms of the offer as conveyed to him by the offeror. It is a final and unqualified expression of assent to the terms of an offer. See RABILU V. USMAN (2016) LPELR-40233 (CA). In OBAIKE VS BENUE CEMENT COMPANY LTD (1997) 10 NWLR (PT.525) 435 it was held that an acceptance must correspond precisely with the terms proposed in the offer. It is the act of compliance with the terms of the offer.

Acceptance must be a clear and unequivocal assent to the terms of an offer as conveyed or spelt out by the offeror, without variation. See UNION BANK OF NIGERIA LTD V. OZIGI (1991) 2 NWLR (PT.176) 677. A conditional or qualified acceptance of an offer cannot give rise to a binding agreement between the parties. See OKUBULE VS OYAGBOLA (1990) 4 NWLR (PT.147) 723.

CONSIDERATION: Consideration under the law of contract may be described as some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. See GAJI V. PAYE (2003) 8 NWLR (PT.823) PG.583. In law, parties to a contract are free to conclude their bargain on whatever terms are deemed to be appropriate. Once the consideration is of some value in the eyes of the law, the Courts have no jurisdiction to determine whether it is adequate or inadequate. In principle therefore, no consideration is too small or too much or unfair in the absence of fraud, duress or misrepresentation. See AFRICAN PETROLEUM LTD. V. OWODUNNI (1991) 8 NWLR (PT.210) PG.391.

INTENTION TO CREATE LEGAL RELATION: This means that the parties to a contract must intend to enter into a legally binding agreement wherein the rights and obligations of the contract are enforceable. Intention to create legal relation is a matter of state of mind and as such it may be difficult to ascertain. However, there are certain rules being used by the courts to determine whether parties intend that their relationship should be legally binding as a contract or not. One of such rules is that as a general rule, commercial or business agreements are presumed to be legally binding and enforceable. But this presumption is rebuttable as was held in SAPARA V. UCH BOARD OF MANAGEMENT (1988) LPELR-3014 (SC). Also as a general rule, social or domestic agreements are presumed not to be legally binding and enforceable as was held in BALFOUR V BALFOUR (1919) 2 KB 571. This presumption is also rebuttable.

CAPACITY TO CONTRACT: This is the legal competence of a person to enter into a valid contract. Certain classes of people do not have the legal competence to enter into a binding agreement.

An Infant: In common law, an infant is a person under the age of 21 years. However, under the Child Right Act/Laws, an infant is a person below the age of 18 years. An infant does not have the legal competence to enter into a valid contract. A contract entered into by an infant is voidable at the instance of the infant. However, a contract for necessities like food, shelter etc. is binding on an infant.

A Lunatic or a Person of Unsound Mind: Like an infant, a lunatic does not have the legal capacity to enter into a contract. A contract entered into by a lunatic is voidable at his instance. Contracts for necessities are also binding and enforceable against a lunatic. Also a contract made by a lunatic during his lucid period is binding on him.

A Person under the Influence of Alcohol or Drug: Where a contract is entered into with a person under the influence of alcohol or drug, the contract is voidable at the instance of such a person. But if it can be proved that the person was sober during the contract; then it would be binding on him. Also contracts for the sale of necessaries are enforceable whether or not he is sober.

Thus, only an adult of sound mind has the legal competence to enter into a valid contract. Also, it should be noted that an illiterate or a blind person has the legal competence to enter into a valid contract. However, the provisions of Illiterate Protection Act/Laws must be complied with in a contract entered into by an illiterate or a blind person.

In conclusion, it is a firmly established principle of law that before any contract or agreement can be said to have come into existence, the parties to the agreement must be in consensus ad idem as regards the terms and conditions freely and voluntarily agreed upon by them. That is to say there must be meeting of minds. See AMANA SUITS HOTELS LTD V PDP (2007) 6 NWLR (PT. 1031) 453 AT 484.

Jimoh Mokanreola Bamigbola

M.J.B. BAMIGBOLA & CO.

mjbbamigbolaandco@gmail.com