Introduction
A contract is any legally binding agreement between two or more parties. A contract defines and governs the rights and duties between parties in a transaction. A contract may be verbally made or written in a document.
A contract can also be formed via electronic messages such as emails or messages exchanged on Whatsapp, Instagram or other social media platforms in so far as offer is accepted and the parties have expressed an intention to create a contract in their correspondence. The foregoing is consistent with the decision of the Court of Appeal in Daspan v. Mangu Local Govt. Council (2013) 2 NWLR (Pt. 1338) 203.
In Obanye v UBN Plc (2018) 17 NWLR (pt. 1648) 375, the Supreme Court held that:
“Parties are bound by the terms of their contract. Therefore, if the conditions for the formation of a contract are fulfilled by the parties thereto, they will be bound. Unless it is established in evidence that a party was fraudulently led into an agreement, parties are bound by the written and express terms of their contract. In other words, in the absence of fraud, duress and undue influence or Misrepresentation, parties are bound by their contract”.
We have compiled below some grounds which a party can rely on in order to invalidate a contract.
What are the factors that can invalidate a contract?
Under Nigerian law, a contract is unenforceable if it has a vitiating element. Vitiating elements in a contract are mistake of facts, duress, illegality, undue influence, misrepresentation and incapacity.
The foregoing vitiating elements are explained below:
i. Mistake of Facts:
In Knight, FrankRutley v A.G Kano (1990) 4 NWLR (pt. 143) 210, the Court of Appeal held that:
“Where the subject-matter of a contract has, without the knowledge of either party ceased to exist or never existed before the contract was made the contract will as a general rule be void on ground of mistake”.
Mistake of fact in contract can be common mistake, mutual or unilateral mistake.
Please note that the defence of mistake may not avail a party who seeks to escape contractual obligation merely because he finds that the contract is no longer favourable or difficult to perform. In Econet Wireless Nigeria Limited v Econet Wireless Limited & Corporate Affairs Commission (2014) 7 NWLR (Pt. 1405) 1, the Court of Appeal reiterated the effect of mistake in a valid contract when it held that:
“Where parties have entered into a contract or agreement voluntarily, and there is nothing to show that same was obtained by fraud, mistake, deception or misrepresentation, they are bound by the agreement. This is because a party cannot ordinarily resile from a contract or agreement, just because he later found that conditions of the contract or agreement are not favourable to him”.
2 Duress
Duress is an intentional and wrongful of force or other kind of pressure exerted upon a person in order to forcethe person into a contract that he or she ordinarily would not enter into. Duress can be either physical or mental coercion, but the coercion must be to the extent that it deprives the other person of free will or freedom of choice. In other words, a person under duress is left with no reasonable alternative other than to enter the contract.In Oilserv Ltd. v. L. A. I. CO. (Nig.) Ltd. (2008) 2 NWLR (Pt. 1070) 191, the Court of Appeal held that only a natural person can claim duress, not a corporate entity.
3 Undue Influence:
Please note that a party who enters into a contract under duress must take steps to repudiate the contract within a reasonable time after the duress has ceased. Failure to act promptly will deny him the defence of duress and the contract will be binding on him or her.
Undue influence is the improper use of a position of power to pressure a party to enter into a contract. This usually occurs where a party in a contract who has an advantage over another party, uses such advantage against that other party.
It is important to note that persuasion alone is not undue influence. In order to be undue influence, the persuasion must amount to excessive pressure that affects a person’s freedom of choice.
In First Bank of Nigeria Plc v Funso Akinyosoye [2005] 5 NWLR, (pt. 918) 340, the Court of Appeal set outthe ingredients of an undue influence in a contract when it held thus:
“To maintain the plea of undue influence, the party concerned must apply timeously to avoid the contract and must not be guilty of undue delay. In other words, with the equitable nature of the doctrine, same must not be caught up by laches and acquiescence. The maxim “vigilantibus et non-dormientibus lex succurrit” (Equity aids the vigilant and not the indolent) is apt. There is need to promptly seek the relief within a reasonable time after the removal of the influence. In other words, a conscious delay presupposes a satisfaction and confirmation of the transaction, which initially was voidable”.
4 Illegality
Generally, a court will not enforce a contract, which is illegal or contrary to public policy. Illegal contracts are those prohibited by law and there are penal sanctions for entering into them. Examples of Illegal contracts may be a contract to commit crime or giving a loan for interest without a money lender’s licence.
The Supreme Court in Olowu v Building Stock Limited [2018] 1 NWLR (pt.1601) 343 held as follows:
“A Contract is illegal if the consideration or the promise involves doing something illegal or contrary to public policy or if the intention of the parties in making the Contract is thereby to promote something which is illegal or contrary to public policy. And an illegal Contract is void and cannot be the foundation of any legal right. When the object of either the promise or the consideration is to promote the committal of an illegal act, the Contract itself is illegal and cannot be enforced. A Contract is illegal where the subject matter of the Contract is illegal or where the consideration or any part of it is illegal.”
An illegal contract cannot be enforced in Nigeria, no matter the loss a party will or has suffered under the contract. In ACB Limited v Alao [1994] 7 NWLR, Pt 621, the Court of Appeal sitting in Lagos Judicial Division held thus:
“It is settled law that where the contract which the plaintiff seeks to enforce whether express or implied is expressly or by implication forbidden by law, no court will lend its assistance to give it effect.”
5 Misrepresentation:
A misrepresentation is a false statement of fact or law which induces the other party to enter into a contract. It is important to know that such statements must have been made before (not after) the contract is entered intoand such statement must be false and must have induced the other party to enter the contract.
The Court of Appeal in Dantata Jnr. V Mouktar & Ors [2012] 14 NWLR, (pt. 1319) 122 held as follows:
“A misrepresentation is an unambiguous false statement of existing fact. A statement of intention is not a statement of fact. A person who fails to carry out his stated intention does not thereby make a misrepresentation”.
There are 3 types of misrepresentation, namely:
Fraudulent misrepresentation is a false statement made knowingly, or recklessly, whether it is true or false.
Negligent misrepresentation is usually found when the party who made the statement cannot prove that they had reasonable grounds to believe that the statement was true. Please note that misrepresentation cannot be regarded as negligent and, therefore, giving rise to liability on the part of the representator unless he owes a duty of care to the representee.
Innocent misrepresentation is neither fraudulent nor negligent. It is made without any belief in its truth.
It is important to note that the above types misrepresentation have different effects and give rise to different rights under Nigerian law. In Mohammed v Mohammed [2012] 11 NWLR (pt 1310)1, the Court of Appeal held as follows:
“There are various species of Misrepresentation. Each type gives rise to different remedies. Fraudulent Misrepresentation can entitle the representee to rescind the contract while other types of Misrepresentation merely give rise to an action for damages”.
6 Incapacity:
A contract may be unenforceable if entered into by persons who have no capacity under Nigerian law. These persons include minors, insanity, intoxicated person, etc.
What must a party seeking to nullify a contract do?
It is important to note that every party to a contractual dispute is responsible for the quality of case he or she puts forward in the courtroom. A party seeking to invalidate a contract must plead relevant facts and lead evidence on the reasons why the Court should nullify the contract.
However, the defence of illegality is given special consideration in that the court may decline to enforce an illegal contract even if the parties fail or omit to plead facts or lead evidence relating the illegality. In other words, where unpleaded facts are revealed in evidence which show that the contract is patently illegal or void, the court should decline to enforce the contract, if satisfied that all the relevant facts are before it.
For instance, in Ajaokuta Steel Co. Ltd, v. Corp. Ins. Ltd. (2004) 16 NWLR (Pt. 899) 369, where parties entered into an insurance contract without paying insurance premium, which is illegal under the Insurance Act, the Court of Appeal held that where a contract is on the face of it illegal or void, the court would take notice of that fact and refuse to enforce the contract even though the vitiating fact has not been pleaded and notwithstanding that the defendant does not wish to raise the objection.
