LAGOS STATE UNIVERSITY

FACULTY OF LAW

DEPARTMENT OF BUSINESS LAW

BUL 307

(BUSINESS LAW FOR NON- LAW

STUDENTS)

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COURSE OUTLINE

1. Nigerian Legal System

2. Contract

3. Agency

4. Sales of Goods

5. Hire Purchase

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 NIGERIAN LEGAL SYSTEM
Definition of Law
Law is commonly understood as a system of rules that are created
and enforced through social or governmental institutions to regulate conduct. It could
also be described as the principles and regulations established in a community by some
authority and applicable to its people, whether in the form of legislation or of custom and
policies recognized and enforced by judicial decision.
Classification of Laws
1. Public and Private Law: Public Law can be defined as that aspect of Law that deals
with the relationship between the state, its citizens, and other states. It is one that
governs the relationship between a higher party — the state — and a lower one, the
citizens. Examples of public law include Constitutional Law, Administrative
Law, Criminal Law, International Law and so on. Private law, on the other hand, is that
category of the law that concerns itself with the relationship amongst private citizens.
Examples include the Law of Torts, the Law of Contract, and the Law of Trust and so
on.
2. Civil Law and Criminal Law: Civil law in this regard can be defined as the aspect of
Law that deals with the relationship between citizens and provides means for remedies
if the right of a citizen is breached. Examples of civil law include the Law of Contract,
the Law of Torts, Family Law etc.

Criminal Law, on the other hand, can be referred to as that aspect of Law that regulates
crime in the society. It punishes acts which are considered harmful to the society at
large. An example of criminal law is the Criminal Code Act which is applicable in the
Southern part of Nigeria.

When treating a criminal case, the standard of proof to be used is proof beyond
reasonable doubt; S.135 Evidence Act 2011. Also, the burden of proof does not shift
from the prosecution. What this means is that before a conviction can be gotten, the
state has to prove the commission of the crime to be beyond reasonable doubt.

On the other hand, in civil cases, the standard of proof is on the balance of
probabilities; S.134 Evidence Act 2011. Also, the burden of proof shifts between both
parties when they need to establish their case. Judgement normally goes in favour of
the particular party that has been able to prove its case more successfully.

3. Substantive and Procedural Law: Substantive Law is the main body of the law
dealing with a particular area of law. For example, the substantive law in relation to
Criminal Law includes the Criminal Code Act and the Penal Code Act.

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Procedural law, on the other hand, is law in that deals with the process which the courts
must follow in order to enforce the substantive law. Examples include the rules of the
various courts and the Administration of Criminal Justice Act 2015, which is the
procedural law in relation to the Criminal Code Act and the Penal Code Act.

4. Municipal/Domestic and International Law: Municipal/Domestic law is the aspect

of law which emanates from and has effect on members of a specific state. An example
of a municipal Nigerian law is the Constitution of the Federal Republic of Nigeria
1999(as amended) which applies in only Nigeria.

International law, on the other hand, is the law between countries. It regulates the
relationship between different independent countries and is usually in the form of
treaties, international customs etc. Examples of International law include the Universal
Declaration of Human Rights and the African Charter on Human and People’s
Rights.

It should be noted that according to the provision of S.12 of the 1999 Constitution (as
amended) International treaties cannot have the force of law in Nigeria except they are
enacted by the Nigerian National Assembly.

5. Written and Unwritten Law: A law would not be regarded as written just because it
is written down in a document. Written laws are those laws that have been validly
enacted by the legislature of a country.

Unwritten laws, on the other hand, are those laws that are not enacted by the
legislature. They include both customary and case law. Customary Law as part of its
basic characteristic is generally unwritten. Case law, though written down in a
documentary format, would be regarded as unwritten law based on the fact that it is not
enacted by the legislature.

An example of this is the good neighbour principle established in the case

of Donoghue vs. Stevenson. The principle posits that manufacturers of products
should take utmost care in their manufacturing activities to ensure that the consumption
of their product doesn’t result in harm to the consumer. This principle is not enacted in a
statute but is a case law which is applicable in Nigerian Courts.

Meaning of Nigerian Legal System

Legal system means, the laws, courts, personnel of the law and the administration of
justice system in a given state, country or geographical entity. Therefore, Nigerian legal
system is the laws, courts, personnel of the law and the administration of justice in

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Nigeria.1 Nigerian legal system consists of the totality of the laws or legal rules and the
legal machinery which obtain within Nigeria as a sovereign and independent African
country.2
All over the world, even in the freest societies, there are laws, rules and regulations and
a system of enforcement and sanctions put in place to guide persons and bodies in the
overall interests of everyone and society in general. Without law and law enforcement
system, society would be in disorder.3
Sources of Nigerian Legal System
1. The Received English Law
Upon the creation of the colony of Lagos in 1862, one of the first steps taken by the
British Colonial Administrators was to introduce into the territory, the main body of
English law.4 The Colony, Protectorate of Southern Nigeria and Protectorate of Northern
Nigeria were amalgamated on January 1, 1914 to form the Colony and Protectorate of
Nigeria.5 After the amalgamation of Nigeria, the application of English law was extended
to the whole of Nigeria. The received English law was made up of the Common law, the
doctrines of equity and the statutes of general application that were in force in England
on the 1st day of January 1990.6
a. Common Law
The English common law, originally known as commune ley in Law French is that part
of the law of England that was formulated, developed and administered by the old
common law courts7 and originally based on the common customs of the realm. 8
Common law is known and called as such as a result of the fact that the law is common
to all parts of England Wales. It is law that grew over time from the practices and
customs which were common to the people of England and Wales. Therefore, common
law is the general custom of the people of the United Kingdom. Common law is largely
unwritten as opposed to statutory law which is codified.9
Common law could be seen as a formulation of Her Majesty’s courts based on the
prevailing customs and practice of the generality of the people and designed to meet
the demands and challenges of changing situations.
However, with the possession of the qualities of a good law, new problems arose;
common law was inflexible and worked hardship in some cases, whilst it did not even
provide redress for litigants in other instances, as it was inadequate to meet all legal

1
Ese Malemi, The Nigerian Legal System: Text and Cases, (4th Edition, Princeton Publishing Co., 2012) p. 2.
2
C.O. Okonkwo, ed., Introduction to Nigerian Law (London, Sweet & Maxwell, 1980) p.40.
3
Supra note 3 at p.3.
4
T.O. Dada, General Principles of Law, 1994, pg.12.
5
Supreme Court Act, No. 6 of 1914.
6
Olufemi Soyeju, Nigerian Law of Business Transactions (Goshen Publishers, 2008) p. 15.
7
The Court of Exchequer, the Court of Common pleas and the Court of King’s (or Queen’s) Bench.
8
J.O. Asein, Introduction to Nigerian Legal System (2nd Edition, Ababa Press Ltd., 2005) p. 102.
9
Supra note 1 at 47.

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problems. The growth of common law was fast, however by the fourteenth century,
common law had begun to slow down and become inelastic due to various
inadequacies. The main inadequacies of common law include:
i. Common law was much concerned with procedure and technicalities rather
than real justice.
ii. Common law writs and claims were expensive
iii. Long delays for different reasons in the prosecution of actions
iv. Complaints by parties about bribery, corruption and oppression in the
common law courts perpetrated by the court personnel.
v. Common law did not have a writ, a head of claim, or law for many causes of
action or wrongs and so it did not grant relief or remedy in certain actions.
vi. Common law did not recognise the institution of trusts and the rights of a
beneficiary in trust property.
vii. Common law remedies were inadequate to redress the wrongs and solve the
grievances of litigants.10
The above inadequacies of common law gave birth to the doctrine of equity.
b. Equity
Common law with its inadequate writ system and technicalities was anything but
satisfactory and most litigants went away disappointed without obtaining any redress.
While contending with the unavailability of remedies or suitable writs, litigants also had
difficulties enforcing judgments obtained against powerful and influential defendants.
Such dissatisfied litigants were compelled to petition the Crown, as the fountain of
justice, to exercise his prerogative. These petitions were considered by the King’s
Council comprising principal officials including the Chancellor who was indeed the
King’s Confessor and a key member of the Council. With time it became customary to
channel the petitions through the Chancellor to deal with, as he deemed appropriate in
the overall interest of justice and fairness. Later, the Chancellor received such petitions
directly from complainants and resolved them in his own court- the Court of Chancery. 11
Those judgments given by the Chancellor later became known as ‘equity’.
Equity means fairness, natural justice and good judgment. In another sense, equity
means those rules of fairness, natural justice and moral rightness which were formed by
the Lord Chancellor and Chancellors in the Court of Chancery, as the ‘keeper of the
King’s conscience’ to temper the rigidity and defects of the common law and do justice
on behalf of the king, to those who appealed against the defects of the common law.
Equity simply means the rules of fairness formed and administered by the Court of
Chancery to supplement common law in order to do justice.12
Maxims of Equity

10
Ibid, p. 52.
11
Supra note 8 at 105.
12
Supra note 1 at 49.

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The maxims of equity are the basic principles around which equity has developed and
by which it intervenes to do justice. The maxims of equity are the essential rules and the
reasonings of equity. The common maxims of equity are as follows:
1. Equity acts on the conscience13
2. Equity does not suffer a wrong without a remedy14
3. Where there are equal equities, the law prevails15
4. Where the equities are equal, the first in time prevails16
5. Delay defeats equity17
6. Equitable remedies are discretionary18
7. He who comes to equity must come with clean hands19
8. Equity aids the vigilant and not the indolent20
9. Equity like nature does nothing in vain21
10. Equality is equity22

c. Statutes of General Application

Statutes of general application that were in force in England on the 1 st day of January
1900 form the third group of laws received under the relevant reception clauses. The
courts are saddled with the responsibility of ascertaining and applying those statutes
that meet the laid down criteria for application under the general provision. This group of
received English law does not, however, apply in states of the old Western Region by
virtue of the Law of England (Application Law) of 19549. 23 A statute is of general
application in England on January 1, 1990, if at that date the statute was either applied
by all civil or criminal courts in England or applied to all cases of persons in England.
Where a statute applied to only certain classes of the English society or was applied by
only certain courts, it was usually held that it was not a statute of general application
and therefore inapplicable generally in other countries and protectorates that made up
the British Empire, now known as the Commonwealth.
2. Customary Law
There is no universal definition of customary law. In fact, different terms, such as ‘native
law and custom’, ‘native law’, ‘native customary law’ and ‘local law’, have been used
interchangeably to refer to this class of laws. 24 Customary law consists of customs
accepted by members of a community as binding among them. 25 Customary law is the
13
See the case of NICON v Power & Ind. Eng. Co. Ltd (1986) 1 NWLR Pt 14, p. 1 SC.
14
See Ashby v White (1703) 1 ER 417
15
See Rice v Rice (1854) ER 646.
16
See Cave v Cave (1880) 15 Ch.D 639.
17
See Aadebanjo v Brown (1990) 3 NWLR Pt 141, p. 611 SC.
18
See Merchant Bank Ltd v Fed. Minister of Finance (1961) All NLR 623.
19
See Gill v Lewis (1956) 2 QB at 13-14, 17.
20
See Mills v Haywood (1877) 6 Ch.D 196.
21
See Awolowo v Minister of Internal Affairs (1962) LLR 177.
22
See Ipaye v Aribisala (1930) 10 NLR 10.
23
Supra note 8 at 107.
24
Supra note 8 at 114.
25
Akintunde Obilade, The Nigerian Legal System (Spectrum Law Series, 2011) p. 83.

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law of the various indigenous peoples of Nigeria, before other systems of law, English
or otherwise, came into the country to displace or modify customary law as the case
may be.26
Customary law or native law was and custom and its enforcement system was the only
legal system that existed among the indigenous peoples and communities, long ago,
before the colonialists, and other religions and systems of law came and took root in the
area known today as Nigeria.
Characteristics / Features of Customary Law
1. Customary law is current, dynamic and adaptable27
2. Customary law has the capacity to adjust to changing circumstances, thereby
absorbing the strain of dynamism to comply with the demands of a developing
society.28
3. Customary law is generally unwritten.29
4. It is flexible or elastic.30
5. It enjoys general application among the people
6. It is accepted as a binding custom
Validity and Application of Customary Law
Every rule of customary law, even after it has been established as accepted in the
community concerned, must necessarily meet the statutory requirements laid down for
its applicability. Each law providing for the recognition and application of native law and
custom contains a further qualification that is shall not be enforced as law if it is
repugnant to natural justice, equity and good conscience or incompatible, either directly
or by its implication, with any law for the time being in force. 31 Section 18 (3) of the
Evidence Act32 provides that the custom must be in accordance with natural justice,
equity and good conscience and also adds a new requirement that it must not be
contrary with public policy.
1. The repugnancy test
2. The incompatibility test and
3. The public policy test.
Repugnancy Test
The repugnancy test is one of the tests which a custom must satisfy before it is
applicable and thereby enforced by a court of law in Nigeria. This test require that for a
customary law to be declared as valid and enforceable by an court in Nigeria, such
customary law should not be repugnant to natural justice, equity and good conscience.
26
Supra note 1 at 64.
27
Lewis v Bankole (1908) 1 N.L.R. 81, per Speed, Ag. C.J., at 83.
28
Agbai v Okabue (1991) 7 N.W.L.R. 391, per Nwokedi, J.S.C at 417.
29
Rotibi v Savage (1994) 17 N.L.R. 117.
30
Balogun v Oshodi (1929) 10 NLR 36 at 57.
31
See for instance Section 20 (1) of the Cross River State High Court Law.
32
Also Section 14 (3) of the Old Evidence Act.

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In the case of Edet v Essien,33 the court held that a rule of customary law which gives
the custody of a child fathered by a husband to another, merely because the dowry paid
by that other had not been returned, was repugnant to natural justice, equity and good
conscience.
The Incompatibility Test
The incompatibility test requires that where a situation is governed exclusively by any
law or statute for the time being in force, then customary law is to give way for such law
to take effect. In other words, the rules of customary law should, for instance, not clash
with the provisions of the Nigerian Constitution, nor with any statute, or any law for the
time being in force in such community in Nigeria. In the case of Re Effiong Okon Ata,34
a custom which granted the head of a house the right to administer the personal estate
of a former slave who died intestate, on the ground of such slavery, was incompatible
with laws for the time being in force, including the Slavery Abolition Ordinance No. 35 of
1916 and was also contrary to natural justice, equity and good conscience.
In the case of Mojekwu v Mojekwu,35 a rule of customary law which precludes
daughters from inheriting in their father’s property was held repugnant to natural justice,
equity and good conscience, and also null and void for being incompatible and contrary
to the fundamental right to freedom from discrimination guaranteed under the Nigerian
Constitution.36
The Public Policy Test
Public policy means public welfare, public good and public interest. It can also mean the
security and welfare of the individual and the state in general. The security and welfare
of the people is the primary and whole purpose why government is established. For a
customary law to be enforceable in court it must not be contrary to the welfare of any
individual and it must not compromise the security of lives and properties of the
members of the community. In the case of Okonkwo v Okagbue,37 an alleged custom
whereby a woman married a dead man, nominally in order to bring forth children for
him, in his name was held to be contrary to public policy. Also, in the case of Helen
Odigie v Iyere Aika38 a custom of woman to woman marriage was held to be odious,
outrageous and contrary to public policy as the practice will not promote the security
and welfare of the parties involved.
3. Statute
A Statute is a law passed by a legislative body of the government. It is any positive
enactment to which the State gives the force of a law, whether or not it has gone
through the usual stages of legislative proceedings or has been adopted in other modes
expressing the Will of the people or other sovereign power of State.
33
(1932) 11 NLR 47.
34
(1930) 10 NLR 65.
35
(1997) 7 NWLR Pt 512, p. 283 CA.
36
See for instance Section 42 of the 1999 Constitution of Nigeria.
37
(1994) 9 NWLR Pt 368, p.301.
38
(1985) 1 Nigerian Bulletin of Contemporary Law p.51.

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Forms of Statute
The principal forms of statutes are:
(a) Ordinances
Ordinances are imperial laws enacted before independence. Ordinances, which were
still in force at Independence have been designated: ‘Acts’ (Designation of Ordinances
Act, 1961)
(b) Acts
Act of National Assembly means any law made by the National Assembly and includes
any law, which takes effect under the provisions of the Constitution as an Act of the
National Assembly. With effect from 1st October 1960, any law made by the federal
legislature became known as Acts. They are enacted I democratic regimes.
(c) Laws
Laws enacted or having effect as if enacted by the legislature of a state of the
Federation. They are enacted I democratic regimes.
(d) Decrees
Decrees are laws promulgated by the Federal Military Government. Decree 107 of 1993
defines it as “an instrument made by the Federal Military Government and expressed to
be, or to be made as, a Decree”
(e) Edicts
Edict is law made by Executive Council of a State of Federation and any instrument
having the force of law made thereunder. (f) Subsidiary Legislation Laws made under
the authority of statutes, order, rules or regulation made in exercise of powers conferred
by an Act. It includes orders and regulations made by Ministers or Commissioners in
exercise of legislative authority.
4. Judicial Precedent
Judicial precedent may mean a decided case that furnishes a basis for determining later
cases involving similar facts or issue. It is a judicial decision, which contains in itself a
principle considered as establishing a rule or authority for the determination of an
identical or similar case afterwards arising, or of a similar question of law. It is also
called Case Law or Judge-made Law.
There are several other sources of the Nigerian legal system and they are classified as
secondary sources. They include textbooks, dictionaries, bibliographies, newspapers,
journals, conventions, law reports etc.
The court system in Nigeria

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The judicial powers of the Federation are vested in the courts established for the
Federation. In the same way, the judicial powers of a state are vested in the courts
established for a state, subject as provided by the Constitution. Judges play vital role in
societies including sustaining peace and order, defence and maintenance of the Rule of
Law, interpretation of statute, to uphold fundamental human rights, to determine justice.
The court system is divided into two: superior courts of record and inferior courts of
record.
Superior courts are courts of unlimited jurisdiction. Generally nothing shall be intended
to be outside the jurisdiction of a superior court except that which specially appears to
be so specified. They exercise supervisory jurisdiction over inferior courts and for that
purpose, may make prerogative orders of certiorari, mandamus and prohibition; and
injunction. They are The Supreme Court of Nigeria, The Court of Appeal, The High
Courts (Federal and States), The Sharia Court of Appeal (Federal and States), The
Customary Court of Appeal (Federal and States) and other courts so designated by the
National or State House of Assembly.
Every court which is not a superior court is an inferior court. Examples are magistrate
courts, coroner’s courts, juvenile welfare courts etc.
The Supreme Court
The Supreme Court is the highest court of the land. It hears and determines disputes
the federation and a state; between two or more states of the federation; between the
House of Assembly of a state and the national assembly; between the houses of
assembly of different states; and between the President and the national assembly.
The Court of Appeal
This is the court next to the Supreme Court in rank. It hears and determines questions
as to whether or not the President was validly elected; whether or not the office of the
President has become vacant; and whether or not the term of office of the President has
elapsed.
The Federal High Court
This court determines disputes relating to copyright, admiralty, financial institutions,
aviation, drugs and poisoning, companies, federal agencies etc.
The High Court of a State
This is a court with enormous powers. It hears matters and determines disputes
pertaining to the civil rights, liabilities and obligations of individuals.
The National Industrial Court
This is a court created to hear matters relating to industrial disputes. Matters involving
labour, strike, wage dispute, trade union, trade disputes, employment, workman
compensation etc. are entertained at the Industrial court.

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 LAW OF CONTRACT
What is Contract?
Simply put, a contract can be described as a legally binding oral or written agreement
which exchanges any combination of goods, services, money and property.
Law of contract deals with the agreements between parties that the law will enforce.
For the law to enforce a contract it must be valid, for contract to be valid it must possess
all the elements of a valid contract.
Elements of Contract
According to Orient Bank (Nig) Plc V Bilante International Ltd (1997) the elements of a
valid contract are:
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 1. Offer
2. Acceptance
3. Consideration
4. Intention to create legal relations
5. Capacity to contract
Offer
An offer is a proposition made by one party called the offeror to another party called the
offeree. The case of Storer v Manchester City Council [1974] 1 WLR 1403 outlines
that an offer is:
1. An expression of willingness to contract on specified terms
2. With the intention that it is to be binding once accepted.
An offer must also be totally accepted by the offeree. See Bilante International v
Nigerian Deposit Insurance Corporation (2011). Where there is no offer, there can be
no acceptance. This was the decision of the court in Ejiniyi v. Adio (1993), 7, NWLR
(Pt. 305) 320, C.A.
Offer Distinguished from Invitation to Treat
An important distinction to make in contract law is that between an offer and an
invitation to treat. An invitation to treat can be defined as an indication that a party is
open to negotiation.
Here are some key distinctions between an offer and an invitation to treat.
Offer:
• Certain promise to be bound
• Clear and specified terms
• The conduct or words of the party show certainty
• There is no room for negotiation
Invitation to Treat:
• There is room for negotiation
• There is an invitation for offers
• There is a request for information
• Lack of certainty
The case of Gibson v Manchester City Council [1979] 1 WLR 294 held the following
statement to be an invitation to treat

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“May be prepared to sell the house to you”
There was clearly no display of contractual intent, due to the words “may be prepared”,
which suggest the Council were open to negotiation, and therefore the statement was
construed as an invitation to treat, rather than an offer.
Presumptions
Throughout the history of contract law, there have been various disputes over the
distinction between an offer and an invitation to treat. Therefore, in order to provide
consistency, there are a number of presumptions which are applied to certain types of
conduct.
1. Display of Goods: The case of Pharmaceutical Society of Great Britain v Boots
Cash Chemists [1953] 1 QB 401 confirms that a display of goods is considered
to be an invitation to treat. The specific approach taken is as follows:
 The display of goods in a shop/self-service shop are an invitation to treat
 The customer makes the offer to the cashier by presenting the goods at the
service desk
 cashier accepts the offer by scanning the goods and requesting payment
2. Advertisement: As a general rule, the case of Partridge v Crittenden [1968] 2
All ER 421 rules that an advertisement is an invitation to treat. The reason for
this is the “multi-acceptance” principle39.
3. Request for Tenders: A tender is where an individual seeks specific goods or
services and advertises their need for them. This is construed as an invitation to
treat, and any response to the tender will be an offer.
4. Negotiation for Sale of Land is an invitation to treat.
5. Auction Sale: Auction sales are of two types. Auction sales with reserves and
those that are without reserve. In both instances, the bids made are offers while
the auctioneer’s acceptance of the highest bid or bid of his choice constitutes
acceptance. The only difference is that in auction sales without reserve, the
auctioneer has to accept any bid no matter how low it is while in auction sale with

39
The multi-acceptance principle: If an advertisement is considered an offer, theoretically, an unlimited
amount of people could accept that offer, which causes obvious problems when the advertisement is for a
limited amount of goods, as the seller would be in breach of contract to each individual whom they could
not provide goods for.

Exceptions to advertisements as invitations to treat:

 One theoretical argument suggests that an advertisement from a manufacturer may be construed
as an offer, as the manufacturer would be able to make more of the item in question in response
to all of the acceptances. This is not a rule, but may be a factor in a court’s decision.
 Advertisements which negate the ‘multi-acceptance’ problem. Lefkowitz v Great Minneapolis
Surplus Stores Inc. (1957) 86 NW 2d 689 did this by stating “3 coats for sale, first come first
served”, making it clear only the first three individuals would be sold the coat.
 Unilateral contracts. A Unilateral contract is formed where the offeror makes a promise in
exchange for an act by any offeree. An example of this would be where an individual puts a
poster up, offering money to anybody who finds their lost dog. A practical example of this is seen
in Carlill v Carbolic Smoke Ball Co Ltd [1893] 1 QB 256.

14
 reserve, the auctioneer is only required to accept bids above the reserve price.
An advertisement for an auction is also an invitation to treat.
6. Invitation for Job Interviews is an invitation to treat.
Termination of an Offer
i. By revocation
An offer can be terminated by the offeror by way of revocation. In an open
offer revocation at any time before acceptance is effective unless the offeree
furnished consideration to secure the offer.
ii. By rejection
This ends the offer and makes the offer incapable of acceptance provided the
rejection is communicated to the offeror.
iii. By counter offer40
A counter offer constitutes an implied rejection. The law is that for an
acceptance to be valid it must correspond with the terms of the offer. The
offeree must accept the terms stipulated without qualification or amendment.
If the terms are amended and new things introduced, the offeree is merely
making a counter offer, which destroys (cancels) the original offer. Such
purported acceptance is rather a fresh offer which the original offeror (now the
offeree) may decide to accept or reject
iv. Lapse of time41
Where time is stipulated within which an offer could be accepted, that offer is
terminated if it is not accepted within the period so stipulated. But where no
time is stipulated an offer can be terminated if not accepted “within a
reasonable time”
Acceptance
An acceptance can be defined as the final expression of assent by the offeree to the
terms of the offer made by the offeror. Acceptance should be without qualification,
equivocation or condition.
An agreement could be inferred from conduct i.e. as offer was said could be from
conduct, so an acceptance may not only be from words of mouth or document between
the parties but also from their conduct42.
40
In HYDE v WRENCH (1840) 334 the defendants made an offer to sell an estate to the plaintiff for
£1000. The Plaintiff was prepared to buy it but only for £950 which offer the defendant rejected. Later the
plaintiff signified intention to buy at the original £1000, which the defendant rejected yet. The plaintiff
went to court purporting that there was a contract. The court held that there was no contract because the
plaintiff counter offer had destroyed the original offer.
41

42
See case of BROGDEN V METROPOLITAN RAILWAY COY. (1877) 200CR P. 666. The
complainants, Brogden, were suppliers of coal to the defendant, Metropolitan Railway. They completed
business dealings regarding the coal frequently for a number of years, on an informal basis. There was no
written contract between the complainant and the defendant. However, the parties decided that it would
be best for a formal contract to be written for their future business dealings. The Metropolitan Railway
made a draft contract and sent this to Brogden to review. The complainant made some minor amendments
to this draft and filled in some blanks that were left. He sent this amended document back to the

15
The general rule is that acceptance of an offer is not complete until it is communicated
by actual notification. There could be various modes of notification.
1. Where the method is prescribed and the offeree use another method, it is void.
2. Where no method is stated, the form of acceptance to be used will depend on the
form of the offer.
3. Where acceptance is by post, the rule is that acceptance is complete and
effective the moment the letter is posted.
It should be noted that acceptance may be revoked but this must be done before
delivery such as is the case in acceptance by post43.
Consideration
Consideration was defined aptly in the case of Currie v Misa (1874) LR 10 Ex 153 and
is summed as: “A valuable consideration, in the sense of the law, may consist either in
some right, interest, profit, or benefit accruing to the one party, or some forbearance,
detriment, loss, or responsibility, given, suffered, or undertaken by the other.”
There are two types of consideration:
1. Executory consideration: This type of consideration is formed when there has
been an exchange of promises between parties otherwise known as a bilateral
contract.
2. Executed consideration: This type of consideration is found in unilateral contract
where one party makes a promise in exchange for an act or conduct to be
performed by another party. When this performance occurs the consideration is
considered executed.
The requirements of consideration
There are a number of things to remember with consideration, namely the most
important are:
 Consideration does not need to be adequate.
 Consideration must have economic value.

defendant. Metropolitan Railway filed this document, but they never communicated their acceptance of
this amended contract to the complainants. During this time, business deals continued and Brogden
continued to supply coal to the Metropolitan Railway.

When disputes arose as to whether or not there existed a valid contract between both parties, the House of
Lords held that there was a valid contract between suppliers, Brogden and the Metropolitan Railway. The
draft contract that was amended constituted a counter offer, which was accepted by the conduct of the
parties. The prices agreed in the draft contract were paid and coal was delivered. Although there had been
no communication of acceptance, performing the contract without any objections was enough.
43
See Rhode Island CO. v. US F. Supp 326 (1949)

16
Capacity
In order for contract to be enforceable the parties must have capacity. Infants, insane
persons, drunkards, married women, illiterates and unregistered companies generally
lack capacity to contract, but there are exceptions.
Capacity of infants
Prior to Child Right Act 2003 an infant for purpose of contract is any person under 21
yrs. However the Child Right Act in Nigeria has stipulated the age of an infant to be 18
years
As a result, any contract entered into by somebody below the age of 18 years will be
null and void. But an infant will be bound by contract he entered into at the age of 18.
The position under the Infant Relief Act 1894 (Statute of General Application) though no
longer applicable in Nigeria is that contract with an infant is divisible into three
1. Valid contract – Absolutely binding on infant
2. Voidable contract – i.e. Binding but may be repudiated upon attainment of
majority within reasonable time if the infant does not like it.
3. Void contract – Absolutely not binding
Case Law on Capacity of Infants
• Valid Contracts: Roberts v Gray44- Engaged a professional billiard player to
educate and train him. Held: bound to pay
• Voidable Contracts: These are contract temporarily valid until and unless
repudiated upon attainment of majority by infant. Steinberg v Scala Ltd45- A
minor had been allotted shares within a company. As time went on, she was
unable to go further with payments on shares allotted. She sought to repudiate
the contract and recover the monies already paid Held: She could successfully
repudiate the contract but the money paid was not refundable.
• Void contracts: These are contracts which are void ab- initio In Labinjo V.
Abake46 an 18 years old trader was supplied goods worth $ 48, 18s, she failed to
pay for it, relying on infant relief Act. Held: not enforceable not binding on the
infant. Contract of loan of money to infant is void.
Capacity of Insane Persons
This category of persons cannot enter into a valid contract. However, an exception is
when they are in their lucid or crisis free moments. A contract made by an insane
person while lucid is valid while a contract made by an insane person while he is insane
is voidable at his own option if only he can prove that he was not normal then.

44
[1913] KB 520
45
[1923] 2 Ch 452
46
(1924). 5 NLR p.33

17
Capacity of illiterate persons
The problem with illiterates being a party to a contract is not necessary a question of
capacity but the law simply raises a shield for them to protect them from fraud and other
malpractices. The Illiterates Protection Act is an act which protects illiterates from the
act of fraudsters and other persons who might want to take advantage of them. The Act
provides for the use of a jurat in contractual documents. A jurat is a special type of
attestation clause stating that all the contents of the document has been read over and
explained to the illiterate person and he having understood, appended his mark to the
document47.
Married Women
Under English Law, until recently, married women had no contractual capacity because
husbands are taken to act on behalf of their wives. However, nowadays women are
personally liable in any contract in which they are involved.
Corporations
They are judicial persons which have contractual powers limited to those stated in their
Memorandum and Articles of Association.
Intention to Create Legal Relations
Enforceability or non-enforceability of an agreement (contract) depends on the presence
or absence of intention to create legal relation.
This assertion has much controversy in academic circle and the question is whether in
addition to the three elements of a valid contract (offer, acceptance and consideration)
we treated earlier there is need for the fourth element i.e. the intention to enter into legal
relation.
Prof. Williston is of the opinion that this fourth element is not required On the other
hand, Lord Denning is of the view that the law requires intention to create legal relation
as an element of a valid contract. According to Lord Denning and as corroborated by
Cheshire and Fifoot, the test to determine this fourth element is: Would reasonable
people regard the agreement as intended to be binding?
For example, would acceptance of an invitation to a party to a reasonable person create
an enforceable contract? The answer is no.
Therefore, in another example, if Olatoye and Salu agree to lunch together and Olatoye
promises to pay for the food, if Salu will pay for the drink, although there is an offer,
acceptance and consideration, there is no contract between Olatoye and Salu because
the two of them never intended to enter into a binding contract with each other.

47
See Igbum v. Nyarinya

18
It must be noted that this fourth element is a presumption of the law. It is usually not
agreed upon by the parties expressly (parties are silent about it). It must also be noted
that this fourth element may be excluded by the parties by stating expressly so.
Where an agreement is of a domestic nature, the courts are prone to assuming that
there is no intention to create legal relations. However, where an agreement is of
commercial nature, the court is more likely to assume that there is intention to enter into
legal relations.
In Balfour v Balfour (1919) 2 K. B. 571, a Briton returned home from Ceylon on leave
with his wife. The wife was unable to go back to Ceylon with him because of ill health.
The husband then promised to make her an allowance of 30 pounds a month until she
joined him. When he failed to make this payment, she sued him to enforce the promise.
The court held that she would not succeed because there was no contract between
them in that the contractual intention is absent in cases between husband and wife (and
other domestic relations).
Distinguishably, in Merrit v Merrit (1970) 2 A. E. R. 760 a husband deserted his wife
and agreed to pay her allowances per month and also transferred the title of the house
to her name but failed to keep the promise, the Court of Appeal held that the promises
were intended to have legal effects.
As for commercial agreements, in Amadi V Pool House Group & Nigerian Pools Co.
(1966) 2 All NLR 532 the plaintiff staked the sum of 1 pound 16 shillings in a football
pool and claimed that on the basis of his correct entry he had won 50 thousand, nine
pounds and 12 shillings. The defendant claimed that the Plaintiff’s coupon was never
received by them even though their agents claimed that they forwarded the coupon to
them. Defendant relied on they honour’ clause and denied any liability. It was held that
‘honour’ clause operated to exclude any contractual liability.
Vitiating Factors
What is a vitiating factor? To vitiate means to impair or make void; to destroy or annul,
either completely or partially, the force and effect of a contract. The main vitiating
factors in the law of contract are: misrepresentation, mistake, undue influence, duress,
incapacity, illegality and frustration.
Under this section we will be looking at two of the vitiating factors- ‘mistake’ and
‘misrepresentation’.
Mistake
Mistake is called by Sir John Salmond ‘error in consensus’ or ‘It is an erroneous belief
concerning something’. Thus mistake is mainly error in consent. Mistake in contract law
is an incorrect understanding by one or more parties to a contract and may be used as
grounds to invalidate the agreement.
Types of Mistake

19
 1. Unilateral Mistake: This occurs where a party is mistaken as to the subject matter
or the terms of the agreement. This could be a mistake as to the terms, or a
mistake as to identity. Where there is a mistake as to identity, it could happen
where the parties are not physically seeing one another e.g. where they deal by
correspondence see Phillips v Brooks [1919] 2 KB 24348.
2. Common Mistake: This occurs where it is alleged that there has been a common
mistake, in that both parties to the contract concluded it under the same
(common) mistake, about some fact which lies at the basis of the agreement. For
example, if X and Y entered into a contract under a common mistake, it means
that although X and Y perfectly understood each other and their respective
intentions, X and Y were mistaken about some underlying and fundamental fact.
See Scott v Coulson [1903] 2 Ch 43949.

3. Mutual Mistake: There is a similarity between mutual mistake and common

mistake in some aspect, namely, that they both involve a mistake of both parties.
But whereas both parties make the same mistake in common mistake, in mutual
mistake, they make different mistakes50. Both parties misunderstood each other.
This means each party is mistaken as to the other’s intention, though each does
not know that their respective promises have been misunderstood. E.g. Bola
wants to sell his HP laptop windows 10 to Aderopo but Aderopo assumed the HP
was windows 11.
Misrepresentation
This is a statement made by one party to the other with regard to some existing fact or
to some past event which is one of the causes that induces the contract. Such
misrepresentation must not be a statement of law or a promise as to the future nor a
statement of intention or a statement of opinion nor mere puffing 51. Misrepresentation is

48
A rogue purchased some items from the claimant's jewellers shop claiming to be Sir George Bullogh. He
paid by cheque and persuaded the jewellers to allow him to take a ring immediately as he claimed it was
his wife’s birthday the following day. He gave the address of Sir George Bullogh and the jewellers
checked the name matched the address in a directory. The rogue then pawned the ring at the defendant
pawn brokers in the name of Mr. Firth and received £350. He then disappeared without a trace. The
claimant brought an action based on unilateral mistake as to identity. Held: The contract was not void for
mistake. Where the parties transact face to face the law presumes they intend to deal with the person in
front of them not the person they claim to be. The jewellers were unable to demonstrate that they would
only have sold the ring to Sir George Bullogh.
49
At the time of entering a contract for life insurance both parties believed the person whose life was to be
insured was living. When in fact he was dead. The court held that the contract was void for mistake as it
was a common mistake as to the existence of the subject matter.
50
Raffles v Wichelhaus (1864) 2 H & C 906 Court. The parties entered a contract for the sale of some
cotton to be shipped by 'The Peerless' from Bombay. The Peerless had a sailing from Bombay in October
and in December. The defendant thought that it was the October sailing and the claimant believed it was
the December sailing which had been agreed. The court applied an objective test and stated that a
reasonable person would not have been able to state with certainty which sailing had been agreed.
Therefore the contract was void as there was no consensus ad idem.
51
Puffing is generally an expression or exaggeration made by a salesperson or found in an advertisement
that concerns the quality of goods offered for sale. It presents opinions rather than facts and is usually not

20
an untrue statement of fact which materially induced a party to enter into a contract.
Generally, mere silence is not a misrepresentation 52. The result of any
misrepresentation is to make such contract voidable. There are three types of
misrepresentation.
a. Innocent Misrepresentation
b. Negligent Misrepresentation
c. Fraudulent Misrepresentation
Innocent Misrepresentation
A representation is innocent if the representor honestly, though carelessly believes that
it is true and consequently has no intention to deceive. See Derry v. Peek (1889) 14 A.
C. 33753.
Negligent Misrepresentation
A negligent misrepresentation is one made carelessly, or without reasonable grounds
for believing it to be true. For a negligent misrepresentation to occur, the parties must
hold a fiduciary relationship, in which the maker of the statement owes the innocent
party duty of care.
In Nocton v. Ashburton (1914) AC 932, a mortgage sued his solicitor, alleging that by
improper advice, the solicitor had induced him to release part of the security for the
mortgage and that the remaining security had become insufficient. He also alleged that
the solicitor was fully aware of this fact but had nevertheless given the advice because
he stood to benefit from the action. It was held that, the mortgagee was nevertheless

considered a legally binding promise. Such statements as "this car is in good shape" and "your wife will
love this watch" constitute puffing. In Weeks v Tybald (1605) Noy 11, the defendant said in a
conversation with the plaintiff, that he would give 100 pounds to anyone who married his daughter with
hi consent. The plaintiff married the daughter with his consent and afterwards sued to claim 100 pounds
when the defendant failed to pay him. The action failed and it was stated that “It is not reasonable that the
defendant should be bound by such general words spoken to excite suitors”. The promise was a mere puff
and not enforceable.
52
Generally in a contractual relationship between sophisticated parties there is no duty to disclose anything
to the other side. Mere silence does not constitute misrepresentation. However, once a representation is
made, as typically happens in the context of negotiations, it must be accurate. The statement made
following a representation must not just be accurate, it should also be comprehensive. What this means is
that once a party makes a statement during the course of a contract or negotiations or conducts himself in
a particular way, he must not be economical with facts or be inaccurate. He must tell the other party all
that is linkable with that representation.
53
In a company prospectus the defendant stated the company had the right to use steam powered trams as
oppose to horse powered trams. However, at the time the right to use steam powered trams was subject of
approval of the Board of Trade, which was later refused. The claimant purchased shares in the company
in reliance of the statement made and brought a claim based on the alleged fraudulent representation of
the defendant.
Held:The statement was not fraudulent but made in the honest belief that approval was [Link]
Herschell defined fraudulent misrepresentation as a statement which is made either:i) knowing it to be
false, ii) without belief in its truth, or miii) recklessly, careless as to whether it be true or false.

21
entitled to the relief sought, for the solicitor had committed a breach of the duty imposed
on him by the relationship in which he stood to the client.
Fraudulent Misrepresentation
This is a fraudulent statement which when made, the maker did not honestly believe in
its truth. It was made knowingly without thinking that it is true54.
In any case of misrepresentation the following redresses or remedies are available to
the parties:
a. Repudiation
b. Rescission
c. Damages
This will be discussed in fuller detail later in this material.
Non Est Factum (not my doing)
If a person signs a document, he is bound by what he signed in court whether he
has read it or not as was held in L’Estrange v. Graucob Ltd. (1934) 2 K.B. 394.
D.C. The Court will not assist a foolish party. It will not add to, subtract from or
import provisions into a contract as was held in Oyeneyin v. Akinkugbe55.
However, a person who is induced by fraud to sign a document can say the action
was not his doing (non est factum). This is without prejudice to the general principle
that a person is presumed to have accepted liability for the content of any document
that he has signed56.
PRIVITY OF CONTRACT
Generally a contract cannot confer enforceable rights or impose obligations arising
under it to any person, except parties to it. Thus, only parties to a contract can sue on it.
It also follows that only those who has furnished consideration toward the formation of
the contract can bring an action on it. Dunlop v. Selfridge (1915) AC 847, at p. 853.
However, it does not follow that a contract cannot affect the legal rights of a third party
to it indirectly. Therefore, the non-party may have some other cause of action (e.g. in
54
Derry v. Peek (1889) 14 A. C. 337
55
(2001) 1 NWLR (Pt. 693) 40 C.A.
56
The principle of non est factum was exemplified in Thoroughood’s case (1584) 2 Co. Rep 9a ..In this
case, Mr. Thouroughoood’s tenant, Mr. William Chicken, owed arrears of rent. Mr. Thoroughood
intended to free him from liability and a document was created to that effect. The document that was
created however was one that transferred the property to Mr. William Chicken. Mr. Thoroughood was an
illiterate and he thus asked Mr. Chicken what the document entailed. Mr. Chicken misrepresented to him
that the document was a document to cancel arrears of rent. Thus, Mr. Thoroughood signed it.
Subsequently, Mr. Chicken sold the property to an innocent third party. The court held that the principle
of non est factum would apply here since considering the fact that Mr. Thoroughood was an illiterate and
he made enquiries as to what purpose the document was for. Thus, the deed of transfer to Mr. Chicken
was void.

22
tort) arising from the contract. For example, such a contract may operate as a license to
the third party to be on the premises, hereby raising a duty of care in tort between him
and them.
The doctrine can be summarized as follows:
a. A person cannot enforce right under a contract to which he is not a party.
b. A person who is not a party to a contract cannot have contractual liabilities
imposed on him.
c. Contractual remedies are designed to compensate parties to a contract, not third
parties.
It should be noted from the above that the scope of the doctrine is to prevent the third
party from being entitled to enforce rights or rely on defenses which arise only under a
contract between two parties. Also, the privity doctrine prevents a contract from being
enforced in favour of, or against someone who is not privy to it.
Exceptions to the Rule
1. Covenants relating to Land: In land matters, contract concerning it may bind
third parties other than the original parties. For instance, in a lease agreement, a
person who acquires interest in the property or in the reversion See Tulk v
Moxhay (1848) 2 CH 774. Where the plaintiff owned several plots of land and he
sold the garden in the Centre of Elms, and he agreed not to build on it, and to
preserve it in its existing state. After the land had been sold to different persons
at different times after the agreement. [Link] purchased the Garden, who
knew of the restrictive covenants but proposed to build on it. The Plaintiff sought
an injunction against the erection of the building. The Court granted the injunction
on the ground that the defendant was aware if the restrictive covenant
notwithstanding not been a party to the Contract at inception.
2. Agency: Agency relationship arises where one party (The Principal) authorizes
another person (The Agent) to act on his behalf. As a consequence of this
relationship the Principal incurs all rights and Liabilities under the contract made
by the agent to third Party. This occurs where the Principal is the Contracting
Party, the agent is only acting within the Principal’s authority.
3. Trust concept. A trust is an equitable obligation to hold property on behalf of
another, the u se of trust has been a general exception to the doctrine of privity.
A trust may be created expressly or impliedly. A person maybe a trustee not only
the physical, object but also a sum of money or clause in action such as debt for
instance, if A lends a sum of money to B and stipulates that the money is to be
used only for paying a debt which B owes C. B holds the money in trust for C 57.
4. Insurance contracts: The law of insurance provides good example of a statutory
exception to the doctrine of privity. With regards to Motor Vehicle insurances,
Section 6(3) of the Motor Vehicle (third party) Insurance Act, Cap. M22LFN 2004

57
In Tomlinson v. Gill (1756) AMB 330 the defendant promised a will to pay her late husband’s debts.
The court held that the widow was a trustee of the promise for the husband’s creditors who could enforce
the promise against the defendant.

23
 provides as follows: “Notwithstanding, anything in any written law contained, a
person issuing a policy of insurance under it is section shall be liable to
indemnify the persons or class of person specified in the policy in respect of any
liability which the policy purports to cover in the case of those persons or class
of person.”
This means that only person or class of persons this indemnified can bring an
action against the insurance company, even though such person or persons
were not privity to the insurance contract.

DISCHARGE OF CONTRACT
Discharge of a contract relates to the circumstances in which the contract is brought
to an end. Where a contract is discharged, each party is freed from their continuing
obligations under the contract. A contract may be discharged in one of the following
ways:
a. By performance
b. By a fundamental breach
c. By agreement
d. By frustration
Performance
A contract becomes discharged through performance where both parties have fully
performed their contractual obligations. If one party does not fully perform the contract
this will amount to a breach of contract and the other party may have a claim for
damages unless the contract has been frustrated58.
Fundamental Breach
This may be due to a mistake of one party or of both parties. The breach goes to the
root of the contract and renders it void.
Discharge By Agreement
A contract may be discharged by agreement when both parties agree to bring the
contract to an end and release each other from their contractual obligations. For a
contract to be discharged through agreement there must be Accord & Satisfaction.

58
In Cutter v. Powell (1795) 6. Term. Rep. 826 the claimant's husband agreed by contract to act as a
second mate on the ship the 'Governor Parry' on a return voyage to Jamaica. The voyage was to take eight
weeks and he was to be paid on completion. A term in the contract stated: "Ten days after the ship
'Governor Parry,' myself master, arrives at Liverpool, I promise to pay to Mr. T. Cutter the sum of thirty
guineas, provided he proceeds, continues and does his duty as second mate in the said ship from hence to
the port of Liverpool. Kingston, July 31st, 1793." Six weeks into the voyage the claimant's husband died.
The claimant sought to claim a sum to represent the six weeks work undertaken. Held: The wife's action
failed. Payment was on condition that he worked the ship to Liverpool, since he did not fulfill this
condition the widow was entitled to nothing.

24
 Accord = agreement
Each party must agree to end the contract. The agreement must be freely given.
Satisfaction = consideration
Both parties must also provide consideration. If both parties have continuing obligations
then generally the consideration will be simply each of them giving up their rights under
the contract. The only time consideration becomes an issue is where one party has fully
performed their part of the contract when the other has not. The non-performing party
must then provide consideration to make the agreement binding. Also if the agreement
is made by deed there is no requirement to provide consideration. There is in effect a
contract to end a contract.
Discharge By Frustration
A contract may be discharged by frustration. A contract may be frustrated where
there exists a change in circumstances, after the contract was made, which is not the
fault of either of the parties, which renders the contract either impossible to perform or
deprives the contract of its commercial purpose. Where a contract is found to be
frustrated, each party is discharged from future obligations under the contract and
neither party may sue for breach.
Examples Of Frustrating Events
1. Destruction of subject matter
2. Death
3. Cancellation of an event
4. Performance rendered illegal

REMEDIES FOR BREACHES OF CONTRACT

These are the following remedies or damages available for breach of a contract:

Damages

Damages in contract law can be defined as a sum of money paid to the innocent party
in compensation for a breach of contract.

When parties make an agreement, they will hope that they both fulfill their obligations.
Therefore, the intentions of the parties cannot usually be used in order to calculate an
amount of damages that should be awarded under the contract. Instead, the amount of
damages will be awarded based on the value of the interest the innocent party has in
the contract59.

Specific Performance

Damages are awarded to put the injured party in the same position as he would have been if not for the
59

breach. This was the position of the court in Universal Vulcanising (Nig) Ltd. V. Ijesha United Tradings
and Transport Co. Ltd & 6 ors.

25
This is usually positive the defaulting party may be ordered by the court to complete the
sale transaction upon which he intends to default (this remedy to the injured party would
be in lieu of damages, if the court considers it equitable that the defaulting party be
ordered to complete).

Rescission

This is an equitable remedy available to an injured party for a breach of condition or

where there is a mistake or misrepresentation. Rescission terminates the contract. In
London Assurance v. Mansel (1987) 11 Ch. Div. 363, a man did not disclose the
material facts on a proposal from by concealing the fact that he had been refused by
other life insurance companies, it was held that the company could rescind the contract.

Injunction

This is also an equitable remedy. It is an order by the court ordering a person not to do
certain acts. It is used for restraining a person from committing a breach of contract. In
Akenzua II v. Benin Divisional Councils (1959) W. R. N. L. R. 1, the Plaintiff sought
damages, injunction or specific performance from defendant Council for withdrawing the
concession given to him to exploit timber, it was held hat since he offered no
consideration, the remedies sought could not be granted.

Quantum Meruit

This is a sort of part- performance in which a party claims “as much as he deserves”.
Quantum meruit is a claim where work is done in partial performance especially where
the contract is severable or divisible or can be separated. In Ekpe v. Mid- Western
Nigerian Development Corporation (1967) N. M. L. R. 407, the Plaintiff sued for the
payment of his salary for the period he worked for the defendant, it was held that even
where a contract is void, the party who worked can sue on quantum meruit basis.

26
 LAW OF AGENCY
The law of agency is an essential part of commercial law because companies can only
conduct business through agents. The function of the law of agency is to enable agents
to bring commercial parties into contractual relations in such a way as to render the
parties, not the agents, liable on, and able to enforce, the contract.
Meaning of Agency
Agency can be defined as the relationship between one person, the agent, having
authority to act, and having consented to act on behalf of another, the principal, in
contractual relations with a third party. The term is also used more widely as one acting
in the interest of another.60 In law, the word 'agency' is used to connote the relationship
which exists when one person has an authority or capacity to create legal relations
between a person occupying the position of principal and third party, an d the relation
also arises when one person called the agent has the authority to act on behalf of
another called the principal and consents (expressly or by implication) so to act.61
Agency Distinguished from other relationships
The concept of agency in commercial transaction has in most cases been mistaken to
be 29 the same with some other relationship of similar nature and character. A
preliminary way of understanding the typical features of agency relationship is to
compare and contrast an agent with some other functionaries and relationships which
appear similar but invariably are distinct and different. Such functionaries include
trustees, servants, bailees, and independent contractor
1. Agent and Trustee
For certain purposes, an agent may be treated as a trustee of his principal. While the
relationship of principal and agent is generally consensual in origin, except in minor
cases, a trust is created without the consent of the beneficiary (cestui que trust) or the

60
See the Oxford Companion Law.
61
James v. Midmotors (Nig) Ltd. (1978)11-12 SC. 21.

27
trustee. Also, when an agent is appointed, this is invariably done by the principal
himself, whereas, in a trust situation, the trustee is never appointed by the beneficiary.
2. Agent, Servant and Independent Contractor
Basically, an agent is distinguishable from both a servant and an independent contract.
The essential feature of the master servant relationship is that the master always has
the right to control the diligent performance by the servant of the terms of his
employment. While a servant merely works for his master, an agent acts for and in
place of his principal to effect legal relations of his principal with third parties.
An independent contractor on the other hand renders services to his employer in the
course of an independent occupation or calling. He contracts with his employer only as
to the results to be achieved, but not as to the means whereby the work is done.
3. Agent and Bailee
A bailment arises where personal property is delivered or transferred by the owner
(bailer) to ano ther person (bailee) under an agreement that the property can be
returned to the owner (bailor) or transferred to a third party or dealt with in any other
way indicated by the owner (bailor). The bailee is not an agent of the bailor strictly
speaking since he has no authority to deal with the property in any other way except in
accordance with the instructions of the bailor. The bailee does not be render any service
at all to the bailor which is an essential purpose of agency.
Classification of Agents
1. General and Special Agents
A General Agent is one who is authorized to act for and on behalf of his principal in all
his affairs in connection with a particular kind of business, trade or profession or who
represents him in the ordinary course of his own trade, business or profession, as
agent. An example of a general agent is a director of a limited liability company who
acts for the purpose of the company’s business. A special agent on the other hand is
one authorized to act for and on behalf of his principal on or for special occasion. Such
an agent may also be required to handle a particular transaction or to do a specific act
which is not within the ordinary course of his trade, business or profession.
2. Commission Agents
A commissioned agent is the one to whom certain goods have been consigned for a
foreign principal. This type of agent belongs to a recognized class of commercial agents
whose rights and obligation are superimposed between the ordinary relationship of
principal and agent on the one hand, and a buyer and seller on the other. 62
3. Mercantile Agents

62
See Ireland v. Livingstone (1872) A.C. 395.

28
A mercantile agent is an agent having in the course of his business, as such agent,
authority to sell or to consign goods for the purpose of sale, or to buy goods or to raise
money on the security of goods. In essence, when one is dealing with a mercantile
agent, it becomes pertinent to inquire whether in the “customary course of the agent’s
business he has authority to sell, consign for sale or to buy or raise money on the
security of goods in his possession as such agent.63
4. Factors
In Barring v. Corrie,64 Abott C. J., described a factor as a person to whom goods are
consigned for sale by a merchant residing abroad or at a distance away from the place
of sale and who normally sells in his own name without disclosing that of his principal.
5. Brokers
A broker is a mercantile agent who, in the ordinary course of his business is employed
to make contact with third parties for the purchase of goods, or property or for the sale
of his principal’s goods or property of which he is not entrusted with possession or
document of title thereto. He has been described under the common law as an agent
employed to make bargains and contact between persons in matter of trade, commerce
and navigation. He is a mere negotiator between such persons with no possession of
the goods. He lacks the power or authority to determine whether the goods belong to
the buyer or seller and no legal or power to determine whether the goods should be
delivered to the one or be kept by the other.
6. Del Credere Agent
A del credere agent is defined as one who, in consideration of extra remuneration called
a del credere commission, guarantees to his principal that third parties with whom he
enters into contract for and on behalf of the principal shall duly pay any sums becoming
due under those contracts.
Capacities to Enter into an Agency relationship: The Principal
The general principle of law in this regard is that the competency of a person to entrust
to another the performance of a task for and on his behalf is co-existent with the
competency of that person to perform the task himself. However, to every rule, there is
always an exception. In this instance where delegation of that said power is prohibited
by law, the general common law rule that powers could be delegated will be of no effect.
Three categories of persons, due to natural or legal disability are either totally or
partially incompetent to be principals.
1. Infants
Generally, an infant cannot validly appoint another person, whether an adult or an infant
to be or act as his agent except in the circumstances in which he can act personally or

63
See Oppenhiemer v. Attenborough (1708) 1 K.B 221.
64
(1818)2 B & AID. 137.

29
for himself. However, under the general law governing contracts, an infant can validly
contract only for his legal necessaries. The term necessaries is not restricted to bare
essentials of life, but extend to articles and matters which can be considered reasonably
necessary to him, having regard to his state of life.
2. Mentally ill Persons
As in the case of an infant, a mentally ill person cannot appoint an agent where the
circumstances are such that he would have been bound if he had himself personally
acted. To render on appointment by such a person void and of no effect, it must be
shown that his infirmity was such as to render him incapable of comprehending the true
nature and probable consequences of his act.
3. Corporations
The primary legal status of the particular corporation usually determines the
competence of that corporation to appoint a person as its agent. This presupposes that
if a corporation has legal personality of its own quite distinct from those of its member
constituting it, it can contract and do other legal acts on its own behalf and in its own
name just like an ordinary person.
Capacity to enter into an Agency relationship: The Agent
The rules governing the competency to be a principal are quite different from that
governing the competency to be an agent. The general rule here is that any person of
age and of sound mind may act as an agent of another person. Thus, the law permits
the employment as agents of infants, drunkards, mentally ill persons, aliens and others
who may be under natural or legal disability. Therefore, the competence of a person to
act as an agent of another is not limited by the competence of that person to act for him
in that regard.
Certain persons or bodies however are prohibited/restricted from acting as an agent.
1. Legal Practitioners
The general rule and belief is that a barrister or solicitor is an agent of his client in
regard to a matter for which he has been briefed. The client for whom he acts as
barristers or solicitor is his principal. For a person to be legally entitled to be and to act
as such agent, he or she must obtain the requisite qualification as a legal practitioner,
be called to the Nigerian Bar and have his name enrolled in the register of the Supreme
Court of Nigeria.
2. Insurance Agents and Brokers
Like the legal profession, insurance business is also regulated by a law. Section 28 of
the Insurance Decree No.58 of 1991 provides in part as follows: (1) No person shall
transact business as an insurance agent unless he is licensed in that behalf under this
Decree. (2) An application for a license as an insurance agent shall be made to the
Director in the prescribed form and be accompanied by the prescribed fee and such

30
other documents as may be prescribed, from time to time. (3) If the Director is satisfied
that the applicant has satisfied the requirements as may be prescribed, he shall license
the applicant as an insurance agent.
3. Auctioneers
Generally, an auctioneer is a person who conducts a sale by auction for a client both
before and of the position of an agent for the vendor i.e. the owner of the goods to be
auctioned. Apart from the requirement of application and obtaining a license from the
appropriate licensing authority, on the payment of any prescribed fee or such other fee
as may be prescribed, no special qualification is required by statute of one who wishes
to carry on the business of or act as an auctioneer.
Creation of Agency
1. Agency by Agreement or Contract
One of the basis of a contract, agreement is the consensus of the contracting parties to
the terms and conditions of the proposed contract. The same principle applies to the
formation of an agency agreement by express agreement or contract of the terms
thereof. In commercial transactions, an agreement is the revelation of the intention of
both the agent and the principal unequivocally to constitute such a relationship.65
2. Agency by Estoppel
The general position of the law in this area is to the effect that where a supposed
principal intentionally or otherwise causes a third party to believe that another person is
his agent and the third party so relies in dealing with the supposed agent, the principal
will be estopped from denying the existence of an agency relationship between him and
e supposed agent. In such a situation, the supposed principal will be bound by an act or
omission of the supposed agent to the same extent as if an agency relationship had
existed between them.66
3. Agency by Ratification
Agency by ratification exists where one person, the agent acts on behalf of another, the
principal who at the relevant time was not aware of the action of the agent but later
acknowledges the action by ratifying same. By this action, he is bound to be liable to the
principal as well as to take all the advantages that comes with it. 67 The doctrine of
agency by ratification can be simply illustrated thus:
If Ayo, unauthorized by Bola, with Charles, which Bola afterwards recognizes and
adopts, there should be no difficulty in dealing with it as having been originally entered
into with Bola’s authority. Charles undoubtedly entered into the contract on the
understanding that he was dealing with Bola, and when therefore Bola subsequently

65
See Ayua v. Adasu & Ors (1992)3 N.W.L.R. 598.
66
See Lukan v. Ogunnusi (1972)5 S.C. 40.
67
Wilson v. Tunman (1843)6 MAN & G 236.

31
agrees to admit that such was the case, Charles was precisely put in the situation in
which he was understood to be.
Generally, ratification is retrospective in nature. It is treated as though it had been
authorized from the onset. All rights and liabilities attaching thereto are in consequence
said to relate back to the date of the original act.68
4. Agency by Necessity
In a restricted range of instances, an agency may arise as a matter of law so the agent
is authorized to bind the principal to the extent required by that instance without prior
authority from them, or ratification by, the principal. This usually occurs in emergency
situations. Generally, the courts are reluctant to find that an agency of necessity exists
because it imposes obligations on someone who has not given consent to the supposed
agent to so act.
Certain conditions must be fulfilled before the court can hold that there is agency by
necessity and this include that the principal's property must be in possession or within
the reach of the agent; the agent is unable to receive instruction from the principal; an
emergency must have threatened the property; the agent acted in good faith and the
action taken must be commercially reasonable.69
Disclosed and Undisclosed Principal
Under the law of agency, the principal is generally responsible to third parties for any
decision, act or omission of his agent which was performed or taken while executing the
terms of the agency. This is the hallmark of the law of agency on a disclosed principal.
Generally, issues in contracts by agents raise the fundamental problem of who can sue
and who can be sued. between the principal or the agent. In either case, the rights and
liabilities attaching to each depend on the following factors: 1) Whether the agent acted
within the scope of his authority; express or implied. 2) Whether the principal is
disclosed or undisclosed. 3) Whether the principal is a national as opposed to a foreign
principal. Where the agent acted within the scope of his authority, or if without authority,
it has been subsequently ratified by the principal, and the identity of the principal
disclosed, the latter alone is generally the true party to the contract and bound thereby.
The agent incurs neither right nor liability under such a contract unless otherwise
expressly made a party thereto.
Lord Erskin stated the position of the law clearly in Ex Parte Hartrop70 when he said:
“No rule of law is better ascertained or stands upon a stronger foundation than this; that,
where an agent names his principal, the principal is responsible, not the agent; but for
the application of that rule, the agent must name his principal as the person to be
responsible.” It is however, not necessary that the agent must specifically have stated
that he was acting for and on behalf of his principal in order for the latter to be
disclosed. It is sufficient if the third party knows or ought to have known that the person

68
See M.R. Koenicablatt V Sweet (1923)2 Ch. D 314.
69
See Sachs v. Miklos (1948)2 K.B.23; Prager v. Blastpiel, Stamp and Hsacock Ltd (1924)1 K.B 566.
70
(1806)12 Ves 349.

32
he was dealing with was acting for another specific person. However, where the
principal is undisclosed, that is, where the fact of agency as well as the identity of the
principal are not known to the third party, the contract may, as a general rule, be
enforced by or against the principal if and when disclosed provided that the agent’s act
was authorized.71
An undisclosed principal is one whose existence and identity are unknown to the third
party at the time of entering into a contract with an agent. Under the doctrine of
undisclosed principal, it is permissible, in appropriate circumstances for such principal
on whose behalf a contract has been entered into by an agent to sue and be sued on
the contract. Although it is a well settled principle of law, the doctrine has been
described as an anomaly in the sense that it offends the doctrine of privity of contract
and it is in this respect that it is often regarded as an exception to the doctrine of privity
of contract rule.
The rights and liabilities of the principal on contracts negotiated by the agent on his
behalf are subject to certain general exceptions. These are:
1. No principal can validly sue or be sued in respect of any contract purported to have
been entered into on his behalf by the agent unless with his consent or authority.
2. At common law, no principal may sue or be sued on any deed, even if it was
expressed to have been executed on his behalf unless he was described as a party
thereto and it was executed in his name.
3. Where the contract in question is a negotiable instrument, for example a bill of
exchange, cheque or promissory note, the principal is not liable unless his signature
appears on it. He needs to sign by himself to be liable.
4. Where the principal is a foreign principal, there is a presumption that the intention
was to bind the agent and not the foreign principal. This may, however, be contradicted
by clear terms of the contract itself or circumstantial evidence from the surrounding
circumstances of the case.
5. The rights and liabilities of the principal may be expressly excluded by a term of the
contract itself or impliedly by a custom, or usage of the particular trade, business or
profession to which the agent belongs or in which he operates. This is subject to the
provision that these are not inconsistent with the express term of the contract and not
reasonable or unlawful.
Duties of an Agent
1. Duty to Perform
The primary duty of an agent particularly where he was appointed under an agreement
with the principal is to execute his agency in accordance with the terms of such
agreement.72 However, where the agent fails to perform his duties or to do so in
71
See Watteau v. Fenwick (1893)1 Q.B.D 346.
72
See Otto Hamman v. Senbanjo & Anor (1962)2 All N.L.R. B9.

33
accordance with the terms of his contract, he is generally liable only for the breach of
his agency agreement.
2. Duty of Obedience or Loyalty
When an agent is executing the terms of his agency, he is obliged to carry out such
instructions as may be given to him by the principal relating thereto. In Eso West
African INC. v. Ali73, an Ibadan High Court held, inter alia, that it is the duty of an agent
to carry out any instructions that may be given to him by the principal and cannot depart
from such instructions even though he reasonably believed that in doing so he was not
promoting the interest of the principal.
3. Duty of Care and Skill
In the course of executing the terms of his agency, an agent is bound to exhibit such
care, skill and judgment as are required under the circumstances of the particular
situations. In Spiropolous Co. Ltd. v. Nigeria Rubber & Co. Ltd,74 a High Court in
Benin held that the prudence which an agent is expected to show in the affairs of his
principal requires that he should not involve the principal in a heavier financial burden
where there is available means of involving him in a lesser financial burden.
Accordingly, it was held that an agent who undertook to effect a policy of insurance on
behalf of his principal is under a duty to do so at the most economical rate.
4. Duty of Personal Performance
The basic principle of law in this regard is covered by the maxim “Delegatus Non Potest
Delegare” which means a delegated power cannot be further delegated. Agency
relationship is one of confidentiality of principal and the agent, and the agent is
generally expected to perform his duties as an agent, personally. 75 However, delegation
may be allowed in certain circumstances such as: Where the transaction is required by
statute to be evidenced by the signature of the principal himself; Where the
competency to do the act arises by virtue of holding some public office or by virtue of
some power, authority, or duty of a personal nature and requiring skill or discretion for
its existence; Where a statute imposes on a person a duty which he is not free to
delegate to another; Where the agent has the express or implied authority of the
principal to do so; Where no personal confidence is reposed on the agent by the
principal or by the terms of his agency; Where the function or duty of the agent does not
require any particular skill or discretion or is purely ministerial; Where a custom or
usage of the trade, business or profession of the agent or within which he operates
allows.
5. Duty to Act in Good Faith
This duty of an agent arises principally from the fiduciary nature or character of the
principal-agent relationship. Agency relationship, as a whole, is based essentially on the
trust reposed on the agent by the principal. The principal employs an agent normally
73
(1968) N.M.L.R 414.
74
(1970) N.C.L.R. 94.
75
See Bamgboye v. University of Ilorin & Ors (1991)8 N.W.L.R. 1.

34
because he requires that agent’s personal service or expertise. He will usually depend
on the agent for the due performance of those services. The law imposes on the agent
the duty to show good faith in his dealings on behalf the principal. The agent must avoid
clash of personal interest with that of his principal; the agent should not make any
secret profit or other benefit from his position as agent in excess of his agreed
commission or remuneration; the agent is under an obligation not to take a bribe while
executing his agency.
6. Duty to Account
It is a fundamental obligation of every agent to keep and to render appropriate account
of his stewardship to his principal whenever he is called upon to do so. Thus he must be
willing and ready at all times to render an account of all transactions undertaken by him
for and on behalf of his principal. This duty is more particularly important where money
or property has been received for and on behalf of the principal.76
Duties of the Principal to the Agent
1. Duty to Remunerate
The primary duty of a principal to his agent is to remunerate him for the services
rendered. Such duties arise whenever the agent is employed under such circumstances
as would reasonably justify the expectations that he should be paid. The remuneration
may take the form of an agreed commission or wages or other benefit agreed between
the parties such as some share of the benefits accruing to the principal from the
agency. However, the duty to remunerate is not absolute for the agent’s right to receive
it accrues only if he is entitled to it in accordance with the agency agreement which will
also include the amount payable, the conditions under which it becomes payable and
the time of payment.
2. Duty of Re-Imbursement and Indemnity
In every agency relationship, there is by implication, a duty on the principal to indemnify
the agent of all loses, damages or liabilities sustained by the agent in the course of
discharging his authorized duties. This implied duty is subject to any subsisting
agreement or declared intention of the parties. All reasonable expenses incurred by the
agent and any incurred by him when he engages the services of a sub-agent or
substitute with the approval of the principal are payable.
Remedies Available to the Principal
In situations where the agent by some misconduct or otherwise commits a breach of a
term of his agency relationship with the principal, the latter may avail himself of one or
more of a number of remedies stated below.
1. Dismissal: The principal may determine or bring the agency relationship to an end
or otherwise dismiss the agent from his employment without notice.

76
See Majekodunmi v. Joseph Daboul Ltd. (1975)2 C.C.H.C.J. 161.

35
2. Rescission and Damages: The principal may also rescind any contract made on his
behalf by the agent without authority or in breach of his duty and this may include claims
for damages.
3. Action for Account: The principal may take an action to compel the agent to render
an account for all his dealings on his behalf, in respect of their agency relationship. This
may also include an account for all money or property of the principal in his possession.
4. Action in Tort: The principal may in addition sue the agent for conversion where the
latter has received property on his behalf and has misappropriated or misused it. He
may also institute an action for negligence where such is in contravention of the agency
agreement.
5. Private Prosecution: The principal may be entitled to and may take out private
summons against the agent where the latter’s conduct, act or omission is criminal.
Remedies Available to the Agent
Where the agency relationship is established by contract and the principal commits a
breach of a term of his agency contract, the agent has most of the remedies ordinarily
available to a contracting party under the general law of contract. The law may imply
certain remedies from the facts and circumstances of a particular agency case in some
cases. Generally, in a case of a breach of an agency contract or a term thereof. Both
the principal and the agent are entitled to and may claim one or more of the following
remedies:
1. Damages: The agent may sue the principal to recover any loss or injury he may have
suffered as a result of the principal’s failure to perform any of his duties under the
agency arrangement. This may include his right to indemnity or re-imbursement and
damages unless the parties agreed otherwise or the agent has waived or otherwise lost
his right to sue.
2. Right of Set-Off: Whenever the principal institutes an action in a court of law against
the agent, the latter may claim a right of set-off or counter-claim of engagement due to
him from the principal by way of remuneration, indemnity or re-imbursement. This he
must specifically do in his defense to the claims by the principal.
3. Right of Lien: The agent also has a right of lien on the property, goods or chattels of
his principal in his lawful possession or custody in respect of and up to the amount of
his claim for remuneration, losses, liabilities and expenses incurred lawfully and for
advances made in favour of the principal. This is however subject to any agreement
between the parties. The law recognizes only two types of lien; the general and
particular lien.
4. General Lien: This enables the agent of retain his principal’s property, chattel, or
goods until any sum due to him from the principal is paid.
5. Particular Lien: This only enables the agent to retain such property, chattel or goods
pending payment of any sums due in respect of that property, chattel or goods.

36
6. Right of Stoppage in Transitu: Where the agent stands towards his principal in the
position of an unpaid seller of goods, he may exercise this right against the goods of his
principal. This will arise where he bought the goods for his principal with his own money
or otherwise incurs a personal liability to the seller for the price.
Termination of Agency
Subject to the operation of the principle of irrevocable authority, an agency relationship
may be terminated by an act of the principal or and the agent. Such an act may be an
agreement between the two parties or a unilateral act of either of them. A unilateral act
of the principal terminating his relationship with his agent is referred to as revocation
and that of the agent with the same effect is a remuneration. These three aspects of
termination require further elucidation for better assimilation of their nature, effect and
significance.
1. Agreement between Principal and Agent
The general nature of relationship of principal and agent is primarily consensual. It is
generally considered as good sense to allow the parties the freedom to be able to
terminate their relationship when it is no longer beneficial to them or fulfilling their
purpose. This freedom to terminate an agency relationship accruing to the two principal
parties exists irrespective of the previous or original agreement by which the agency
relationship was established or in any subsequent constituted agreement.77
2. Revocation by Principal
An agency relationship is generally presumed to have been created, formed or
established for the benefit of the principal. It therefore follows that he is generally also
free at any time to revoke the agency or any authority granted to the agent when he
considers that the object or purpose is no longer attainable or when that benefit is no
longer accruing to him. Such revocation may constitute a breach for which an action
may lie. While a revocation may be valid and effective and the authority granted to an
agent terminated, the principal may also be liable in damages to the agent or a third
party who has dealt with the agent for any loss, injury or damage sustained as a result
of such revocation.78
3. Renunciation by Agent
Renunciation occurs where the agent unilaterally terminates his relationship with his
principal. This right is implied in every agency relationship if the agent so wishes except
in cases of irrevocable authority. The agent is contractually bound to perform his agency
and any renunciation by him may constitute a breach of contract which may expose him
to liabilities in damages. This would however not prevent the renunciation from being
valid and effective to terminate his authority and duties as an agent.
4. Termination by Operation of Law

77
See Esso West African INC. v. Alli (Supra).
78
See Alexander Logios v. Att. General of Nigeria (1938)4 W.A.C.A. 163.

37
This is the type of revocation that occurs regardless of the agreement and intention of
the parties.
a. By Effluxtion of Time
It is generally expected that the authority of an agent which was conferred on him for a
specific period of time terminates or ceases automatically upon the expiration of that
period of time.
b. By Performance
In cases where an agent is given an authority to accomplish or achieve a specific result
reason demands that the authority terminates upon the object of the power being
accomplished.
c. By Frustration
Where an agency agreement exists between the principal and the agent, it may be
terminated by the operation of the doctrine of frustration. This doctrine operates in
situations when two people enter into a contract of agency which is dependent for the
possibility of its performance on the continued existence or availability of a specific thing
or matter. When the subject matter comes to an end by reason of circumstances
beyond the control of the parties, that contract of agency is regarded as prima facie
dissolved.
d. By Death of Principal or Agent
Death is inevitable to every living being ordinarily. Save in cases of irrevocable
authority, the death of a principal or agent terminates the agency relationship unless
there is an express or implied stipulation to the contrary in their arrangement.
e. By Insanity of Principal or Agent
One of the basic ingredients of a valid contract is that the parties to such an agreement
must be of sound mind. In an agency situation, this rule is also applicable and where the
insanity or mental incapacity of the principal or the agent occurs, the relationship is
terminated except in cases of irrevocable authority.

LAW OF SALES OF GOODS

This is Act of the United Kingdom which regulates contracts in which goods are sold by
the seller and bought by the buyer. A Buyer is a person who intends to buy goods from
the seller and the seller is a person who sells out what the buyer wants.
A sale of Goods Act regulates the contract whereby the seller transfers the property in
the goods to the Buyer for a consideration called price.

38
The Act lays down a number of compulsory legal rules concerned with an array of
presumptions and implied terms, which aim to reflect the commercial expectations in the
most commonly agreed sales contracts. In the absence of contrary agreement these
terms will govern a contract.
Sales of Goods Defined
Sales of Goods is defined in section 1(1) of the Sale of Goods Act, 1893 as “A contract
whereby the seller transfers or agrees to transfer the property in goods to the buyer for
a money consideration called the price”.
This means that in addition to the ordinary elements of a contract, two other elements,
goods and money consideration, must also be present in a contract of sale of goods.
Meaning of Goods under the Act
Section 61 of the sale of goods Act defines goods to include all personal chattels but
excludes all the services or choses in action or money. Products of the soil are
generally sold with a view to severance and are usually goods within the meaning of the
Act.
Goods may be classified as follows:
Existing goods: refers to those goods which are actually in existence when the contract
is made. They may be either specific or unascertained.
Future goods refers to goods yet to be acquired or manufactured or grown by the seller
see section 5(1)) of the Act as in the case of Sainsbury vs Street where the seller
agreed to sell to the buyers a crop of some 275 tons of barley to be grown by him on his
farm.
Specific goods are those goods identified and agreed upon at the time the contract of
sale is made see section 61(1) of the Act. e.g the contract for the sale of a pair of shoes
at a Boutique.
Unascertained goods refer to situation where S agrees to sell to B 100 bags of Cement
from a stock of 2000 lying in S’s warehouse. The main problem in examination terms
arises in question which is concerned with when ownership in such goods passes from
seller to buyer.
TERMS IMPLIED BY THE SALE OF GOODS ACT
These terms are implied into the contracts of sale of goods. Breach of these terms may
entitle the defendant to be sued and claim for damages.
Implied Condition as To Title
In Section 12(1), there is an implied condition on the part of the seller that he has the
right to sell the goods if the situations show a different intention. Also that he will have
the right to sell the goods at the time when the property is to pass.

39
Section 12(1) provides that, unless the circumstances show a different intention, there is
an implied condition on the part of the seller that in a case of a sale he has the right to
sell the goods, and that in the case of an agreement to sell, he will have the right to sell
the goods at the time when the property is to pass.
In the case of Rowland v Divall (1923), plaintiff bought a car from defendant and used
it for several months. It then realized that defendant has no title to this car and the
plaintiff is bound to return it back to the true owner. He sued defendant to recover back
the purchase-money that he had paid. The court held that he is entitled to recover the
whole of the price because the consideration for the use of car had totally failed.
Section 12(1) might be construed as meaning that the seller must have the power to
give ownership of the goods to the buyer, but if the goods can only be sold by infringing
a trade mark, the seller has no right to sell for the purposes of s 12(1).
Implied Warranties as To Title
Section 12(2) provides that there is an implied warranty that the goods are free until the
time when the property is to pass, from any charge or encumbrance not disclosed or
known to the buyer before the contract is made, and that buyers will enjoy quiet
possession of the goods except so far as it may be disturbed by the owner or other
person entitled to the benefit of any charge or encumbrance so disclosed or known.
Sale by Description
Section 13(1) provides that, where there is a contract for the sale of goods by
description, there is an implied condition that the goods shall correspond with the
description. A sale is by description where the purchaser is buying on a mere
description, having never seen the goods. A classic example occurs in the case of mail-
order transaction.
The case of Beale v Taylor (1967) was an example of the sale by description in section
13(1). The defendant advertised a car for sale as being a 1961 Triumph Herald 1200
believing it to be true. The claimant inspected and checked the car and saw a metal disc
at the rear of the car with “1200″ on it and purchased the car. He later discovered that
the car was made up of a rear 1961 Herald Triumph 1200 welded to the front of an
earlier model Triumph Herald 1948. It was held to be a breach of Section 13 despite the
fact that claimant had inspected the car as he relied on the description in the
advertisement and the metal disc at the rear of the car.
Section 14(2)
This section deals with the quality of the product. This section imposes the following
criteria to be fulfilled by a commodity to be considered of satisfactory quality −
 The commodity must be fit for serving all the purposes for which it is sold.
 The appearance and finish of the commodity must be acceptable.
 There should be freedom for minor defects of the product.

40
  The good should be safe and durable.
Buyers cannot expect legal remedies in accordance with the following −
 Fair wear and tear
 Misuse or accidents
 In case the item is not needed anymore
Section 14(3)
 Any specific purpose for which a commodity is bought by the buyer must be
conveyed to the seller by the buyer and the seller must comply with the purpose.
 The purpose may be regardless of the purpose for which the commodity is
commonly bought.
Implied Conditions as To Fitness
These terms are implied by section 14 and are only relevant where the seller is acting in
the course of a business. There is no requirement as to the status of the buyer. The
condition of Section 14(3) are where the seller sells goods in the course of a business
and the buyer, expressly or by implication, make known to the seller or dealer of any
particular purpose for which the goods are being bought, there is a condition that the
goods supplied under the contract are reasonably fit for that purpose, whether or not
that is a purpose for which such goods are commonly supplied, except where the
circumstances show that the buyer does not rely, or that it is unreasonable for him to
rely, on the seller’s skill or judgment.
The same principle applies in Priest v Last (1903). This case demonstrates the
principle if the buyer told the seller the particular purpose which he/she is purchasing
the goods, then it is an implied condition that the goods are reasonable for the purpose.
From this case, the buyer who bought a hot-water bottle from the seller was a chemist.
His wife uses the hot-water bottle and then after 5 times, the bottle burst and the wife
was scalded. Evidence shows that, the bottle was not fit for use as a hot-water bottle.
The buyer claimed for breach of section 14(3). The seller stated that, the buyer had not
made known the purpose for the hot-water bottle would be used. However, this was
rejected by the court. The court held that, the buyer is entitled to recover the expenses
in the treatment of the buyer’s wife injuries. It is because the buyer relied on the seller’s
judgment and he had in fact used the hot-water bottle for the usual purpose.
Satisfactory Quality: The Current Test
An implied term in a contract for the sale of goods within the meaning of the Sale of
Goods Act 1979 (SOGA).Goods are of satisfactory quality if they meet the standard
which a reasonable person would regard as satisfactory, taking account of:
Any description of the goods; the price; and all other relevant circumstances including
the quality of goods, their state and condition, the goods will be considered of

41
satisfactory quality if they are: Fit for all the purposes for which goods of that kind are
commonly supplied; Free from minor defects; has safety; and durability.
Merchantable Quality: an unsatisfactory test
The goods should be of such quality as would in all circumstances of the case be fully
acceptable to a reasonable buyer who had full knowledge of their condition, quality and
characteristics. For example, a buyer of goods had no rights at all where there were a
number of minor defects, such as small scratches and dents in a new car. The car was
not necessarily unmerchantable because of these defects, nor was it unfit for the
purpose.
In Shine v General Guarantee Corporations Ltd the courts held that a second hand
car was not of merchantable quality where the manufacturer’s warranty had been
terminated because it was unknown to the buyer that the car had been submerged in
water for over 24 hours. The buyer brought up the action when he was aware that the
car was being submerge for over 24 hours although there were no major problems with
the car. The court held that the car was not of merchantable quality since no one would
have bought the car knowing if its condition without at least a substantial reduction of
the price.
Sale by Sample
Where goods are bought in bulk and the buyer has tested or examined a small number
of those goods, the seller is obliged to make sure that every item in the bulk
corresponds with the quality of the sample tested or examined. Section 15
 This section deals with the contracts of sale determined by sample.
 If the seller and the buyer come across a contract of sale by the sample, the
sample of goods provided by the seller to the buyer must correspond to the
whole bulk of the commodity.
When Does the Property Pass According to Sale of Goods Act?
A person who has property over goods is also in possession. It is the law that he who is
in possession of anything is the owner until the contrary is proved by he who asserts the
contrary. Often, goods which are the subject of sale are stolen or destroyed, seized by
government or mistakenly sold to another person. The question will naturally arise as to
who bears the loss or liability arising from such occurrence or incident.
Invariably, this will depend on the time at which property in the goods passed from the
seller to the buyer. This will further depend to a large extent on whether the goods are
specific or unascertained.
The law in this regard, attempts to answer the following questions:
a. At what point can the buyer sell the goods to another person?
b. At what point can the seller sue for the price of the goods?
c. At what point does risk in the goods pass to the buyer?

42
Unascertained Goods
i. By section 16 of the Act, where unascertained goods are sold to the
buyer, ownership thereof is not transferred to the buyer unless and
until the goods are ascertained. Thus if something is yet to be done by
or on behalf of both parties before the goods are delivered, property in
the goods will not be transferred until the particular thing is done. Thus
where goods are to be sold by measurement, the stipulation of
measurement and of delivery at a particular place renders the sale
conditional and incomplete until occurrence of those events.79

Specific Goods
ii. In a contract for the sale of specific ascertained goods, the property in
the goods passes from seller to the buyer at such time (if any) as the
parties to the contract expressly or implied stipulate in the contract of
sale.80 However, if the parties fail to stipulate the time at which the
property is to pass, recourse must be had to certain rules laid down by
the Act for this purpose namely:
iii. In an unconditional contract of the sale of specific goods which are in a
deliverable state, the ownership of the goods is transferred to the
buyer when the contract is made notwithstanding that the time
payment is to be made or both are expressly postponed by the
contract.81 Once the goods have been put in such condition that the
buyer is bound to take them, they are in a deliverable state.82
iv. In a contract for the sale of specific goods to which the seller has to do
something to put them in a deliverable state, ownership of such goods
does not pass to the buyer until such thing is done and the buyer has
notice thereof.83
v. In a contract for the sale of specific goods which are in deliverable
state, but which the seller has to weigh, measure, test, or do some
other acts or things for the purpose of determining the price; ownership
does not pass to the buyer until such act or thing is done and the buyer
has notice thereof. This rule only applies if the act is to be done by the
seller and the price to be paid is dependent upon such act of the
seller.84
vi. When goods are delivered to the Buyer on ‘approval’ or ‘on sale’ or
‘return’ or other similar terms, the ownership of the goods is transferred
to the buyer:
79
Boro vs. Kenney (1955) WACA 51.
80
Section 17 of Sale of Goods Act 1893.
81
Section 18 of Sale of Goods Act 1893
82
Talabi vs. Mandila (1976) 3 O.Y.S.H.C. 79.
83
Underwood Limited vs. Burgh Castel Brick &Cement Syndicate (1921) ALL ER Rep. 515.
84
Nanka Bruce vs. Commonwealth Trust Limited (1926) AC 77.
43
  When he communicates his approval or acceptance to the seller
or does any other act adopting the transaction.
 Where he does communicate his acceptance or approval to the
seller if he retains the goods, without giving notice of rejection,
beyond the time (if any) fixed for rejection, or if no time is fixed,
then beyond a reasonable time. However, this arm of Rule 4 will
only apply if it is the buyer who retains the goods i.e. where the
detention is done by the buyer himself. In Re Ferrier85 the goods
delivered ‘on sale’ or ‘return’ within one week, were retained, by
a third party beyond the time fixed. It was held that the property
had not passed to the buyer under Rule.

Duties of and Remedies for the Buyer And Seller

It might have been thought that in a sale of specific goods there would be an implied
condition on the part of the seller that the goods were in existence at the time when the
contract was made. It is the duty of the seller to deliver the goods, while the buyer has a
duty to accept and pay for the goods. It is important to note that performance of the
contract under sale of goods entails three main things:
• Delivery by the seller
• Acceptance by the buyer
• Payment by the buyer
The duty of one party is the right of the other. Section 27 of the Sale of Goods Act
provides for the rights and duties of both the seller and the buyer.
Duties of the Seller
1. Duty to deliver goods at the right time
2. Duty to pass good title
3. Duty to supply goods of satisfactory quality
Duties of the Buyer
1. Duty to pay the price
2. Duty to accept the goods
Remedies for the Seller
• Action for the price
• Action for damages

85
(1944) Ch. 295.
44
Remedies for the Buyer
• Recovery of the Price
• Rejection of the Goods
• Action for Damages

HIRE PURCHASE TRANSACTION

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DEFINITION
A Hire Purchase agreement is a contract whereby the owner of a chattel lets it out on
hire for a periodic rent with the provision that on due compliance with the various terms
of the agreement, and the compliance with the various terms of the agreement, nd the
completion of the agreed number of payment of rent, the hirer either becomes the
owner of the goods automatically or shall have the option of purchasing the chattel by
the payment of a small agreed sum
Halsbury’s Laws of England Vol. 1st Edition, defined a contract of hire purchase as “a
contract of hire with option to purchase under which the owner of the chattel undertakes
to sell it to, or that it shall become the property of the hirer conditionally on his making a
certain number of payments. Until the making of the last payment, however, no property
in the chattel passes.”
The contract of hire purchase is mostly governed by the Hire Purchase Act, Law of the
Federation, 1990 and common law.
NATURE OF HIRE PURCHASE
Hire Purchase Distinguished From Hire
Hire is a kind of contract that does not pass title of the goods at a future date. The
definition of Hire Purchase as seen above is different from the concept of hire. Hire only
enables a person to use the goods for his immediate use and does not want to own the
property. The hirer will return the chattel to the owner after its use.
Hire Purchase Distinguished From Loan and Mortgage Loans and Mortgages
Mortgage is a kind of arrangement where one person who desire some finance borrows
money from a person or a financial institution for his use in order to satisfy some needs.
Hire Purchase Distinguished From Sale on Credit Terms
This is a situation where a person wants to make an outright purchase of goods but
may find out that he does not have sufficient money to make full payment for them. In
this instance, the person may pay in instalment, while the goods pass to the buyer on
credit. In this instance, the seller loses his seller’s right of lien on the property and where
the buyer resells the goods; the third party will be an innocent purchaser for value
without notice and will have a good title.
Reason for the Adoption of the Hire Purchase System
There are mainly three reasons for the Hire Purchase system of commercial
transactions
1) One of the most important reasons and the first is that it enables credit to someone,
who is unable to pay cash for the goods he wants and who would be happy to pay some
deposit and therefore pay the balance in installments at a stipulated rate of interest.

46
2) The other reason for this system is that the dealer or the manufacturer of the goods
cannot always provide credit and yet the goods must be bought to enable the dealer in
business.
3) The third option for the adoption of the hire purchase system is the possible evasion
of the Money Lenders Act 1939 Cap 124 LFN, 1958, which regulates the conduct of the
business of money lending.
ORAL OR WRITTEN
A Hire Purchase agreement may either be oral or written under the common law rule. It
is however pertinent to note that a detailed Hire Purchase agreement is usually in
writing and indeed should be in writing. The common law rule does not specify a
prescribed pattern or form for hire-purchase agreements. Note that hire-purchase
agreements are characterized by three main essentials which are: a. a clause by which
the owner agrees to let, and the hirer agrees to hire the goods. b. a clause which
empowers the hirer to determine the hiring and return the goods. c. a clause giving the
hirer the right or option to purchase the goods for a nominal sum at the end of the hiring.
ELEMENTS OF HIRE PURCHASE TRANSACTION
Offer and Acceptance
This is the first essential requirement of the hire-purchase agreement, which will give a
party the right to enforce or sue for a breach of the agreement, in order to enforce a
contract. If the number of the parties in agreement is two then, the offer in respect of the
hire-purchase in writing is constituted by the hirer signing the hire purchase agreement,
while the owner signifies acceptance by executing the agreement already signed by the
hirer. The acceptance must be communicated to the hirer in order for it to be valid. An
oral agreement between the hirer and the owner is also possible. If the hire-purchase
agreement involves three parties, i.e the owner, the dealer and the hirer, then the offer
is made by the hirer. Generally the dealer is not an agent of the owner, but for the
purpose of receiving the offer, he may be construed as the agent of the owner for that
particular moment. Mere delivery of the goods is not sufficient as acceptance. It is
important and compulsory to communicate such to the hirer.

Capacity of the Parties

The liability of infants under the general law of contract is the same under the hire-
purchase agreements. Prima facie, infants are not liable under the hire-purchase
agreement except those relating to necessaries and beneficial contract.
Obligation of the Owner
The first obligation of the owner under the common law is to deliver the goods which are
the subject matter of the hire purchase agreement to the hirer. It is therefore a
fundamental duty and its breach will entitle the hirer to repudiate the contract. Delivery

47
in this sense might not be physical transfer but voluntary transfer of possession from
one person to another.
Obligation of the Hirer
This is the fundamental obligation of the hirer to accept delivery of the goods, the
subject matter of the hire purchase. Such Hirer will be liable in damages if he fails to
take delivery within a reasonable time after he had been requested to do so. It is also
the primary duty of the hirer to pay, punctually the various sums provided for in the
agreement in accordance with the provisions of the agreement. The payment of
installments as specified in the hire-purchase agreement is mandatory and must be
strictly complied with. There are certain circumstances where the installment payment
may be suspended or waived. See the case of Offodile and Sons Enterprises v.
S.C.O.A (Nig.) Ltd (1969) CCHCJ 1333. The court held that the owners were entitled to
the rentals, and that the hirer’s strict liability to pay rentals during the war period was
only waived or suspended during the civil unrest that should not be regarded as
destroying the right to recover the rentals.
Obligation of the Dealer
In practice generally, the hirer is allowed to face with the dealer in the transaction to
enforce certain rights under an independent contract entered into between them despite
the fact that the finance company is the owner of the goods. However the dealer is
closer to the hirer as stated by the Supreme Court in Amusan and Thomas v. Bentworth
Finance Co. Ltd (1966) N.M.L.R 276, that in law, the dealer (S.C.O.A) could be treated
as agents of the finance company for the purpose of delivery of the vehicles but not for
all purposes.
CONTROLS OF HIRE PURCHASE AGREEMENT
Adverse Possession and Conversion Where section 14(1) of the Act applies, a hirer in
possession of goods under a hire purchase agreement is deemed to be in adverse
possession if the owner, in any action to enforce a right to recover possession of the
goods from the hirer, proves that after his right to possession accrued and before
commencement of the action, he made request in writing for the possession of the
goods. The purpose of this section is that where the hirer has defaulted, and a written
notice has been issued on him, then if he refuses to deliver them up, the owner will
have a cause of action for adverse possession against him. Giving of notice is
mandatory, and if he refuses to deliver up the goods, his possession will be regarded as
adverse, sufficient enough to ground the statutory cause of action in damages for
adverse possession and could also be sued for conversion.
There are usually two or three parties to a Hire-Purchase Agreement: the Owner, the
Hirer and in some cases, the Guarantor. The Owner is the party who is hiring out his
property with an option to purchase to the party called the Hirer. The Guarantor is the
party who undertakes to perform the Hirer’s obligations under the Hire-Purchase
contract if the Hirer defaults.
.

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FORM OF A HIRE PURCHASE AGREEMENT

1. A Hire-Purchase Agreement is expected to be in writing and to be signed by the

parties to the agreement. There have been situations where an oral Agreement
would still be enforced by the courts if the terms of the contract are ascertained.
However, it is always advisable that all forms of contract be in writing in order to
avoid the challenges and limitations which come with enforcing an oral contract.
2. A Hire Purchase Agreement is required to state the price at which the property,
for which the hire-purchase agreement is sought to be entered, can be
purchased for by the Hirer. This is to be done in writing otherwise the hire
purchase contract will be unenforceable against the hirer, unless the court is of
the opinion that failure to state the price has not prejudiced the hirer and that it
would be fair and just to enforce the contract against the hirer.
3. A Hire Purchase Agreement is also expected to reflect the hire‐purchase price in
respect of which the Hire Purchase Agreement is made, the amount to be paid in
each instalment, and the dates on which they are to be paid or the mode of
determining the date upon which each instalment is payable. It is also essential
that the property in respect of which the Agreement is made is described with
sufficient particulars so that it can be easily identified.

The Hire Purchase Act provides for certain terms which when included in a Hire-
Purchase Agreement would be void.

a. Any provision which allows the Owner or his agent to enter into the premises of
the Hirer to recover or take possession of any property which has been let under
a Hire Purchase Agreement and any clause or provision in the contract which
seeks to relieve the owner or his agent of any liability for such unlawful or
unauthorised entry.
b. Any provision which seeks to restrict or deprive the hirer of his right under the law
to terminate the contract or increase the liability already imposed by law on the
hirer for terminating the contract.
c. Any provision where the Hirer, after the determination of the hire-purchase
agreement is subject to a liability which exceeds the liability to which he would
have been subject if the agreement had been determined by him.
d. Any provision whereby any person acting on behalf of an owner in connection
with the formation or conclusion of a Hire Purchase Agreement is treated as or
deemed to be the agent of the hirer.
e. Any provision whereby an Owner is relieved from liability for the acts or defaults
of any person acting on his behalf in connection with the formation or conclusion
of a hire-purchase agreement.
f. Any provision whereby a hirer is required or compelled to avail himself of the
services, as insurer or repairer or in other capacity whatsoever, of a person other
than a person selected by the hirer in the exercise of his unfettered discretion.

LIABILITY OF A HIRER UPON TERMINATION OF THE HIRE PURCHASE

49
 CONTRACT

When either party to a contract unilaterally terminates the contract, it amounts to

a breach of contract. Under the Hire-Purchase Act, a Hirer has the right to
terminate the contract, but he incurs some liabilities when he does so:

1. Where a Hirer terminates the hire-purchase contract, the law mandates him to
pay half of the hire-purchase price and any sum due (any unpaid instalment or
money still being owed) under the hire purchase agreement immediately before
the termination. If the total amount he has paid under the Hire Purchase
Agreement exceeds one half of the Hire Purchase sum, he forfeits that extra sum
and where the total amount he has paid under the Hire Purchase Agreement is
less than one half of the Hire Purchase Price, he is liable to pay up the
difference. Any provision which seeks to increase the amount which a hirer would
pay upon terminating the contract is void.
2. The Hirer is also liable to pay damages in respect of the Hire Purchase Property,
where the Hirer has failed to take reasonable care of the property.
3. A Hirer who terminates a Hire Purchase Agreement is also expected to return the
Hire Purchase property to the owner and to settle all outstanding liabilities.

Usually, the hire-purchase agreement is required to state the circumstances in which

the owner may terminate the contract. Where the Owner terminates the Hire Purchase
Agreement otherwise than in accordance with the contract, he could be liable to the
Hirer for a breach of the hire-purchase contract.

RECOVERY OF THE HIRE PURCHASE PROPERTY BY THE OWNER

Until the Hirer exercises the right to purchase the property under the Agreement, the
ownership or title to the property remains in the Owner. Thus, if the need arises, the
Owner can recover his property from the Hirer. The law provides that where goods have
been let under a hire‐purchase agreement and ‘the relevant proportion of the hire‐
purchase price’ has been paid, the Owner shall not enforce any right to recover
possession of the goods from the Hirer otherwise than by an action Instituted in court for
the recovery of the property.

The Hire-Purchase Act defines what ‘relevant proportion of the hire purchase
price’ means:

 In any case where the property in respect of which the Hire Purchase Agreement
is made is not a motor vehicle; the relevant proportion is one half of the hire-
purchase price;
 And in the case of motor vehicles, three‐fifths of the purchase price.

The provision and wordings of the law gives the impression that where the relevant
proportion of the hire-purchase price has not been paid, the Owner has the right to

50
personally recover the hire-purchase property without recourse to a court of law. This
must, however, be done within the confines of the law.

There are consequences for contravening the provisions of the law on recovery of the
hire-purchase property. When an Owner contravenes the law, the following happen:

1. The hire-purchase contract is automatically terminated by operation of law;

2. The Hirer shall be released from all liability under the agreement and shall be
entitled to recover from the owner all sums paid by him under the agreement and
a guarantor would also be entitled to recover all sums paid in respect of any
contract of guarantee made in respect of the hire-purchase agreement.

The foregoing would not apply where the Hirer has already exercised his right to
terminate the hire-purchase agreement.
The law, however, gives the Owner an opportunity to protect the hire-purchase property
from damage or depreciation when the need arises. The law provides that where three
or more installments of the hire‐purchase price of a motor‐vehicle under the Agreement
are due and unpaid, the owner may remove the motor vehicle to any premises under his
control for the purpose of protecting it from damage or depreciation and retain it there
pending the determination of any action, but the Owner shall be liable to the Hirer for
any damage or loss which may be caused by the removal.

51