Understanding Contracts From a Legal Perspective

By DIY Law | 3 min read
20th July 2017
Understanding Contracts From a Legal Perspective

Definition of a Contract

A contract is an agreement between two or more parties where legal rights are created which the law will enforce.

Types of Contracts

There are two major types of contracts, namely:

  1. Formal contracts: These are contracts made by deed or under seal e.g a contract for the sale of land.These contracts must always be in writing and be signed, sealed and delivered

  2. Simple contracts: These are defined as all contracts other than formal contracts. They may be oral or in writing. For e.g, your contract with the Danfo driver who transported you from your house to work.

Other classifications of contracts exist but they all fall within the scope of these two contracts mentioned above.

Essentials of a Valid Contract

The essentials of a valid contract are:

  1. Offer: An offer may be defined as a statement of willingness to contract on certain terms made with the intention that, if accepted, there will arise a binding contract. An offer must be clear, complete and definite.

  2. Acceptance: Acceptance is the final and unqualified expression of assent to the terms of an offer. For example, you handing a gala seller,#50 for the gala you want to buy, is an offer, which he accepts by collecting the money and handing you the gala(acceptance). An acceptance must be clear, complete and final and it must be communicated to the other party.
  3. Consideration: Consideration is the price for which the promise of another is bought. It need not necessarily be in form of money. The consideration in a barter agreement would be goods given in exchange for other goods.

  4. Intention to Create Legal Relations: There must be an intention to enter into a legally binding contract. If such intention doesn't exist , there is no contract.
  5. Capacity to Contract: The general rule is that everybody is capable of entering into a contract. However, the law regards certain classes of people as needing protection, thus:


  • Infants: Persons under the age of 21(for contractual matters, in Nigeria). Infants can only contract for necessaries (essential things such as food, clothing etc.) and beneficial contract of service (contracts in which an infant receives training or instruction for his future career).

  • Persons of unsound mind: Any contract entered into by a person of unsound mind is revocable at the instance of the insane person. However, a person of unsound mind can enter a contract during his sane moments.

  • Drunken persons: Any contract entered into by a drunken person, is revocable at the instance of the drunkard. However, the contract can be approved when the person becomes sober.

Other Important terms:

  • Invitation to Treat: An invitation to treat is an invitation for offers .It is the process of negotiations that precedes the making of an offer. For e.g advertisements made in newspapers, or goods displayed in supermarkets.

  • Counter-Offer: A counter-offer is any amendment made to the offer.It cancels the original offer. For e.g a trader at Yaba market offers to sell a blouse for #2000 and a customer unwilling to pay that amount, asked, “Ko gba #1000?”.The #1000 offered by the customer is the counter-offer.

  • Privity of Contract: The doctrine of privity of contract provides that, only the parties to contracts can sue to enforce their rights.

Elements that Invalidate a Contract

The basis of contract law is a "voluntary agreement" between the parties.Thus, any conduct casting doubts on the voluntariness of the agreement may affect the validity of contract. Such as:

  1. Lack of consent: Consent means the parties must have agreed upon the same thing in the same sense.

  2. Duress: Duress is wrongful pressure exerted upon a person in order to coerce that person into a contract that he or she ordinarily wouldn't enter.                                                                                                                

  3. Misrepresentation: Misrepresentation is an untrue statement made by one party which induces another party to enter into a contract. For example, I claim to own the National theatre, to a person, who entered a contract to buy it, because of the misrepresentation.

  4. Mistake: A mistake is an erroneous belief, at contracting, that certain facts are true. A sells a cow to B for #8,000 because it is an infertile cow. The cow is actually pregnant and worth #80,000.

DIY Law
Legal, Simplified. | Winners of Innovating Justice Awards 2015. | Creating access to legal for African entrepreneurs. Posts are not legal advice.
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