AN
ASSIGNMENT
ON
RELEVANCE OF CAPACITY OF
BUILDING CONTRACTS IN NIGERIA
PARTIES
TO
(ARC 510)
BY
RAHEEM S. A.
And
SALAMI T.O.
ARC/04/3226
ARC/04/3227
SUBMITTED TO
THE DEPARTMENT OF ARCHITECTURE, FEDERAL
UNIVERSITY
STATE.
OF
TECHNOLOGY,
AKURE,
ONDO
LECTURER: Prof. Ogunsote O.O.
NOV, 2009.
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TABLE OF CONTENTS
Pages
1.0 INTRODUCTION
1
2.0 BUILDING CONTRACT DEFINITION
1
3.0 NATURE OF A CONTRACT
2
4.0 ESSENTIAL ELEMENTS
4
5.0 CAPACITY OF THE PARTIES
5
6.0 EXEMPTION CLAUSES
7
7.0 RELEVANCE OF CAPACITY OF PARTIESTO BUILDING CONTRACT
9
8.0 CONCLUSION
11
REFRENCES
2
1.0 INTRODUCTION
If the world of business was building, contracts could be described as the foundation
upon which it depends for stability. A contract is simply promise or set of promise that
the law finds enforceable. In essence the universal law of contract requires that a valid
contract posses certain factors. An intension to enter into legal relations, an agreement
and a deed under seal (written) or supported by consideration or payment.
However, the capacity of parties to the contracts and relevances in Nigeria is vividly
emphasised on in this paper.
2.0 BUILDING CONTRACT DEFINITION
A contract is a legally binding agreement made between two or more parties by which
rights are acquired by one or more for acts or forbearances on the part of the other.
A contract is an agreement between two or more parties which is intended to have legal
consequences.
Definition of the American Restatement of Contracts is consequently accepted as the
most accurate. A contract is a promise or a set of promises for the breach of which the
law gives a remedy or the performance of which the law in some way recognizes as a
duty.
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Hence, even a transaction which is immediately and completely executed on both sides
such as cash sale in shop is a contract. It may seem artificial to talk of such a transaction
as consisting of a promise or a set of promises, but the artificiality is reduced when it is
recalled that a promise that a state of affairs exist, e.g. that the goods sold are of good
quality is a contractual promise.
It is submitted that the weakness of the definition of the American Restatement is that
it ignores the bargain element in contracts. No indication is made in the definition that a
contract is a two-sided affair. Something being promised or done on one side in return for
something being promised or done on the other side.
3.0 NATURE OF A CONTRACT
In English law a contract is an agreement made between two or more parties which is
intended to have legal obligations. Every contract is an agreement but not all agreement
is contract. A contract is an agreement which gives rise to obligations which will be
recognized by law and enforced in the law courts. A party to an agreement cannot have
the assistance of the courts in the event of a dispute arising, as the essential features of
legal obligation and enforcement are missing.
The law accepts that agreements are made without any intention that they should have
legal consequences; social or domestic arrangements are agreement only. Parties may
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wish to make agreement which would usually be contracts but they have chosen to avoid
forming a contract.
In the case of Rose and frank co. v Jr Crompton and bros ltd 1925, two commercial
company made an agreement which expressly said that it was not entered into as a formal
or legal agreement, was not to be subjected to legal jurisdiction in the law courts and was
to be held to be an expression and record of the intention of the parties to honourably
pledge themselves. The House of Lords decided that the agreement was not a legally
binding agreement: there was no intention that it was to have the effect of a contract.
An agreement which usually contains express provision that it is not to have legal
consequences is the normal letter of intent. A contract will come into existence only
when the parties have proceeded in a manner which the law accepts converts the letter of
intent into a contract.
A contract in English law is in the nature of a bargain: each party is expected to derive
some advantage. The advantages for each party do not have to balance each other, but in
general the courts will not enforce a contract against a party who would receive no
benefit from the contract.
There are two types of contract: a simple contract and a contract by deed. A simple
contract may be formed by word of mouth, in writing or by conduct; it is how all
common transaction are conducted.
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A contract by deed, usually known as a contract under seal, is a more formal contract
made in a prescribed manner. It is used for contracts of a substantial nature, for example a
construction contract.
4.0 ESSENTIAL ELEMENTS
The essential element of a contract is that the agreement most have been made with the
intention that will have legal obligation. In the addition the following elements most be
present.
i.
Offer and Acceptance: a contract is formed by one person making an offer to
another person who then accepts the offer. An offer may be made in writing or by
word of mouth and may be made to unknown person. Acceptance may be made in
writing or the word of mouth. Offer and the acceptance may be also be held to
have occurred from the conduct of the parties. Negotiation may take place to
obtain in agreement which is acceptable to both parties. There is then an offer on
the agreed basis and then an acceptance of that particular offer.
ii.
Form or Consideration: English law requires that a contract not made in a
particular form most have consideration if it is to be a contract. A contract by deed
or under seal has a special status since, historically, it was made by a man of
honour affixing his personal seal into molten wax on the contract document over
the years, person without their own personal seals were able to make this form of
contract by affixing to the contract document.
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iii.
Legality: a contract will not be one the courts will recognize and enforce if the
substances of the contract are legal. The construction industry has in the past been
subject to government licensing: if parties entered into a construction contract or
unlicensed work that was an illegal contract.
iv.
Capacity: in other to enter into a contract the parties must have the necessary
capacity. Persons under the age of eighteen (in Nigeria), cannot enter into a
binding contract.
v.
Genuine Consent: a contract is freely negotiated agreement within the parties
with agreed terms. The consent of each party is to be freely giving. A party`s
consent to a contract would not be genuine if they had entered into a contract as
direct result of some misinformation given to them by the other party which was
fundamental to the contract or a party entered into a contract solely because of
threat made to them.
5.0 CAPACITY OF THE PARTIES
English law recognizes that certain parties are restricted in their capacity to enter into a
contract. For individual under the age of eighteen, common law makes minors not bound
by their contract unless they are for necessaries that are food, clothing, accommodation
and essential services.
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At one time companies, as corporate bodies, were subject strictly to the ultra vires rule:
any contract made by the company which went beyond its capacity to make that kind of
contract was beyond its powers and so association objects clauses, which set out a
purpose of the company.
Any act by the company, other than one which is incidental to its subject which goes
beyond the object is subject to the ultra vires rule. An early example is the case of
Ashbury Railway Carriage and Iron Cov Riche1875, where the company’s objects clause
was for was for the construction and sale of railway stock and the business of mechanical
engineers. The company entered into an arrangement for the development of a railway
line in Belgium. Riche was appointment as its contractor. The company discovered its
true legal position and a repudiated the contract it had with Riche. Riche sued but his
claim was unsuccessful on the ground that the contract was ultra vires the objects clause
of the company.
Modern practice has been for the objects clause of a new company to be drafted in the
widest way so as not to restrict the business activities of the company; there is also power
under the Companies Act 1985 for a company to change its objects clause if it so wishes
The Companies Act 1985, as amended by the companies Act 1989, was made in order to
comply with a European Community Directive and to improve the position of those who
contract with companies.
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Section 35 states that validity of an act done by a company shall be call into a question
on the ground of lack of capacity by reason of anything in the company memorandum. A
contract made by the company itself, by its seal, is not ultra vires because the contract in
not within the objects clause of the company. Under Section 35A, a person dealing in a
good faith with a company by means of the board of directors is entitled to be treated on
the basis that directors are acting free of any limitation of the objects clause. Under
Section 35B, a party to a transaction with a company is not bound to inquire whether that
transaction is permitted by the object clause.
6.0 EXEMPTION CLAUSES
In standard forms of contract one party normally inserts a clause which seeks to exempt
the party from liability under the contract or to limit liability under the contract or to limit
liability. Often the user of the other party has not got the bargaining power to remove or
reduce the effect of such clause.
Until the unfair contract terms act 1977, the resolution of disputes with these clauses
had to be by the use of the use of common law. To a limited extent this is still the case:
common law determines whether such a clause is a term in the contract, and whether it
covers the loss or damage suffered
A term in a contract must be brought to the notice of the other party and provided
reasonable steps are taken to bring the term to that party’s notice the fact that the term is
not read or understood does not exclude it from the contract.
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The notice must, as we saw in the case of Olley v Marlborough Court Ltd 1949, he
brought to the attention of the other party before the contract is made.
Over the years the courts, mindful of the unequal position of parties in contracts which
contain exemption clause, have sought to assist the weaker party to the contract. A
measure used is the contra referendums rule: if there should be any uncertainty or other
doubt in an exemption clause. An application of this rule may be seen in a case we have
considered in another respect. In Smith v South Wales Switchgear Ltd 1978, the house of
Lords decided that an indemnity clause in a purchase order which sought to exempt
liability for, among other things, personal injury was ineffective. As this clause did not
make specific reference to negligence nor could its provisions be read sufficiently to
include negligence then the rule applied. This meant that the party’s own negligence was
not exempt by the exempt by the indemnity clause.
An exemption clause will also be ineffective if they have been misrepresentation: the
misrepresentation has removed the protection otherwise provided by the exemption
clause. In Curtis v Chemical Cleaning and Dyeing Co 1951, Ms Curtis took a wedding
dress to a branch of market receipt; when she questioned this she was told that they
would not accept liability for certain risks, including risk of damage by or to the beads
and sequins with which the dress was trimmed. She signed the receipt which contained a
clause that exempted the company for any damage howsoever arising. The dress returned
with a stain and Ms Curtis sued.
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The Court is Appeal held that the assistant’s statement that the exemption related to the
damage by or to the beads of sequins was a misrepresentation. It was done innocently but
nevertheless created a false impression. That in turn meant the exemption clause could
not be relied on.
7.0 RELEVANCE OF CAPACITY OF PARTIESTO BUILDING CONTRACT
All parties to the contract must have legal capacity to do so. For example minors,
persons of unsound mind, co-operation among others may be excluded from certain type
of contract. It is of course realized that no contract could be made or exist without parties
to which that contract is affected. However, the importance of capacity of parties to
contract could not be over looked.
As a result of this, the role of contract is that any person may engage in a building
contract but certain classes of people are not allowed to enter into building contract.
The exemption people from building contract are:
- Infant.
- Illiterate.
- Mentally disorder person.
- drunken persons.
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Under the customary law in Nigeria, an infant relief Act of 1874, infant is generally
exempted from liability from contract, others are also exempted for the following
reasons:
 To prevent contract fraudulent.
 To ensure that properties of, say father of infant which could be easily claimed by
fraud, the child is protected.
 A chance of claiming of some properties of insane person is protected.
 Save guide an illiterate from signing a contract document because any document
to be sign would have to translate by the interpreter from the both parties and
which said will be read over and over again by the representatives that are
collectively representing their instruction and aims.
 A mentally disorder person could be avoid the proving that the person that entered
the contract was in sane without medically proved which made him to incapable of
building contract.
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8.0 CONCLUSION
The study of building contract and relevance of capacity of parties to the building
contract in Nigeria, has elaborated the fact that nothing is more necessary in building
contract than the capacities of parties involved in the contract. This ,though one of the
essential elements of building contract, is even more important not only that it serves as a
way of protecting fraudulent, taking advantages over someone, claiming others’
properties and belongings. But also has to give more consideration, if contract is to be
free from being void and voidable
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REFRENCES
http://Doctrine/ofprivity/contract&.nigeria.org
http://nigeria.smetoolkit.org/nigeria.org
Keith Nanson .Law for Civil Engineering, an Introduction.
Prof. Ogunsote O.O. building law: a note book given to 500 Level, Department of
Architecture, Federal University of Technology. Akure. 2008/09 Session.
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