Types of Contract

Quick Summary

• Contracts are classified based on how they’re created, their legal status, and execution stage
• Written contracts provide better evidence than oral contracts in Nigerian courts
• Valid contracts are enforceable, while void contracts have no legal effect
• Bilateral contracts involve mutual promises; unilateral contracts involve one-sided promises
• Understanding contract types helps determine enforcement rights under Nigerian law

Understanding Contract Classifications

Every contract you encounter in Nigeria falls into specific categories. When you buy airtime from MTN, sign an apartment lease in Lagos, or accept a job offer from GTBank, you’re creating contracts. But these contracts differ in important ways. Some are written, others oral. Some bind both parties, others bind only one side. Some courts will enforce, others they won’t.

Understanding these classifications matters because it determines your legal rights. Can you enforce this agreement in court? What evidence do you need? What happens if the other party breaks their promise? The type of contract answers these questions.

Classification by Formation Method

1. Written Contracts

Written contracts are agreements recorded on paper (or electronically) with the terms clearly documented. Both parties usually sign the document.

Nigerian Examples:

• Employment contracts: When Dangote hires an engineer, they sign a written employment letter stating salary, duties, and working conditions
• Tenancy agreements: Renting an apartment in Ikeja involves signing a written lease agreement with your landlord
• Bank loan agreements: When Access Bank gives you a N5 million loan, you sign detailed loan documents
• Sale of land: Property transactions in Nigeria require written contracts (often called Deeds of Assignment)
• Business partnership agreements: Partners in a Lagos trading company sign written partnership documents

Advantages of Written Contracts:

• Clear evidence: If disputes arise, the written document proves what you agreed to
• Court acceptance: Nigerian judges prefer written evidence over oral testimony
• Prevents misunderstanding: Both parties can read and confirm terms before signing
• Legal requirement: Some Nigerian laws require written contracts (land sales under the Statute of Frauds)
• Professional appearance: Shows seriousness and builds trust in business dealings
• Reference document: You can check the contract later to confirm specific terms

Disadvantages:

• Takes time to draft and review
• May need lawyers (costs money for legal fees)
• Some people can’t read or write well
• Creates formality that may seem unfriendly in personal dealings

2. Oral (Unwritten) Contracts

Oral contracts are spoken agreements without written documentation. They’re just as legally binding as written contracts (with some exceptions), but harder to prove in court.

Nigerian Examples:

• Market transactions: When you buy tomatoes at Onitsha market, you verbally agree on price and quantity – no written receipt needed
• Transportation: Boarding a danfo bus in Lagos creates an oral contract – you promise to pay, driver promises to transport you safely
• Service agreements: Hiring a bricklayer to build a fence, agreeing verbally on N150,000 payment
• Small business deals: A trader ordering N50,000 worth of goods from a supplier by phone
• Short-term employment: Hiring someone to help move furniture, agreeing verbally to pay N5,000

Advantages of Oral Contracts:

• Speed: Agreements happen instantly without paperwork delays
• Convenience: No need for lawyers or formal documents
• Common in daily life: Most Nigerian market transactions use oral contracts
• No cost: Free – no legal fees or documentation expenses
• Flexible: Easy to modify by simply agreeing verbally

Disadvantages:

• Hard to prove: In court, it becomes “your word against theirs” without written evidence
• Memory problems: People forget exact terms they agreed to months ago
• Disputes common: Without written records, parties often disagree about what was promised
• Not accepted for major transactions: Nigerian law requires written contracts for land sales and contracts lasting over one year
• Witness requirement: You may need witnesses who heard the agreement to prove it in court

Classification by Formality

1. Formal Contracts (Specialty Contracts)

Formal contracts must follow specific legal procedures to be valid. They require more than just agreement – they need special formalities like sealing, witnessing, or registration.

Types of Formal Contracts in Nigeria:

A. Contracts Under Seal (Deeds):
These are written contracts bearing the party’s seal and delivered as their formal act. In traditional English law (which Nigeria inherited), the seal was a wax impression. Today, it’s usually a red paper seal or simply writing “signed, sealed, and delivered.”

Nigerian Examples:

• Deeds of Assignment for land transfers
• Deeds of Mortgage when using property as loan security
• Deeds of Lease for long-term property rentals
• Company formation documents registered with Corporate Affairs Commission (CAC)

Special Features:

• Don’t require consideration (unlike simple contracts)
• Have longer limitation periods (12 years vs 6 years for simple contracts)
• Carry more legal weight in Nigerian courts
• Must be registered at relevant government offices for land deals

B. Contracts Required by Statute to be Written:
Certain Nigerian laws mandate written form for specific contracts.

Examples:

• Land sales: Property Law requires written contracts for land transactions
• Hire purchase agreements: The Hire Purchase Act requires written agreements showing terms, interest rates, and payment schedules
• Company contracts: CAMA requires certain company agreements to be in writing
• Insurance policies: The Insurance Act requires written insurance contracts
• Bills of Exchange: Must be written and signed under the Bills of Exchange Act

2. Informal Contracts (Simple Contracts)

Informal contracts don’t require special formalities. They can be written, oral, or even implied from conduct. Most everyday contracts are informal contracts.

Nigerian Examples:

• Buying groceries at Shoprite
• Hiring a taxi in Abuja
• Ordering food at a Lagos restaurant
• Purchasing phone credit from MTN
• Agreeing to fix someone’s car for N20,000

Requirements:

• Offer and acceptance
• Consideration (something of value exchanged)
• Intention to create legal relations
• Capacity to contract
• Legal purpose

Classification by Expression of Terms

1. Express Contracts

Express contracts have terms clearly stated in words, either written or spoken. The parties explicitly discuss and agree on the terms.

Nigerian Examples:

• A written employment contract stating: “Salary: N250,000 monthly, resumption date: January 15, working hours: 8am-5pm”
• Verbally agreeing with a mechanic: “Fix my car’s engine problem for N35,000, ready by Friday”
• A supplier stating: “I’ll deliver 100 bags of rice at N40,000 per bag by Tuesday”
• Insurance policy document listing coverage, premiums, and exclusions

Key Feature: The exact terms are communicated clearly – no guessing required.

2. Implied Contracts

Implied contracts arise from parties’ conduct or circumstances, not explicit words. The law infers agreement from actions.

There are two types:

A. Implied-in-Fact Contracts:
Created by parties’ behavior showing they intend to contract.

Nigerian Examples:

• Restaurant service: You sit down at a Lagos restaurant, order jollof rice, and eat. You never explicitly promised to pay, but your conduct (ordering and eating) creates an implied promise to pay the bill.
• Parking lot: You drive into a paid parking area at Ikeja City Mall. Even without verbal agreement, your action implies you’ll pay the parking fee.
• Professional services: You enter a barber shop, sit in the chair, and let the barber cut your hair. No words needed – your conduct creates an implied contract to pay for the haircut.
• Bus transport: You board a commercial bus. Your action implies agreement to pay the fare when you reach your destination.

B. Implied-in-Law Contracts (Quasi-Contracts):
Not true contracts, but the law treats them as contracts to prevent unjust enrichment.

Example: A doctor provides emergency treatment to an unconscious accident victim on Third Mainland Bridge. The victim can’t agree to treatment (unconscious), but the law implies a contract requiring the victim to pay reasonable fees. Otherwise, the doctor provides free service while the victim gets unjust benefit.

Classification by Validity

1. Valid Contracts

Valid contracts meet all legal requirements and are fully enforceable in Nigerian courts.

Requirements for Validity:

• Offer and acceptance (agreement)
• Consideration (something of value exchanged)
• Capacity (parties are adults and mentally sound)
• Intention to create legal relations
• Legal purpose (not criminal or against public policy)
• Genuine consent (no fraud, mistake, or duress)
• Certainty of terms

Nigerian Example: Chidi (age 30, sound mind) agrees to sell his Toyota Camry to Ada (age 28) for N4.5 million. They sign a written agreement. Both have legal capacity, there’s consideration (car for money), clear terms, legal purpose, and genuine consent. This is a VALID contract.

2. Void Contracts

Void contracts have no legal effect from the beginning. They’re treated as if they never existed. Nigerian courts will not enforce them.

Reasons a Contract is Void:

• Illegal purpose: Contract to smuggle goods past Nigeria Customs is void
• Impossible performance: Agreeing to sell a car that was destroyed before the contract (unknown to parties)
• Lack of capacity: Contract with a person declared mentally incompetent
• Against public policy: Agreement to bribe EFCC officials is void
• Wagering agreements: Gambling contracts are generally void in Nigeria

Nigerian Example: Emeka agrees to pay Tunde N500,000 to burn down a competitor’s shop. This contract is VOID because its purpose is criminal (arson). Even if Tunde performs the act, courts won’t make Emeka pay because the law doesn’t enforce illegal contracts.

3. Voidable Contracts

Voidable contracts are valid initially but one party has the right to cancel (void) them due to some defect. The innocent party can choose to enforce or cancel the contract.

Reasons a Contract is Voidable:

• Fraud: One party deliberately lied about important facts
• Misrepresentation: False statements induced the contract (even if unintentional)
• Duress: One party forced the other through threats or violence
• Undue influence: One party used their position of power to pressure the other
• Mistake: Serious errors about contract subject matter
• Minors’ contracts: Contracts with persons under 18 (except for necessaries)

Nigerian Example: A car dealer in Lagos sells you a “2020 Honda Accord” for N8 million. You discover it’s actually a 2015 model. The dealer’s misrepresentation makes this contract VOIDABLE. You can choose to:

• Accept the car (affirm the contract), or
• Return it and get your money back (rescind the contract)

Key Difference: Void vs Voidable

• Void: Never valid, no one can enforce it, automatic from the start
• Voidable: Valid until innocent party cancels it, can be enforced if not cancelled, requires action to void

4. Unenforceable Contracts

Unenforceable contracts are valid but cannot be enforced in court due to technical defects, usually lack of required evidence or form.

Nigerian Example: You verbally agree to buy land in Lekki for N15 million. The agreement is unenforceable because the Property Law requires land contracts to be written. The contract is valid between you and the seller, but if the seller refuses to transfer the land, courts won’t help you because you lack the required written evidence.

Another Example: A debt that exceeds the statute of limitations (6 years for simple contracts). The debt is valid, but after 6 years, you can’t sue to collect it – the contract becomes unenforceable.

Classification by Performance Status

1. Executed Contracts

Executed contracts are fully performed – both parties have completed their obligations. Nothing remains to be done.

Nigerian Examples:

• You buy a phone at Slot for N85,000 cash. You pay, they give you the phone immediately. Contract EXECUTED – finished completely.
• A painter completes painting your house, you pay him the agreed N120,000. Both obligations fulfilled.
• You buy fuel at a filling station, pay N10,000, and receive 10 liters. Transaction complete.

Key Feature: Past tense – everything already happened. No future obligations remain.

2. Executory Contracts

Executory contracts involve future performance – obligations remain unfulfilled by one or both parties.

Types:

A. Wholly Executory: Neither party has performed yet.

Example: You sign a contract today to buy a car next month for N3 million. You haven’t paid, seller hasn’t delivered the car. Both obligations are future – WHOLLY EXECUTORY.

B. Partly Executory: One party performed, the other hasn’t.

Example: A furniture maker delivers your custom wardrobe (he performed), but you haven’t paid the N250,000 yet (you haven’t performed). The contract is PARTLY EXECUTORY.

Nigerian Examples of Executory Contracts:

• Hire purchase: You take delivery of a generator but will pay N15,000 monthly for 12 months. Your payment obligation is executory (future).
• Employment contract: First National Bank offers you a job starting next month at N350,000 monthly. The contract is executory until you start work and receive first payment.
• Construction contract: You pay a builder N2 million deposit to construct a house. He hasn’t built it yet – his obligation is executory.
• Subscription services: You pay DStv N8,000 for next month’s service. DStv’s obligation to provide service next month is executory.

Classification by Obligations

1. Bilateral Contracts

Bilateral contracts involve mutual promises – both parties make promises to each other. Each party is both a promisor (making a promise) and a promisee (receiving a promise).

Simple Explanation: “I promise to do X if you promise to do Y.” Two-sided promises.

Nigerian Examples:

• Employment: “I (employer) promise to pay you N200,000 monthly IF you (employee) promise to work for me.” Both promise something.
• Sale agreement: Seller promises to deliver 500 bags of rice, buyer promises to pay N20 million. Mutual promises.
• Rental agreement: Landlord promises to provide apartment, tenant promises to pay N1.2 million yearly rent. Two-way obligations.
• Service contract: You promise to pay mechanic N50,000, mechanic promises to fix your car. Both make promises.

Key Feature: The contract forms when promises are exchanged. Performance comes later.

2. Unilateral Contracts

Unilateral contracts involve a one-sided promise. Only one party makes a promise. The other party doesn’t promise anything – they just perform the requested act.

Simple Explanation: “I promise to pay you N50,000 IF you find my lost dog.” You don’t promise to search – you either do it or don’t. If you do it, I must pay.

Nigerian Examples:

• Reward offers: “N100,000 reward for information leading to arrest of armed robbers.” Police don’t promise to search – if they provide information, you must pay.
• Bank promotions: “Open account and deposit N500,000 to receive free debit card.” You don’t promise to open an account – if you do, bank must give the card.
• Contest prizes: “First person to correctly answer this question wins N1 million.” Contestants don’t promise to participate – if they win, organizer must pay.
• Lost property: A notice saying “N50,000 reward for return of lost laptop containing important documents.” Finders don’t promise to search – if they return it, reward must be paid.

Key Difference: Bilateral vs Unilateral

Summary Comparison Table

Common WAEC Exam Mistakes

Practice Questions

Multiple Choice Questions

1. A contract where both parties have completed their obligations is called:
a) Executory contract
b) Executed contract ✓
c) Express contract
d) Bilateral contract

2. Which of the following contracts MUST be in writing under Nigerian law?
a) Buying bread at a bakery
b) Hiring a taxi in Lagos
c) Purchasing land in Abuja ✓
d) Ordering food at a restaurant

3. “N50,000 reward for return of lost phone” is an example of:
a) Bilateral contract
b) Void contract
c) Unilateral contract ✓
d) Formal contract

4. A contract that is valid but one party can choose to cancel it is called:
a) Void contract
b) Voidable contract ✓
c) Unenforceable contract
d) Illegal contract

5. When you board a commercial bus in Lagos without verbal agreement on fare, what type of contract exists?
a) Express contract
b) Implied contract ✓
c) Void contract
d) Formal contract

Essay Questions

Question 1 (12 marks): Distinguish between the following pairs of contracts, giving ONE Nigerian example for each:
(a) Written and oral contracts (4 marks)
(b) Express and implied contracts (4 marks)
(c) Bilateral and unilateral contracts (4 marks)

Examiner Tips:

• “Distinguish” means show DIFFERENCES – don’t just define each type separately
• Each pair needs: definition of type 1, definition of type 2, key difference, example for each
• Examples MUST be Nigerian (not foreign scenarios)
• Spend about 3-4 sentences per pair to get full marks
• For (a): Mention that written provides evidence, oral is harder to prove
• For (b): Explain express = stated in words, implied = inferred from conduct
• For (c): Highlight that bilateral = mutual promises, unilateral = one promise + one act

Question 2 (15 marks): (a) What is a void contract? (3 marks)
(b) Explain FOUR circumstances that make a contract void in Nigeria. (12 marks)

Examiner Tips:

• Part (a): Define void contract as having no legal effect from the beginning, unenforceable by any party
• Part (b): Use the word EXPLAIN properly – don’t just list the four circumstances
• Good circumstances: illegal purpose, impossible performance, lack of capacity, against public policy, wagering agreements
• For each circumstance: state what it is + explain WHY it makes contract void + give Nigerian example
• Nigerian examples: contract to smuggle (illegal), contract with mental patient (capacity), contract to bribe EFCC (public policy)
• Spend 3 sentences minimum per circumstance

Question 3 (10 marks): Explain FIVE differences between executed and executory contracts with examples from Nigerian business.

Examiner Tips:

• Each difference needs 2 sentences for full marks
• Key differences: timing of performance, obligations remaining, contract status, evidence, enforceability issues
• Executed examples: cash purchases at Shoprite, completed painting job, fuel bought and paid for
• Executory examples: hire purchase agreements, employment starting next month, building contract not yet completed
• Don’t confuse with bilateral/unilateral – this is about WHEN performance happens, not WHO promises
• Use clear Nigerian examples that examiners can easily understand

Question 4 (8 marks): A trader in Onitsha market verbally agreed to sell 200 bags of rice to a hotel owner at N35,000 per bag. The hotel owner paid N1 million deposit. The trader later refused to deliver the rice.
(a) What type of contract exists based on formation method? (2 marks)
(b) What type of contract exists based on performance status? (2 marks)
(c) Can the hotel owner enforce this contract in court? (4 marks)

Examiner Tips:

• Part (a): Oral/unwritten contract – agreement made by word of mouth, not documented
• Part (b): Executory contract – hotel paid (partly performed) but trader hasn’t delivered (future performance remains)
• Part (c): YES, enforceable – oral contracts are valid in Nigerian law for sale of goods. Though written evidence is better, witnesses and the N1 million payment receipt can prove the agreement existed. Apply Sale of Goods Law.
• Award marks for correct legal reasoning, not just yes/no answers

Memory Aids

Remember “WOFFE-VEX-B” for main contract classifications:

• Written or Oral (formation method)
• Ormal or Informal (formality)
• Formal or Informal
• Express or Implied (expression of terms)
• Valid, Void, Voidable, or Unenforceable (validity)
• EXecuted or Executory (performance status)
• Bilateral or Unilateral (obligations)

To distinguish VOID from VOIDABLE, remember “VOID = Illegal, VOIDABLE = Victim”:

• VOID: Illegal from start, helps nobody, never valid (contract to commit crime)
• VOIDABLE: Victim can cancel, valid until cancelled, protects innocent party (fraud, misrepresentation)

For BILATERAL vs UNILATERAL, count the promises:

• BILATERAL: TWO promises (bi = two) – both parties promise something
• UNILATERAL: ONE promise (uni = one) – only promisor promises, other party just acts

For EXECUTED vs EXECUTORY, think past vs future:

• EXECUTED: Past tense – already done, finished, completed
• EXECUTORY: Future tense – will be done, pending, not yet performed

Related Topics

To master contract law fully, study these related Commerce topics:

• Law of Contract – General framework governing all contracts in Nigeria
• Essential Elements of a Valid Contract – Requirements that make contracts legally binding
• Parties to a Contract – Who can make enforceable contracts
• How Contracts are Terminated – Ways contracts come to an end
• How to Discharge a Contract – Methods of fulfilling contract obligations