Contracts are an essential part of everyday personal and business transactions. They establish the obligations of the parties and provide certainty about what each party is expected to do.
However, a contract does not always go according to plan. One party may fail to pay, refuse to deliver goods or services, perform an obligation late, or otherwise fail to comply with the terms of the agreement.
When this happens, the affected party may have a legal claim for breach of contract in Nigeria.
Understanding what constitutes a breach of contract, the different types of breach, and the remedies available can help individuals and businesses protect their interests when contractual obligations are not fulfilled.
What Is a Breach of Contract?
A breach of contract occurs when a party fails to perform an obligation required under a legally enforceable contract without lawful justification.
A breach may occur where a party:
- Fails to perform an agreed obligation.
- Performs an obligation inadequately.
- Performs an obligation late.
- Refuses to perform the contract.
- Does something expressly prohibited by the agreement.
Whether a particular act amounts to a breach depends on the terms of the contract and the circumstances of the case.
Common Examples of Breach of Contract
Breach of contract can occur in many situations.
Examples include:
- A buyer fails to pay for goods supplied.
- A contractor fails to complete agreed work.
- A supplier fails to deliver goods as agreed.
- A tenant breaches an obligation contained in a tenancy agreement.
- A service provider fails to provide the agreed services.
- A business refuses to honour an agreed commercial arrangement.
- A party fails to meet an agreed deadline where time is contractually important.
The consequences will depend on the nature and seriousness of the breach.
Types of Breach of Contract
1. Actual Breach
An actual breach occurs when a party fails to perform an obligation when performance is due.
For example, if a supplier is required to deliver goods on a specified date but fails to do so, the failure may constitute an actual breach.
2. Anticipatory Breach
An anticipatory breach occurs where, before the time for performance arrives, one party clearly indicates that they will not perform their contractual obligations.
For example, if a contractor informs the client before the agreed completion date that the contractor will not carry out the work at all, the circumstances may give rise to an anticipatory breach.
The appropriate response depends on the terms of the contract and the applicable law.
How Do You Know If a Contract Has Been Breached?
The first step is to examine the contract itself.
Look at:
- The obligations of each party.
- Performance deadlines.
- Payment provisions.
- Termination provisions.
- Conditions precedent.
- Notice requirements.
- Dispute resolution provisions.
- Clauses dealing with default or breach.
It is important not to assume that every failure to perform automatically gives rise to the same legal remedies.
What Should You Do When a Contract Is Breached?
Step 1: Review the Contract
Read the agreement carefully and identify the obligation that has allegedly been breached.
Pay particular attention to clauses dealing with default, notice, termination, dispute resolution, and remedies.
Step 2: Preserve Relevant Evidence
Keep documents that may establish the existence of the contract and the breach.
These may include:
- The signed agreement.
- Invoices.
- Receipts.
- Bank statements.
- Emails.
- WhatsApp messages.
- Delivery records.
- Photographs.
- Correspondence between the parties.
Electronic communications can also be important evidence depending on the circumstances.
Step 3: Notify the Other Party
Depending on the contract and circumstances, you may notify the other party of the breach and request that it be remedied.
The contract may specify how such notice must be given.
Step 4: Consider a Demand Letter
Where appropriate, a lawyer may issue a formal demand letter setting out the breach and the action required from the defaulting party.
A demand letter may give the parties an opportunity to resolve the dispute without commencing litigation.
Step 5: Consider Negotiation or Alternative Dispute Resolution
Litigation is not always the best first option.
Depending on the contract, parties may consider:
- Negotiation.
- Mediation.
- Arbitration.
- Other agreed dispute-resolution mechanisms.
A negotiated settlement can sometimes resolve the dispute more quickly and at lower cost.
Step 6: Consider Legal Action
If the breach cannot be resolved amicably, the affected party may consider commencing legal proceedings.
The appropriate claim and court procedure will depend on the nature of the contract, the relief being sought, and the applicable law.
Remedies for Breach of Contract in Nigeria
A party who suffers loss because of a breach may have access to one or more legal remedies, depending on the circumstances.
1. Damages
Damages are a monetary remedy intended to compensate a party for loss resulting from the breach, subject to applicable legal principles.
The claimant must establish the basis for the damages claimed and satisfy the applicable requirements for recovery.
2. Specific Performance
Specific performance is a court order requiring a party to perform a contractual obligation.
It may be considered where monetary compensation would not adequately remedy the claimant’s loss and the requirements for the remedy are satisfied.
It is not automatically granted in every breach of contract claim.
3. Injunction
In appropriate circumstances, a party may seek an injunction to restrain another party from carrying out a particular act or, in some cases, to perform a particular action.
Whether an injunction is available depends on the facts and applicable legal principles.
4. Rescission
In appropriate circumstances, a contract may be rescinded, bringing the contractual relationship to an end and potentially restoring the parties to their pre-contractual positions, subject to the applicable law.
Rescission is not available in every contractual dispute and should be distinguished from termination for breach.
5. Termination
A contract may sometimes be terminated following a sufficiently serious breach or in accordance with an express contractual termination clause.
The right to terminate depends on the terms of the agreement and the applicable law.
Can You Sue for Breach of Contract Without a Written Contract?
A written contract provides strong evidence of the parties’ agreement, but the absence of a formal written agreement does not necessarily mean that no contractual relationship exists.
Depending on the circumstances, a contract may arise through conduct, communications, or oral agreement.
However, proving the terms of an unwritten agreement can be considerably more difficult.
For this reason, important commercial arrangements should generally be documented in writing.
What If the Contract Contains a Dispute Resolution Clause?
Some contracts require parties to attempt negotiation, mediation, or arbitration before commencing court proceedings.
If your contract contains such a clause, it should be carefully reviewed before filing a lawsuit.
Commencing proceedings without complying with a binding contractual dispute-resolution procedure may create unnecessary procedural complications.
Common Mistakes to Avoid
When faced with a contractual dispute, people sometimes:
- Act without reading the contract.
- Ignore notice requirements.
- Destroy or lose relevant evidence.
- Terminate the contract without legal advice.
- Assume every breach automatically permits termination.
- Demand excessive or unsupported compensation.
- Commence litigation without considering settlement.
- Ignore limitation periods.
These mistakes can weaken an otherwise legitimate claim.
How Long Do You Have to Sue for Breach of Contract?
Contractual claims are subject to limitation laws, and the applicable limitation period can depend on the limitation law of the state where the action is to be instituted.
A person who believes a contract has been breached should therefore seek legal advice promptly rather than assuming that there is unlimited time to commence proceedings.
Why Legal Advice Is Important
Contract disputes can involve complicated questions concerning contractual interpretation, evidence, damages, termination, and procedural requirements.
A lawyer can help you:
- Review the contract.
- Determine whether a breach has occurred.
- Assess available remedies.
- Prepare a demand letter.
- Negotiate a settlement.
- Commence legal proceedings where appropriate.
- Defend a contractual claim.
- Advise on enforcement of a judgment.
Early legal advice can help prevent an avoidable dispute from becoming more expensive and complicated.
How Lexforte Attorneys Can Help
At Lexforte Attorneys, we advise individuals, businesses, companies, and other organisations on contractual and commercial disputes.
Our services include:
- Contract drafting and review.
- Contract interpretation.
- Breach of contract claims.
- Defence of contractual claims.
- Commercial litigation.
- Debt recovery.
- Negotiation and settlement.
- Alternative dispute resolution.
- Judgment enforcement.
We help clients protect their contractual rights and pursue practical solutions when commercial relationships break down.
Conclusion
A breach of contract in Nigeria can have significant financial and legal consequences. However, not every contractual disagreement automatically gives rise to the same remedy.
The first step is to examine the contract, identify the obligation that has been breached, preserve relevant evidence, and consider whether the matter can be resolved without litigation. Where necessary, legal proceedings may be commenced to pursue an appropriate remedy.
If you believe that another party has breached a contract—or that someone is accusing you of breaching one—obtaining legal advice early can help you understand your rights and choose the appropriate course of action.
Have you suffered a loss because another party breached a contract? Contact Lexforte Attorneys for professional advice on contractual disputes, negotiation, and litigation.