DOING BUSINESS IN NIGERIA: 5 THINGS TO NOTE BEFORE SIGNING ANY CONTRACT
| LEGAL TIPS:
– ALWAYS CONSULT A LAWYER TO REVIEW OR DRAFT YOUR CONTRACTS – NEVER SIGN ANYTHING THAT YOU DON’T UNDERSTAND OR AGREE WITH – DO NOT PROMISE SOMETHING YOU CANNOT PROVIDE OR FULFILL – ALWAYS PUT YOUR CONTRACTS IN WRITING – ALWAYS KEEP A COPY OF ALL DOCUMENTS YOU SIGN |
A contract is like a promise between people. It is an understanding, a deal between two or more people or organizations to do certain things. Each person or organization who agrees to do something in a contract is called a party. An agreement, or a contract, says what you and the other person have agreed to do. It is a written list of the promises you have made. The best form of contract is written on paper and signed by each party. Whilst we cannot over emphasize the absolute need to engage a lawyer to review your contracts, the following are some important things a party to a contract can also take notice of before signing a contract.
1.Parties to the Contract.
This defines the persons or entities entering into an agreement and it usually names the parties, their business address and their legal status e.g. This Sales Agreement is between ABC Limited of No XYZ Street, Lagos and 123 Limited of No 456 Street, Enugu. It’s important to ensure that the contract accurately identifies the parties because there is no contract without valid parties.
A common error is to use the name of a person representing an entity rather than the name of the entity. To ensure that you do not incur personal liability in contracts involving corporations, it’s advisable that the named party is the corporation and not your name as the owner/ director.
2.Obligations & Tenure
The essence of any contract is the performance of obligations by both parties and thus it’s important that the contract clearly describes the purpose of the agreement, role of each party and when the roles must be performed.
Bearing in mind that a contract is the major evidence of a transaction it’s important to pay attention to this portion of a contract so as to ensure that there is no ambiguity on the obligations of each party. A well drafted contract should leave no room for third party interpretation as it should contain everything you need to interpret the parties’ roles and duties. An example is a contract containing the clause “consignment to be delivered on the 30th of June” which could be termed ambiguous where the other party wants the goods before 12pm on 30th June.
A contract must also specify a termination date as it’s unusual to have an unending contract. Particular attention must also be paid to what happens after termination i.e. does one party render account or return all materials given to him by the other party? What happens if there is a Breach of Contract?
3.Keep it confidential.
Often, when one business hires another to perform a service, the other business will become privy to sensitive business information. Your agreement should contain mutual promises that each party will keep strictly confidential any business information it learns of while performing the contract.
4.Ensure the Contract Cannot Be Assigned Without Your Written Permission
When we enter into business transactions, its usually as a result of our belief in the value the other party is bringing on the table and thus in the event that the other party suddenly decides to assign his obligations to another party you may find yourself doing business with an entity with which you are not familiar or comfortable. It is for this reason that every contract should specify that neither party can assign the contract without the written consent of the other party.
5.What happens if there is a breach of the Contract?
A breach of contract is the default of one of the parties to perform its obligations under the contract. Where this happens the contract should contain a remedy for the breach which could be in form of a penalty or payment of damages to the other party.
The Contract should also specify method of resolving disputes amongst the parties which could range from mediation, arbitration or litigation. In some instances, the parties contemplating entering in a contract know that damages may be difficult to determine; in such cases, they sometimes include a “liquidated damages” clause — a clause that specifies in advance the amount of money damages one party will be entitled to if the other party breaches the contract
Good Luck!!!
