As Nigerians doing business in Nigeria with Nigerians, we must be very vigilant in every business venture. We know how hard it is to get our agreements in writing especially when the business deal is with a friend or a family member. If you own a small or medium-sized business, you are more likely to have family and friends as your customers, and most times, we are reluctant to write down our agreement because we feel like we can trust our family and friends.
But what do you do when this family member or friend fails to fulfil their end of the bargain? If you let it go, how would your business grow? You will be leaving money on the table and encouraging others to disappoint too. Definitely not a wise business strategy.
Don’t fret. All hope is not lost. Read everything in this article to effectively arm yourself on actionable steps you can take today to get back all that you are owed and make sure your oral agreements are kept and upheld.
What Is A Contract?
A contract is an agreement that the parties must fulfil. If any of the parties fail to fulfil his part of the agreement, the other party can enforce the agreement or get compensation for the party’s failure to fulfil.
A contract is simply any agreement that the law will recognize and enforce. Not all agreements are contracts. For example, the promises that parents make to their children are domestic, hence the law does not recognize such promise as a contract, so the child cannot enforce the promise in law.
What Is An Oral Contract?
An oral contract is an agreement, entered into by two or more people, which was not written down. A contract is oral even if receipts for payments are issued.
Note that text messages, email communications, and letters would not ordinarily turn an oral contract into a written one.
What Does It Mean To Enforce A Contract?
The enforcement of a contract simply means the ability of one party, to ensure or compel the other party to fulfil his end of the bargain or to receive compensation where the other party fails to fulfil his promise.
Illustration:
Mr. John Audu visits Mrs. Aisha Jonathan in her shop. Mr. John tells Mrs. Aisha that if she supplies 10 bags of Alfa rice to him every Monday, he will pay her the sum of N100, 000 every Saturday. Mrs. Aisha agrees. Mr. John and Mrs. Aisha have entered into a contract. Mrs. Aisha delivers 10 bags of Alfa rice to Mr. John on Monday; Mr. John did not pay her on Saturday as he promised. Another Monday, Mrs. Aisha delivers another set of 10 bags of Alfa rice to Mr. John, again, he did not pay her on Saturday. Mr. John has failed to fulfil his end of the agreement.
Can Mrs. Aisha enforce the agreement? Yes.
How can Mrs. Aisha enforce? Keep reading.
To be able to enforce an oral contract; four elements must be present:-
- Offer
- Acceptance
- Consideration
- Intention to contract
Offer
Offer is simply a promise, made by one party to another, with the intention that it will become binding as soon as it is accepted by the other party. Once an offer is accepted, a contract is born.
The terms of the offer must be clear. During bargains, negotiations, and haggling of price, there is no contract until they agree on all aspects of the transaction. Any of the parties can make an offer.
If one party makes an offer and the other states that something else is to be done or disagrees with any part of the offer, there is no offer yet.
Illustration:
From our above story, we will define an offer. When Mr. John informs Mrs. Aisha that he will pay N100,000 every Saturday if she supplies 10 bags of Alfa rice to him every Monday. Mr. John has made an offer.
Let’s assume that Mrs. Aisha felt that the Saturday payment was too far away and tells Mr. John that he will have to be paying her every Wednesday instead; Mr. John’s offer has been cancelled. A new offer has been made by Mrs. Aisha thus: she will supply 10 bags of Alfa rice to him on Monday and he will pay N100,000 every Wednesday.
If Mr. John does not object to this, then a contract has been created. So during negotiations and bargaining, there is no contract yet. All we have are different offers and counter-offers. A contract is created when the parties both agree to clear terms.
Acceptance
This is a final assent to the terms of an offer. It is an indication that a party has agreed to the terms of the offer. A valid acceptance is unconditional which means, the party accepting the offer, did not attach any condition to it. The acceptance of an offer must also be made known to the other party who made the offer.
If a fresh term is introduced by the party who is to accept, there is no acceptance. An acceptance can be by words or by conduct. If the party who offered, gives a timeframe for acceptance, and the acceptance is not made and communicated to him within the timeframe, there is no contract.
If the party, who offered, prescribes a method through which the other should communicate acceptance, and the party fails to convey the acceptance through that method, there is no contract; unless the party, who made the offer, decides to still acknowledge the acceptance regardless.
Consideration
Simply put, consideration is value. There must be an exchange of promise or something of value, for there to be a contract. Consideration may be an exchange of money or money’s worth for goods or services.
Anything of value given by one party to another to induce the other party to do his part of the agreement is consideration. The most common form of consideration in today’s transactions is the exchange of goods or services for money and vice versa.
Illustration:
The considerations in our story are as follows:
- Mr. John’s consideration is the payment of N100,000 to Mrs. Aisha.
- Mrs. Aisha’s consideration is the supply of 10 bags of Alfa rice to Mr. John.
To enforce an oral contract, you must show that you have done your part of the agreement and the other has failed to do his, either completely or partly.
Thus, for Mrs. Aisha to enforce the oral contract she had with Mr. John, she must have supplied the 10 bags of Alfa rice on Monday. If she hasn’t, she cannot compel Mr. John to pay up.
Intention To Contract
The law presumes that in every commercial transaction, the parties intend to enter into a binding agreement. It will be nearly impossible for one party to claim that he did not intend to enter into an agreement with the other.
Where a party approaches another and they begin negotiations for some goods or services, they already have shown an intention to have a binding agreement.
There are 2 situations, however, where there will not be an intention to contract:
- Assertions/statements, not intended to be taken seriously or literally.
If a party makes a promise that a reasonable person cannot take seriously, then there is no presumption of intention. Common examples are TV adverts of products, where there are wild exaggerations of what the product will do for the user, that is unreasonable, then there is no intention. - Where one of the parties expressly states that he doesn’t want to be bound.
Where it is clearly stated that a particular statement or act does not give rise to any legal relationship or contract with each party, then there will be no presumption of intention to contract.
Therefore, in commercial transactions, where one party comes looking like he means business, and he fails to tell you not to take him seriously, the law has presumed that he will be bound by the terms of the contract.
Illustration:
Since Mr. John approached Mrs. Aisha, looking sane and appears to be someone to be taken seriously, it is already presumed that Mr. John intended to be bound by their agreement, therefore he cannot claim that he didn’t intend to enter into an agreement with Mrs. Aisha.
3 Steps To Enforce Your Oral Contract
You may choose to employ the services of a lawyer or not. Here are simple steps that you can take:
- Formal Notification of Default
Formally notify the defaulter of his failure to fulfil his part of the agreement, preferably in writing. If you can, send a letter and get the Defaulter to acknowledge receipt of the letter. In the letter, include a timeframe within which he should fulfil his part. For instance, “you have 14 days from the date of this letter, to pay up the balance sum of N100,000”. - Indicate Your Willingness to Seek Redress in a Court of Law
Where he fails to meet up with the deadline or contact you for settlement or additional time, you can inform him of your willingness to go to court for the settlement of the issue(s). Usually, lawyers also include this in the first letter and decide not to give him any further notice. But you may choose to send two separate letters, especially if you are not too keen to proceed to court.
- Seek Redress in Court
Although in Nigeria, you can sue a person or a business by yourself, you should always seek legal advice before approaching the courts, especially high courts. In court, you would need to prove the elements stated above and if you have, you should consider calling witnesses too.
Conclusion:
Just because an agreement is oral, does not mean it cannot be enforced. Therefore, if you have entered into an agreement with another and he has failed to fulfil either a part or all of the contract terms, you can enforce the agreement because there is a valid contract.
A contract does not become invalid simply because it is unwritten.
Using the police or other uniformed personnel to enforce contracts is illegal and the defaulter can sue you to court and you will pay compensation to him for doing so.
If you are looking for a business lawyer to help you with this issue or any other issues in business contracts, you can contact us here.