Contracts are the foundation of any serious business relationship. They provide clarity, allocate risk, and establish enforceable rights and obligations. Yet, many entrepreneurs in Nigeria either operate without contracts or enter into agreements that are poorly drafted and inadequately reviewed. Both scenarios expose businesses to unnecessary risk and potential losses.
Understanding Contracts in Law
A contract is more than a written agreement; it is a legally binding framework that ensures promises made in business are enforceable. Under Nigerian law, a valid contract must include:
- Offer and acceptance: a clear meeting of minds (consensus ad idem)
- Consideration: Something of value exchanged (quid pro quo)
- Intention to create legal relations.
- Capacity of the parties.
- Legality of purpose.
Without these elements, what appears to be an agreement may lack legal standing.
Why Every Entrepreneur Needs Proper Contracts
- Clarity of obligations: A good contract will define roles, timelines, and deliverables.
- Risk allocation: A good contract will anticipate and manage potential disputes.
- Credibility: Investors, banks, and partners look for structured agreements.
- Enforceability: Contracts provide the legal basis for redress when obligations are breached.
Risks of Operating Without Contracts
- Verbal promises and casual arrangements are easily denied.
- Informal communication (such as text messages or chats) rarely satisfies the evidentiary threshold in court, and leaves room for ambiguity, and uncertainty.
- Unclear arrangements can quickly escalate into expensive disputes.
Risks of Poorly Reviewed Contracts
Not all contracts protect you. Entrepreneurs often sign agreements drafted by the other party or copied from generic templates. These contracts may contain:
- Midnight clauses: hidden provisions buried in fine print that impose heavy liabilities, waive important rights, or create automatic obligations.
- Ambiguities: unclear terms that invite disputes.
- One-sided provisions: agreements that leave one party entirely exposed.
Such contracts can bind a business in ways that are difficult and costly to undo.
What Makes a Strong Contract
A good contract is comprehensive and anticipates not only the transaction itself but also what happens afterward. Key considerations include:
- Remedies for default or breach.
- Mechanisms for dispute resolution (litigation, arbitration, or mediation).
- Force majeure provisions for unforeseen events.
- Termination clauses and conditions for exit.
- Confidentiality and intellectual property protections.
These elements ensure that the agreement remains effective, even in the face of change or conflict.
Key Lessons for Nigerian Entrepreneurs
- Written agreements are indispensable; do not rely on trust alone.
- Do not sign what you do not fully understand.
- Free templates or borrowed documents rarely fit your unique business needs.
- Contracts must consider both present obligations and future risks.
- Legal review is an investment, not an expense in the protection of your business.
For Nigerian entrepreneurs, contracts are not optional. They are strategic tools that protect investments, preserve relationships, and promote sustainable growth. Entering business without them, or with poorly reviewed agreements is a gamble that can undo years of hard work.
At Metalex Legal, we help entrepreneurs draft, review, and negotiate contracts that protect their interests and anticipate future risks. In business, prevention is always less costly than cure.
