Essential Elements of a Valid Contract: Exploring Offer, Acceptance, Consideration, Capacity, and Intention

Everyday human being interact with each other by entering into an agreement to do or not to do a particular thing. It is worthy to note that not all of these agreements could be referred to as a contract. Although, all contracts are agreements but not all agreements are contract. Contract is an agreement which is recognized and applied by the court as binding on parties to it. It is the agreement which the law will enforce or recognized as affecting the legal rights and duties of the parties.[1] Learned Jurist as considered contract as an agreement which is legally binding on the parties to it and which, if broken, may be enforced by action in court against the defaulting party.[2] Contract is also considered an agreement between two or more parties which creates reciprocal legal obligations to do or not to do particular things.[3]

It is pertinent to differentiate between contract and agreement, while the latter consist of just offer and acceptance as elements, contract consist of certain conjunctive elements without which an agreement cannot be recognized or enforced by a court, these elements include; offer, acceptance, consideration, capacity to contract, and intention to enter into legal relation.[4]

An agreement will not amount to contract without a person proposing to do something or refrain from doing something for the act of another person. A promise made by a party to another for a considerable promise of benefit, profit, or detriment, forbearance is termed offer. Offer is a definite and unequivocal promise made by a party who intends to be bound by it upon acceptance by the party to whom the promise is addressed.[5] It is an expression to contract on certain terms by an offeror with the intention that it shall be binding upon acceptance by the offeree.[6] Before such a promise to be valid it must be precise and unequivocal, communicated by the offeror to the offeree, it must be complete, it must be distinguished from invitation to treat. Invitation to treat is a mere invitation to negotiate which may or may not lead to a definite offer. An invitation to treat is not an offer that can be accepted to lead to a binding agreement but its end product can be an offer.

Nevertheless, an offer is not sufficient to give rise to an enforceable agreement without acceptance, which is the absolute assent, without modification, to the terms and conditions present in an offer. Acceptance is the definite and unqualified expression of assent to the terms of the offer.[7] In other words, it is the reciprocal act or action of the offeree to the offer in which he indicates his agreement to the terms of the offer as conveyed to him by the offeror.[8] An expression of assent will only consist of a valid acceptance if it is plain, unequivocal, unconditional, without variance of any sort between it and the offer, and if it is communicated to the offeror without unreasonable delay.[9] However, in situations when there exist variance between the acceptance and the offer, when the acceptance is subjected to a condition or subject to contract, when the acceptance is made at the ignorance of the offer, or when the acceptance is not communicated to the offeror, such acceptance will be deemed invalid and as such cannot birth an enforceable agreement. In the light of communication of acceptance, this can be done by words, conduct, writing, telex, telegram, fax, email, or by post. When an acceptance is made by post such acceptance becomes valid and binding upon postage of such letter as established in Adams v. Lindsell.[10]

Nevertheless, after an offer has been accepted there is need for exchange for a thing of value in the eye of the law between the offeror and the offeree, termed consideration. Consideration is a thing of value in the eye of the law which must be given for a promise to be binding and enforceable.[11] A comprehensive definition of consideration was given in the case Currie v. Misa[12]where it was stated that “a valuable consideration in the eye of the law may consist of either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other …” An action for the enforcement of a contract will only be sustained if the party suing has furnish some consideration for the promise of the other party if not such action will be dismissed for the want of consideration, this has been the position of the law since time immemorial as seen in Eastwood v. Kenyon[13] where it was held that moral obligation cannot amount to consideration. Also in the case of Faloughi v. Faloughi[14] natural love and affection is said to not amount to consideration. A party who does not furnish a consideration is not entitled to right, benefit, interest or profit under a contract.

Moreover, the general rule of contract is that it is binding on parties to it. Nevertheless, a contract may not be binding or enforceable against certain categories of people who enjoy a special status in contractual transaction. The special status is a form of protection for people that the law assumed to lack the required mental ability or capability to enter into a contract and can be easily exploited or defrauded in making bargain.[15] This categories of persons include the infant, illiterate, lunatic, and drunkard. It is held in Thoroughgood’s case[16] that even when all the ingredients which go to make a valid contract are present in an agreement, it may turn out to be illegal, voidable, or unenforceable due to the defective capacity to enter into it. There are laws guiding the exemptions of persons from entering into a binding contract such as the Illiterate Protection Laws, Land Instrument Registration Law, Infants Relief Act of 1874, Sales of Goods Act, etc.

In addition, while some learned jurists accept and validate intention to enter into legal relation as an element of a valid contract, others negate this opinion such as Professor Williston. Intention to enter into legal relation is the assumed objective of a party to enter into a binding contract. Intention, mostly, is assumed by the court. There are situations when intention will be said to not have been present such as in domestic and social engagements,[17] when the agreement contains a clause that expressly excludes the contractual intention,[18] and also situations when the court will assume the presence of intention such as; when spouse are living in amity,[19] commercial agreement.[20]

In conclusion, an agreement that lacks any of the conjunctive essential elements of a valid contract will not be recognized or enforceable by the court. When an agreement is made without either offer, acceptance, consideration, capacity to contract, or intention to enter into legal relation, such agreement will not hold water, and therefore cannot birth a legally binding agreement on parties to it. The elements of a valid contract are sacrosanct to the formation of contract without which such agreement would be void, voidable, or illegal. 

[1] I.E., Sagay, Nigerian Law of Contract (rev edn, Spectrum Books Ltd 2018) 1.

[2] Kabo Air v. Tarfa (2004) 6 WRN 135 at 49

[3] Orient Bank (Nig.) Ltd. v. Bilante International Ltd. (1997) NWLR  (pt.515) 37 at 76

[4] Alfotrin Ltd. v. A.G. Federation & Ors [1996] 12 LLER 1

[5] Ibid., see footnote 1, p.18.

[6] Sunday Akanmu v. Oluwole Olugbode [2001] 13 WRN 132.

[7] Ibid., see footnote 1, p.32.

[8] Ibid., see footnote 3, p. 37

[9] Ibid., see footnote 1, p.37-8.

[10] (1818) 1 B. & A. 681

[11] I.E., Sagay, Nigerian Law of Contract (rev edn, Spectrum Books Ltd 2018) 77

[12] (1875) L.R. 10 Exch. 153 at p.162

[13] (1840) 11 A. & E. 438

[14] [1995] 3 NWLR (pt. 384) p. 343.

[15] Ibid., see footnote 11, p. 537

[16] (1863) 32

[17] Balfour v. Balfour [1919] 2 K.B. 571, see also Spellman v. Spellman [1961] 1 WLR 921.

[18] Amadi v. Pool House Group and Nigerian Pools Co. [1966] 2 All N.L.R. 254

[19] McGregor v. McGregor (1888) 21 QBD 424, see also Merritt v. Merritt [1970] 1 WLR 1211

[20] Omoyinmi v. Ogunsiji [2008] 3 WRN 115 at 135