Over the years, in my professional capacity, as well as in my personal life, I have seen extremely ugly disputes erupt amongst people who would have once referred to themselves as close friends or family; all because they attempted to do business or engage in a project together which subsequently resulted in discord.
The importance of formally documenting proposed business obligations cannot be over stated. Some people believe it might be insulting to the other party if seemingly out of nowhere they bring a document for that party to review and sign; but I always stress that prevention is better than cure, and in most instances, to actually save a friendship one has to be objective and follow due process. If you were doing business with a stranger, you would certainly mandate that the two of you sign something to show each-others clear intentions…. So why should this change because you are dealing with your “best friend”.

The Principals Behind Legally Binding Contracts
The foundations of legally binding contracts are premised on intention, an offer, acceptance of that offer and valid consideration. Each party to a contract acquires rights and duties relative to the rights and duties of the other parties.
Key elements for the formation of a legal contract include: -

a. Intention – all parties must have intended to create relations by entering into the contract;

b. Offer – there must be a valid, definite and clearly stated offer to do something;

c. Acceptance – this must be unequivocal and unconditional, and must be in accordance with the terms of the initial offer; and

d. Consideration – this may be in any form accepted by both parties, aside from a monetary consideration, it can also take the form of physical objects, promised actions, services, absence from future actions and the list goes on.

The general position of legal authorities is that any contract is legally binding and enforceable where the parties to the contract, at the time of entering into the contract, had the intention to be bound to the terms of the contract. All courts around the world appreciate that the sole objective of a legal contract is to define the agreement that the parties have consented to enter into, thus fixing their rights, duties and obligations in-line with what has been clearly set out in the contract. There is no legal body empowered to enforce the terms of a contract which does not exist.

Capacity to Contract
In saying this, I must stress that there are instances where a party to a contract may be deemed as lacking the capacity to enter into the contract, thus the contract regarded as unenforceable where some laws which relate to that nature of person are not duly complied with.
These persons include: -

a. An Illiterate – this is generally a person who cannot read or write in the language in which the contract has been executed;

b. An Infant – this is persons under the age of 21 (with an exception being contracts for the sale of goods)

c. A Lunatic or Person of Unsound Mind – however in these instances, a contract entered into with a lunatic at lucid intervals is valid (here the test for determining whether someone is a lunatic is not quite clear under Nigerian law, as we often see “many are mad but few are raving”)

Parties to a contract are bound by the terms of that contract, even in instances where the terms are more favourable to of the parties; as long as the contract is not the result of duress, undue influence or fraud, it is not the duty of the courts to determine the business viability of the contract terms.

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Credit: Ivie Omoregie