Introduction

Commercial contracts are the foundation of virtually every business relationship in Nigeria. Whether you are entering a supply agreement, a service contract, a joint venture, or a distribution arrangement, the terms you agree to today will govern the relationship — and any disputes — for months or years to come.

Yet many Nigerian businesses approach contract signing with insufficient attention to the legal implications of individual clauses. This article outlines the key considerations every business should understand before committing to a commercial agreement.

1. Understand What You Are Actually Agreeing To

It sounds obvious, but many disputes arise simply because one or both parties did not fully understand what they agreed to. Before signing any commercial contract, ensure that you have read and understood every clause — not just the headline terms.

Pay particular attention to:

  • Payment terms and conditions for payment
  • Delivery obligations and timelines
  • Conditions precedent that must be satisfied before the contract becomes binding
  • Termination provisions and the circumstances in which either party may exit
  • Limitation of liability clauses

2. Governing Law and Dispute Resolution

Every well-drafted commercial contract should specify which country's law governs the agreement and how disputes will be resolved. In Nigerian commercial practice, contracts may specify Nigerian law, English law, or another jurisdiction depending on the nature of the transaction and the parties involved.

The dispute resolution clause is equally important. You should understand whether disputes will be resolved through litigation in Nigerian courts, arbitration (domestic or international), or mediation. Each mechanism has different implications for cost, speed, confidentiality and enforceability.

3. Representations and Warranties

Commercial contracts typically contain representations and warranties — statements of fact made by one or both parties as at the date of signing. If a representation proves to be false, the other party may have a right to claim damages or rescind the contract.

Before signing, ensure that any representations you are making are accurate and that you understand the consequences if they are not.

4. Indemnity Clauses

Indemnity clauses require one party to compensate the other for specific types of loss. These can be extremely broad and may expose your business to significant financial liability. Always review indemnity provisions carefully and consider whether the scope of your potential exposure is acceptable.

5. Force Majeure

A force majeure clause excuses a party from performing its obligations when prevented by circumstances beyond its reasonable control — such as natural disasters, government action, or other extraordinary events. The scope of what qualifies as force majeure varies significantly between contracts.

6. Seek Legal Advice Before Signing

The cost of obtaining legal advice before signing a commercial contract is invariably less than the cost of resolving a dispute after the relationship has broken down. A qualified commercial lawyer can identify unfavourable terms, negotiate improvements, and ensure that the final agreement properly reflects the commercial understanding of both parties.

This article is for general informational purposes only and does not constitute legal advice. For advice specific to your circumstances, please contact Ebokpo, Adedayo & Co.