By Nkiru Zikora
A contract can be said to be an agreement between two or more parties to undertake a given activity or activities. It can be defined as a voluntary, deliberate, legally binding and enforceable act creating mutual obligations between the parties concerned. It can also be said to be an agreement with a definite obligation to be performed or forebear to be performed between two or more persons. A typical contract is an exchange in which one party gives something to another and receives something else in return. For example, a seller needs money and offers to sell his goods at a price, a buyer needs the goods and can pay the price, the seller sells the goods and receives money while the buyer gives money and receives the goods. In other words, the parties of a contract will all benefit something from the agreement. The parties of a contract can be individuals, group of persons, companies / organizations, or countries. The agreement can be either verbal or written. However, it is important to write down a contractual agreement to avoid ambiguity in the performance of the contract. It is pertinent to note that for a contract to be legally binding, it must be valid and enforceable by law. This means that in case of non-performance, parties to a contract can seek redress in a court of law.
A contractual agreement must therefore have an offer, acceptance and consideration. An offer is that which the parties of a contract have agreed to give up for another thing while acceptance is the agreement to take the proposed offer by the offeree. Without the acceptance of the proposal, there will be no agreement. To make an acceptance valid, it should be communicated through prescribed manner to the offeror. Consideration is that which each party of the contract should be seen to give up, something of value to obtain a benefit. Consideration could be monetary in the case of sale of goods, but consideration is not always monetary and must not be. It can be goodwill or services. For a contract to be valid and enforceable, the terms and conditions must be clearly stated (no ambiguity), the parties must not be minor (must be above 18 years old), parties must be of sound mind, the contract must have a fair value. The contract must not be for illegal activities such as a contract to deal in hard drugs or commit any form of crime. Contracts on illegal activities are considered void ab initio.
Therefore, for any business venture to thrive, there must be an agreement/contract binding the parties in the business venture. This rule applies to the real estate business where properties exchange hands either by outright purchase or a lease/rentage. Where a property is leased/rented, for whatever purpose (business or residential), the tenant/lessee enters into a contractual agreement known as Tenancy Agreement with the landlord/lessor of the subject property. A tenancy agreement is therefore a legally binding contract between a tenant and a landlord entered prior to the commencement of a tenancy. Like all contractual agreements, it must be concise with clearly defined terms and conditions. Such terms and conditions refer to the duration of tenancy, option of renewal at the determination of the term, rent payable (whether annual, biannual or biennial (two-yearly). Others include what use is the property to be put (is it residential or commercial etc.), the repairs to be handled by the landlord and those to be handled by the tenant, who pays the bills accrued to the property (utility bills, tenement rates etc.) and so on. These must be clearly spelt out in the agreement in a concise language. Therefore, it is imperative that the tenancy agreement is written with the tenant’s and landlord’s obligations in the contract clearly spelt out to avoid any form of ambiguity. The tenancy agreement must also include a clause on dispute resolution/settlement in case of a breach.
Breach can be said to be an act of breaking or failing to adhere to a requirement of law, an agreement, or a code of conduct. A breach of contract occurs when the terms and conditions of a contract has not been met by a party to the contract. A breach of contract can then be said to be the act of not adhering to the terms and conditions of a contract or a violation of all or some of the terms and condition of a binding contract without a legal excuse. A breach can occur if one party to a contract refuses to perform their duties set out in the contract, performs a sub-standard work, reneges on payment of services or does not pay within the stipulated time, or fails to deliver the contracted goods or services, and or arrives late with the services with no reasonable excuse.
In a tenancy agreement, a breach can occur when the tenant does not pay the agreed rent at the agreed time, or the landlord reneges on the performance of liabilities accrued to him or some other terms/conditions are not met. So, to forestall the acrimonious relationship between landlords and tenants, and/or the legal tussle that ensues with the breach of the terms and conditions of a tenancy agreement, it is imperative that a clause on dispute resolution/settlement in case of breach is included in the tenancy agreement.
Tenancy disputes need not end up in courts before resolution considering the lengthy nature of court proceedings which often drag for years. The dispute resolution clause therefore acts as a valid and less rancorous conflict resolution mechanism. To be effective, it should spell out how any foreseeable dispute should be resolved without litigation and parties to the contract would normally select who to act as arbitrators should there be a conflict in performance of the terms and conditions of the contract at any given period of the execution.
*Zikora, an Estate Surveyor and Valuer, writes from Abuja
