BUL 506

(2)
ENGINEERING PRACTICE AND
CONTRACTUAL AGREEMENT
 Introduction
• This section shall deal with the application of law of contract to practice of engineering in Nigeria. It is therefore
seeks to explain how an engineer can enter into a contractual relationship with another be it engineer or other
person.
• Contract can therefore be defined as an agreement between two or more persons that will have legally binding
effect if accepted. Therefore, the cardinal point of notice in any contract is what is called Concensus adi dem,
meaning “the coming together of the minds of the parties to the contract” or meeting of mind of the parties.
• CLASSIFICATION OF CONTRACT
• 1. Formal and Informal. While Formal contract is a contract made by deed. It is a contract signed sealed and
delivered. It is also called Contract of Specialty or under seal, An Informal contract are all other contract except
informal contract. This also known as Simple contract.
• 2. Express and Implied. While Express contract is a contract whose terms and conditions are clearly stated by
the parties to it, an implied contract on the otherhand is the one whose terms and condition are not stated but
implied by law, trade or custom or profession into the contract for the parties.
• 3. Bilateral and Unilateral. A Bilateral contract on one hand is a contract whereby parties exchange promises
to one another, while unilateral contract is the one where it is only one party that promise to do an act in
exchange for another promise. Eg Carllil v. Carbolic case
• ELEMENTS OF ENGINEERING CONTRACT
• 1. Offer and acceptance
• 2. Consideration
• 3. Intention to create legal relation
• 4. Contractual capacity
• Offer and Acceptance
• Offer: It an expressin of readiness to contract and if accepted shall become binding on the parties. It is also an undertaking to
enter into an agreement/contract with another person that if accepted will have legally binding effect. (Stabilini v. Obasi).
• To whom an offer is made?
• To an individual,
• Group of individual, and
• General public at large (Carllil v. Carbolic Smoke Ball ind.)
• How an offer is made?
• Oral or parol’
• Writing
• When does an offer becomes effective
• It is when it reaches the other party (Offeree) i.e when the offerree became aware of the offer from the offerror.
• Termination offer
• 1. Revocation of offer. When the offeror revoke before the offer is accepted otherwise it is binding.
• 2. Death of either party before acceptance
• 3. Rejection of offer .
• 4. Counter offer. When another offer is made countering the original offer made by the original offerror.
• 5. Lapse or efflussion of time
Offer and invitation to treat distinguished
Invitation to treat is an invitation to make an offer while offer is an expression of readiness to contract.
Display of engineering product or goods in a shop window is an invitation to treat (Pharmaceutical Society v. Great Britain
Auction sales is an invitation to treat but not an offer. (Harris v. Nickerson)
• Inviting people for interview in an engineering company orelsewhere
• Advertisement in a radio or daily news paper.
Acceptance
It is final and unqualified assent to the term offer. (Orient Bank Nig. Plc v. Bilante Int’l).
Mode of Acceptance
1. Conduct
2. Oral or parol
3. Exchange of documents between the parties.
Note:
Acceptance must not be conditional.
Acceptance must be communicated to the offerror except in a Unilateral contract or contract to the whole world (Carllil v. Carbolic)
Acceptance must not be qualified.
Acceptance must be in a prescribed mode.
Acceptance by post
The rule is that the acceptance is effective the moment the letter of acceptance is duly posted in the recognised post office. (Adam v. Lindsell)
Consideration
It is an exchange of promise for promise (Abubakar v. Smith) (Currie v. Misa). Note that a promise not supported by consideration is a gratitutous promise, thus not binding.
Classification of consideration
 Executory and Executed consideration. While executory consideration, on one hand is an exchange of promises for the act or promise of another, on the
otherhand, executed consideration is a performance of an act in return for the promise of another.
 Past consideration is where an act has been performed before the promise is made. This is not a binding consideration, although with some exceptions which is
outside the scope of this class.
Rules governing consideration
 Consideration must move from promisee to the promissor.
 Consideration must not be illegal
 Consideration needs not be adequate but sufficient in the eye of the law
 Consideration must not be past
 Performance of an existing duty will not amount to consideration.
 Intention to create legal relation in
Engineering contract.
• Parties are free to enter into a contract with the intention that
such a contract will be binding and enforceable in a court. That is
why concencus adidem is very important in a contract. A contract
or agreement without intention to be binding is not contract in
the eyes of the law.
• The following are not contract/agreements intended to be
binding:
• 1. Agreement between husband and wife (Domestic
agreement) (Balfour v Balfour). But it will during heated debate
or when there is misunderstanding between the parties.
• 2. A binding agreement but expressly stated not to be binding.
• 3. Mere puff agreement.
 ENGINEERING CONTRACT AND CAPACITY
TO CONTRACT
• The general rule is that there is presumption that all humanbeings and companies are capable and have capacity to enter into a
valid contract. However, the following people have been held to lack contractual capacities, but their contract is subject to certain
rules of law of contract.
• A. Minor : A person below the age of 18 years under the Nigerian Constitution 1999 as amended. Even though in the case
Abake V. Labinjo the court held that a person below the age of 21 is a minor, but the correct position is that of below 18 years.
• Contract of minor
• 1. Valid Contract of necessity/necessaries. Supply of necessaries to a minor at the particular time of his/her need. Excess
supply of necessaries to a minor is outside the scope of this principle of law. Thus, the contract is void. Necessaries are good which
are suitable to the condition in life of the minor at that particular time. Examples are food, clothing, shelter among others. See Sec.
2 Sales of Goods Act. (Nash v. Inman). Note that what is necessary to a minor may be unnecessary to another. Therefore, it
depends on the status of the parent/guardian of that minor in consideration.
• 2. Valid Beneficial contract of service : This is a contract where the minor is to benefit. Eg, education, apprentice, health etc.
• 3. Voidable Contract of continuing nature: This a contract where the infant has option to continue with contract or terminate it
when he reaches the age of majority. The contract is voidable at the time of minority when he/she was entering into the contract.
Eg, buying of share in a company, or joining a partnership firm etc.
• 4. Void contract of minor. This includes contract for the supply of goods not necessary; account stated; repayment of money
lent/loan. All these are not binding on minor. Sec. ! Infant Relief Act 1874.
• B. Mentally disorder persons
• Drunkard or insane person. They are bound by the contract of necessaries entered into during their lucid period. They are to pay
reasonable price of the contract supplied. Note that extreme durnkness will suffice incase of drunkard.
• C. Allien : He lacks capacity to enter contract in Nigeria especially during war or conflict between Nigeria and his country.
• D. Illiterate : Illiterate can enter into contract with another but with strict adherence to the provision of Illiterate Protection Act,
where certain requirements must follow. A person who wants to contract with an Illiterate must insert Illiterate Jurat into the
contractual agreement. See sec 4 of the Illiterate Protection Act,2004.
 APPLICATION OF LAW OF AGENCY TO
ENGINEERING PRACTICES
• Who is an Agent?
• An agent is the one who has authority to act on behalf of another (Principal) in an agency relationship.
• Agency law can be defined as a branch of business law that deals with who, how and when a person (agent)
is to act on behalf of another (Principal) and their relationship in relation to agency relationship between
them. It is expressed “Quit facit parlium facit per se” (“He who acts through another acts for himself”.
• Classification of agent
• General Agent: An agent authorizes to act in all matters in the ordinary course of his business or trade or
profession. Eg Legal practitioners and director of an Engineering company.
• Special agent: It has unrestricted authority to act on behalf of his principal. It has authority to act outside his
ordinary course of his business. It is usually appointed by a Power of Attorney.
• Mercantile agent: is the one authorizes to sell or buy goods or raise money on the security of goods
belonging to his principal.
• Broker: Appointed to negotiate on behalf of another for the purposes of buying or selling of property for
another for a commission called Brokerage. Example Shipbroker, Stock Exchange etc. He has no possession of
the property.
• Factor: Appointed to sell or deal with the goods consigned to him by his principal. He has possession of the
goods. He has lien in the goods in his possession.
• Del credere: He guaranteed his principal that the third party will perform his obligations to the principal. He
performs his duty for a higher commission. He promises to indemnify his principal if the other party failed to
perform his obligation in the contract.
 Remedies for Breach of Engineering
Contract
• Whenever there is incidence of breach of contractual relationship between an Engineer or company, the following are the
remedial devices available to the victim:
• 1. Damages
• 2. Specific performance
• 3. Injunction
• 4. Quantum meruit
• Damages
• This is a common law remedy available to a party whose right (s) to the contract is breached. It is a monetary compensation for
a party who suffered injury as a result of the breach from the other party. The victim must satisfactorily prove that he suffers
injury.
• Note that it is compulsory that the victim must as a matter of law mitigate the injury he is suffering or his to surfer from the
breach of the contract otherwise he will not entitle to any compensation.
• Note that a party will entitle to Nominal damages where he has suffered damage(injury) but he is unable to prove same. A
special damages is the one which is awarded for loss that is specifically proved and pleaded on one hand, a General damages is
awarded for the loss occasioned as a result of the breach of contract.
• An Exemplary damages is the one awarded in excess of the loss actually suffered due to unreasonable action or inaction of a
party who breached the contract that caused the injury. It could be awarded partly as punitive and/or as compensation. An
Aggravated damages is an additional compensation awarded against a party whose breach of contract caused the victim
additional loss or damages.
• Liquidated damages is the one that are fixed by the parties on one hand, on the other hand, Unliquidated damages is the one
fixed by court. It is the court that determines the amount of compensation awardable to the plaintiff.
• Note that the court will only award compensation for injury that directly and naturally follow from the contract or that are
forseeable by the parties to the contract or contemplated by the parties. This is what is called Remotiness of damages. (Hadley v.
Baxendale)
• Specific performance
• This is an equitable remedy consisting of an order of the court directing a defaulting party to perform his obligation(s)
according to the terms of the contract. It is awardable where compensation will be inadequate. It is discretionary in
nature as it is not granted as of right.
• Note that it will not be granted in a contract of personal service (Contract between employer and employee) ( African
Song Ltd v. Sunny Ade).
• A plaintiff who wants an order of specific performance must show that he has performed his obligation or willing to
perform his obligation as stated in the terms of the contract. This is because “He who wants equity must come with
equity” and “Equity is equality” and “He who wants equity must come with clean hands”.
• Injunction
• It is an equitable remedy prohibiting a defendant/Respondent from doing, continuing or repeating some actions
(Prohibitive injunction) or compelling him to perform certain act(s) (Mandatory injunction). It is available to stop a
defendant from continuing breach of contractual obligation or to perform obligation in a contract.
• Quantum meruit
• This is a compensation for the value of work done. It literally means “How much is it worth”. A plaintiff instead of suing
for damages may go for this class of remedy.
• Rescission
• A victim /plaintiff in a contractual breach may treat a contract as rescinded especially where it is a breach of condition as
against warranty.
• A condition is an important term of the contract the breach of which will entitle the aggrieved party right to cancel the
contract and claim damages on one hand, on the other hand, a warranty is a less important term of the contract the
breach of which only entitle the victim to damages as oppose to cancellation. (Sec. 11 and 12 SOGA Act).
 Creation of Agency Relationship
• Agency relation may come into being by any of the following ways:
• Express: This by appointing an agent by word of mouth or in writing which may be Deed or
ordinary writing. It should be by Deed (Power of Attorney) where the agent is to execute a Deed
otherwise ordinary writing suffices.
• Implied: This where the nature of the business between the parties give an assumption or
imputation that one has authority to act on behalf of other. Eg Co-partner in an Engineering
partnership firm acting on behalf of others.
• Conduct/Estoppel: This is where the principal made somebody into believing that someone acted
on his behalf. Thus, the principal will be prevented (estopped) from denying the existence of an
agency relationship.
• Ratification: This is where the principal ratifies the act of his agent who is without authority or
acted outside the scope of his authority on behalf of his principal and the principal later
ratifies/approves the agent action. Note that ratification must take place within a reasonable
period and must be illegal.
• Necessity: This is created when someone who is in possession of another’s goods does some acts
without the instruction of the owner of the goods, to protect the goods from being destroyed.
Note that it must be impracticable or impossible to get instruction from the owner of the goods; it
must be in an emergency situation; and that the Agent must have acted in good faith and in the
interest of the owner (principal).
 Duties of an Agent
• As an agent of Engineering company, the following are your duties to the principal:
• Duty to follow lawful and legal instruction of your principal
• Duty to be loyal to the principal i.e act in the interest of the principal
• Duty to exercise diligent and special skill required of your own calibre.
• Duty not to delegate authority except where it is necessary to carry out his principal instruction or where
the trade or custom of the profession permits or where the principal authorizes same otherwise the
principal is not bind by such illegal and unauthorized delegation and may claim damages for loss where
occasioned.
• Duty to render account upon reasonable demand.
• Duty not to make secrete profits otherwise the principal may dismiss the agent or recover the amount or
refused to pay the agent’s commission.
• Rights of an Agent
• Right to Remuneration/commission or wages or salary
• Right to indemnity as a result of debt incurred during the performance of his duty.
• Right of Lien if the principal filed to pay the agent dues among others but the agent must be in possession
of the goods.

• Duties and Rights of Principal

• Note that rights of an agent are the duties of principal, while duties of an agent are the rights of principal.
Legal effect of contract of an Engineer acting
as Agent with the third party
• If the principal is named, the principal is liable.
• If the principal is unnamed, the principal is liable.
• If the principal is undisclosed, the third party can either sue the agent
or principal when he discovers the existence of the principal.
• Termination of Agency Relationship
• Express agreement of the parties.
• Death of the either party.
• Efflusion of time.
• Bankruptcy of either party.
• Frustration of agency relationship.
• Insanity of either party.
• Revocation of the agency relationship by the principal.