Most Nigerian business owners know their contracts need attention. Yet, only a few have read them recently. There is a gap between what a contract actually says and what a business truly needs. In terms of scale, risk exposure, and commercial relationships, it grows wider every year the document is left unreviewed.
This article examines five clauses that we consistently find in Nigerian business contracts. Each of them has real commercial consequences if it fails. All of them are fixable if the problem is identified before the dispute, the loss, or the failed deal.
- FORCE MAJEURE
A party is excused from performance under force majeure clauses where circumstances beyond its control prevent performance. The events mentioned in most Nigerian commercial contracts were drafted some few years ago and have not been reviewed and updated since then despite the annual or occasional renewal of these contracts by parties.
These are the risks that should now appear in any properly drafted Nigerian force majeure clause: shortages of foreign exchange and difficulty in obtaining foreign exchange at the official rate, sudden regulatory intervention including CBN directives, NRS enforcement actions, and unforeseen sector-specific regulatory changes, digital infrastructure failures including internet outage or cloud service disruption, critical business systems become unusable because of power supply and energy failures, etc.
An outdated or unsupported force majeure clause is not protection, it is a false sense of security. The real question for every contract is not simply “does it contain a force majeure clause?” but “would this protect us if something went wrong today?”
- GOVERNING LAW AND JURISDICTION
The governing law determines which country’s laws will be applied in interpreting the contract. The jurisdiction that is stated is what will determine which court can hear the dispute. The difference between specifying Lagos courts and specifying Nigerian law as governing law and jurisdiction is not the same thing and this is one of the most frequent drafting errors in Nigerian commercial contracts. The governing law determines which country’s laws apply to the interpretation of the contract while jurisdiction determines which court can hear and determine the dispute.
A contract between two companies that provides “Lagos courts” but not Nigerian law is an ambiguity that an adept opposing counsel will exploit in a dispute. As well, a contract that sets Nigerian law as the governing law without specifying jurisdiction opens the door to litigation in a venue neither party expected.
As such it is important that every contract must state:
- The governing law (Nigerian law, English law, or another law as appropriate), and
- The dispute resolution forum (a specific High Court, the Lagos Court of Arbitration, or institutional arbitration under LCIA or ICC International Court of Arbitration).
