The Legal Implication Of An Unwritten Contract; Does The Absence Of A Written Contract Of Employment Vitiate A Contract?

By Oyetola Muyiwa Atoyebi, SAN

It is generally accepted that documentary evidence is the best evidence and the best way to enforce a contract is to reduce it into writing, however, this in no way suggests that oral evidence is not enforceable. Oral Contracts are valid contracts and are mostly inferred from the conduct of the parties. For a valid contract to come into being there must be a definite offer, acceptance and a valid consideration. Mutuality of purpose and intention must be evidenced.

Then the question is; Whether an oral agreement freely entered into by the Parties is binding on the parties and gives rise to an enforceable contract.

If the answer to the above questions is in the affirmative, the following question would be; How does proving the existence of the contract of employment rescue you from the woes of an unwritten contract?

Our focus in this article is to learn the position of the Law as it relates to unwritten contracts of employment and its enforceability.

WHAT IS A CONTRACT?

A contract is a promise, or a set of promises, for breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. This definition may not be entirely satisfactory since it requires a subsequent definition of the circumstances under which the law does in fact attach legal obligation to promises. But if a definition were attempted which should cover these operative facts, it would require compressing the entire law relating to the formation of contracts into a single sentence.

The term “contract” is also used by laypersons and lawyers alike to refer to a document in which the terms of a contract are written. Use of the word in this sense is by no means improper so long as it is clearly understood that rules of law utilizing the concept “contract” rarely refer to the writing itself. Usually, the reference is to the agreement; the writing being merely a memorial of the agreement.[1]

A contract means a contract of Employment, and includes a contract of apprenticeship[2]

WHAT ARE THE ELEMENTS OF A VALID CONTRACT?

For a contract to be enforceable in law, it is required to reflect the following elements:

1. Offer (the terms proposed to the Offeree).
2. Acceptance (mutual agreement to the terms of the Offeror).
3. Consideration (Money).
4. Intention to enter into legal relations.
5. Capacity (The ability to contract not hindered on account of infancy, old age, insanity or personality. i. e. for companies, an unregistered company cannot enter into a valid contract because it has not taken on the identity of a corporate body).

CLASSIFICATIONS OF CONTRACTS

Basically, there are two types of contracts: Formal contracts and Simple contracts. A formal contract is a contract under seal or a contract made by deed. Formal contracts also include negotiable instruments and judgments and recognisances entered in the record of proceedings of a court of record.

All other contracts are simple contracts. However, all contracts, whether formal or simple, come under one or more of several classifications[3].

WHAT IS A CONTRACT OF EMPLOYMENT?

A contract of employment means, any agreement, whether oral, written, express, or implied, whereby one person agrees to employ another as an employee and the other person agrees to serve the employer as an employee[4].

WHAT IS THE GENERAL RULE ABOUT CONTRACT OF EMPLOYMENT?

The Statute of Fraud in Section 4[5] states thus;

“No action shall be brought whereby to charge any executor or administrator upon any special promise to answer damages out of his own estate or whereby to charge the defendant upon any special promise to answer for the debt default or miscarriages of another person or to charge any person upon any agreement made upon consideration of marriage or upon any contract or sale of lands tenements or hereditaments or any interest in or concerning them or upon any agreement that is not to be performed within the space of one year from the making thereof unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the parties to be charged therewith or some other person thereunto by him lawfully authorised.”

The implication of the above statute requires all contracts to be in writing but the general rule notwithstanding is that a contract of employment may be in any form, and not necessarily in writing and by virtue of Section 91 of the Nigerian Labour Act[6] which states thus;

“contract of employment” means any agreement, whether oral or written, express or implied, whereby one person agrees to employ another as a worker and that other person agrees to serve the employer as a worker;

The above section implies that a contract of employment may be in any form.

A contract of employment may as well be inferred from the conduct of the parties if it can be shown that such a contract was intended although not expressed. It should be noted that the inference may be rebutted if such service is incompatible with employment. This may happen where the parties are relations or where the service was performed on the basis of a charity. Nevertheless, a contract of employment may be oral unless there is a statute requiring such a contract to be in writing or by deed.

In any case where the absence of a contract of employment is threatening the existence of a contract, Section 75 of the Evidence Act, 2011[7] states thus;

“When the court has to form an opinion as to the relationship of one person to another, the opinion, expressed by conduct, as to the existence of such relationship, of any person who, as a member of the family or otherwise, has special means of knowledge on the subject, is admissible…”

The above section takes judicial notice of the Nigerian Labour Act[8], which made provisions for the protection of wages, contracts of employment and terms and conditions of employment of workers in Nigeria.

WHAT DOES THE LAW SAY ABOUT UNWRITTEN CONTRACTS?

The fact that a contract has not been reduced into writing does not make it unenforceable. However, the party who is asserting the existence of a contract of employment must prove such facts by presenting credible evidence of the existence of such a contract. The party can adduce evidence in one or all of the following ways;

1. CONDUCTS OF THE PARTIES

The behaviour and actions of the parties can portray the existence of a contractual relationship between them. A typical example is an agency relationship. When an agent carries out certain functions in the name and the capacity of his principal it can be easily deduced that the agent is in the employment of such a principal, in fact, the principal will be estopped from denying the existence of such a relationship. Where the conducts or performance objectively show that the parties had the intention to be bound by a contract, a valid contract can be said to exist between them.

1. ORAL TESTIMONY OF THE ALLEGING PARTY

The parties alleging the existence of a contractual relationship can prove same effectively if he satisfies the Court that the elements of a valid contract exist (Offer, acceptance, consideration and intention to create legal relations) In the case of TAURA v. CHUKWU[9],

“An agreement can be oral, or can be inferred from the conduct of the parties thereto. Notwithstanding the contract is oral, it is enforceable. In the instant case, the conduct of the parties shows that the agreement was not in writing. For a valid contract to come into being in law, there must be a definite offer by the offeror and definite acceptance by the offeree and of course a legal consideration.

There must be mutuality of purpose and intention. See the cases of; OKUBULE VS. OYAGBOLA (1990) 4 NWLR pr.r47 pc.723. DAHIRU VS. KAMALE (2001) FWLR pT.62 18s3. If an oral agreement becomes the subject of legal proceedings as in the instant case, a Court is unlikely to uphold that agreement if the essential elements of a valid contract are not satisfied. Where a party alleges the existence of oral contract, that party has the burden of proving the assertion to the satisfaction of the Court. In the instant case, the plaintiff at the lower Court gave oral evidence of what transpired and what was agreed, he highlighted the key terms and he was able to prove the existence of the essential elements.

Therefore, it is my view that the said oral contract between the parties exists and is enforceable. See paragraphs 3 to 12 of the plaintiff/Appellant statement of claim on pages 48-49 of the record of appeal.” Per ABOKI, J.C.A. (Pp. 16-17, Paras. F-F)

1. THIRD PARTY TESTIMONY

A third party can testify to the existence and terms of a contract of employment. Where a third party witnesses the making of the said agreement or the execution of the obligation to be carried out by either of the parties the 3^rd party can testify to the existence of such a contractual relationship.

1. WRITTEN COMMUNICATIONS

Written communications between the parties can evidence the existence of a contractual relationship between them. Written communication includes but is not restricted to; emails, text messages, correspondences, letters of instruction, and letters of demand. The obligations of the parties can also be inferred from written communications.

1. EXECUTION OF OBLIGATION UNDER THE CONTRACT

Where a party has fulfilled an obligation of which the other party clearly owes a responsibility it can be inferred that a contract of employment exists between the parties. Proof of execution of an obligation can evidence a contractual relationship.

1. EVIDENCE OF PART PAYMENT

As earlier mentioned, consideration whether in part or full, is an essential element of a valid contract. Where it can be shown that part payment has been paid in fulfilment of an obligation it can be said that the parties had the intention to create legal relations and as such the parties are bound. The party to which the part payment has been made is bound to fulfil his end of the obligation.

It should be noted that to prove the existence of a contract made orally, the party alleging the existence should be able to prove that there was consensus ad idem.

TYPES OF CONTRACTS THE LAW WILL NOT PROTECT

The terms of a contract of employment are enforceable by the Courts to protect the rights of parties however, not all contracts are enforceable by the Court whether they are made in writing or orally. The Court will not enforce:

1. A contract to commit a crime, a tort or a fraud[10].
2. A contract injurious to a friendly State or detrimental to the State[11].
3. A contract prejudicial to the administration of justice[12]
4. A contract that tends to promote corruption in public life[13]
5. A contract to defraud the state of revenue[14].

CONCLUSION

Formal or simple contracts of employment are valid and enforceable in law, whether they are written or unwritten. The onus of proof however is on the party alleging the existence of such a contract of employment. Engaging in unwritten contracts does not vitiate it unless a statute mandates that the contract is by deed. It should be clearly stated, however, that contracts involving huge amounts of consideration be reduced into writing.

SNIPPET

The fact that a contract has not been reduced into writing does not make it unenforceable. However, the party who is asserting the existence of a contract of employment must prove such facts by presenting credible evidence of the existence of such a contract.

KEYWORDS: Contract, Labour Law, Labour, Contract Of Employment, Employment

AUTHOR: Oyetola Muyiwa Atoyebi, SAN

Mr Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm).

Mr. Atoyebi has expertise in and vast knowledge of Corporate Law Practice and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng

CONTRIBUTOR: Prince Igho

Prince is a member of the Dispute Resolution Team at OMAPLEX Law Firm. He also holds commendable legal expertise in Contract Law Practice

He can be reached at prince.ogho@omaplex.com.ng

[1]Barclays Group Representative (Nig) Ltd V. Atoyebi (2015) Lpelr-26028(Ca)

[2] Section 91 of the Nigerian Labour Act, CAP L1 Laws of the Federation of Nigeria, 2004

[3] Edwin Obimma Ezike, Nigerian Contract Law (LexisNexis, 2015)

[4] Section 91 of the Nigerian Labour Act, CAP L1 Laws of the Federation of Nigeria, 2004

[5] Statute of Frauds (1677), Section IV <https://www.legislation.gov.uk/aep/Cha2/29/3/section/IV> accessed 20^th March, 2023

[6] CAP L1 Laws of the Federation of Nigeria, 2004

[7] Evidence Act, 2011

[8] CAP L1 Laws of the Federation of Nigeria, 2004

[9] (2018) LPELR-45990(CA)

[10] Dann v. Curzon (1911) 104 LT 66

[11] Regazzoni v. KC Sethia (1944) Ltd. (1958) AC 301 at p. 322

[12] John v. Mendoza (1939) 1 KB 141

[13] Golden Okoronkwo v. P.O. Nwoga (1972) 2 ECSLR

[14] Miller v. Karlinski (1945) 62 TLR 85