Article authored by EMMANUEL EKPENYONG FCIArb. (UK), Managing Partner, Fred-young & Evans LP.

Generally, the doctrine of privity of
contract stipulates that it is only parties to a contract that have right to
sue and be sued to enforce the rights and obligations arising from the
contract. This means a third party to a contract cannot sustain any claim
arising from a contract.

However, where there is a collateral contract
between one of the parties to a main contract and a third party arising from
the terms of the main contract, any of the parties to the main contract has the
right to sue the third party to enforce terms of the collateral contract and
vice versa. This is one of the common law exceptions to the doctrine of privity
of contract.

For instance, where Effiong, a real estate
developer, enters into a purchase and sale agreement with Godwin, a purchaser
for value, to purchase and own the title to a 5 Bedroom Duplex (“the
property“) to be constructed by Yakubu Ltd., a renowned construction
firm, Godwin would enter into a construction contract with Yakubu Ltd detailing
the particulars of the construction of the property.

If upon practical completion of the property
and delivery of the property to Godwin, he refuses or fails to pay the contract
retention sum or balance of the construction sum (“the sums“),
either Effiong or Yakubu Ltd, has the right to sue Godwin to recover the sums.

However, this straight forward relationship
between Effiong, Godwin and Yakubu Ltd may be difficult to prove if for
whatsoever reason there is no signed purchase and sale agreement, sublease
agreement or collateral construction contract between the parties. It will be
cumbersome to prove the terms, rights and obligations of the respective
relationships between Godwin, Effiong and Yakubu Ltd.

It is settled Nigerian law that where an
agreement is unsigned, the very essence of the agreement is in doubt because
its authenticity is questionable. It is like a man without face and identity.
An unsigned document commands no judicial value. It is a worthless piece of
paper which cannot benefit any of the parties seeking to rely on its terms.

Hence, in our hypothetical case above, it is
better for Effiong and Yakubu Ltd to commence an action in a Court with
jurisdiction, jointly as Claimants to recover the sums against Godwin. It is
clearer for Effiong and Yakubu Ltd to plead and prove their case directly
against Godwin than to labor to enforce obligations and rights arising from
unsigned documents.