For Nigerians in the diaspora, foreign investors, SMEs, startups, lenders, borrowers, contractors, suppliers, and business owners, contracts are the foundation of commercial relationships. Whether the transaction involves investment, financing, procurement, construction, technology services, distribution, or joint ventures, the success of the relationship often depends on each party performing its contractual obligations.
However, many businesses only begin to appreciate the importance of contractual obligations when a dispute arises.
In AUSTIN LAZ THERMOPLASTIC INDUSTRIES LTD & ANOR v. GTBANK (2025) LPELR-81398(SC), the Supreme Court restated a fundamental principle of Nigerian contract law: a breach of contract occurs when a party, without lawful justification, fails, neglects, or refuses to perform its obligations under the contract, renders itself incapable of performing those obligations, or withdraws from carrying out a material term of the agreement.
In reaffirming this principle, the Court referred to its earlier decision in Ethiopian Airlines v. Polaris Bank Ltd. (2025) 6 NWLR (Pt. 1987) 451.
Why This Decision Matters for Investors and Businesses
Nigeria continues to attract significant investment opportunities across infrastructure, manufacturing, agriculture, technology, energy, real estate, logistics, and financial services. At the same time, commercial disputes remain one of the most significant risks facing investors and businesses.
Many business owners mistakenly believe that a breach only occurs when a party expressly states that it will not perform a contract.
The Supreme Court’s decision demonstrates that breach can occur in several ways, including:
- Failing to perform a contractual obligation.
- Delaying performance without lawful excuse.
- Refusing to perform an agreed obligation.
- Taking actions that make performance impossible.
- Abandoning a material aspect of the agreement.
For businesses, understanding these principles can help prevent costly disputes and protect commercial interests.
A Warning for Nigerians in the Diaspora
Many Nigerians living abroad invest in businesses, real estate developments, agricultural projects, and commercial ventures through local partners, agents, family members, or representatives.
Frequently, disputes arise because parties rely on trust rather than clearly documented contractual obligations.
A project may stall. An investment partner may fail to contribute agreed capital. A contractor may abandon a project. A supplier may fail to deliver goods. A local representative may act outside agreed instructions.
In each of these situations, the investor’s legal rights will largely depend on the terms of the underlying agreement and whether a breach can be established.
This is why properly drafted contracts remain one of the most important investment protection tools available to diaspora investors.
Lessons for Foreign Investors
Foreign investors entering the Nigerian market often focus on regulatory compliance, licensing requirements, and market opportunities. While these considerations are important, contractual risk management deserves equal attention.
Before entering a transaction, investors should ensure that contracts clearly address:
- Scope of obligations.
- Performance timelines.
- Payment terms.
- Default events.
- Termination rights.
- Dispute resolution mechanisms.
- Governing law.
- Damages and remedies.
When obligations are vague or poorly drafted, enforcement becomes more difficult if disputes arise.
Lessons for SMEs and Growing Businesses
Many SMEs operate on informal arrangements, verbal commitments, and long-standing business relationships.
While these relationships may work during favourable circumstances, they can become problematic when commercial interests diverge.
The Supreme Court’s decision highlights the importance of documenting business arrangements properly and ensuring that each party understands its obligations.
SMEs should avoid assumptions and instead ensure that contracts clearly define:
- What must be done.
- When it must be done.
- Who is responsible for performance.
- What happens if performance fails.
What Businesses Should Do Before Signing a Contract
Before executing any significant commercial agreement, businesses should:
1. Understand every obligation: Do not sign a contract unless the obligations and risks are fully understood.
2. Assess your ability to perform: A party that becomes incapable of performing its obligations may still face liability for breach.
3. Document key terms clearly: Ambiguity often becomes the source of litigation.
4. Include dispute resolution provisions: Clear dispute resolution clauses can save substantial time and cost.
5. Seek legal review: Professional legal review can identify risks before they become disputes.
What Businesses Should Do When a Breach Occurs
If another party fails to perform a contractual obligation:
- Preserve all communications and documentation.
- Review the contract carefully.
- Identify the specific obligation that has been breached.
- Consider available contractual remedies.
- Obtain legal advice before taking enforcement action.
Prompt action can often preserve rights that may otherwise be lost.
Key Takeaway
The Supreme Court’s decision in AUSTIN LAZ THERMOPLASTIC INDUSTRIES LTD & ANOR v. GTBANK (2025) LPELR-81398(SC) reinforces a fundamental commercial principle: parties are expected to honour the obligations they voluntarily undertake. A breach may occur not only through outright refusal to perform but also through failure, neglect, delay without justification, or conduct that makes performance impossible.
For Nigerians in the diaspora, foreign investors, SMEs, startups, lenders, borrowers, contractors, and business owners, the lesson is straightforward: contracts should never be treated as mere formalities. They are critical legal instruments that define rights, allocate risks, and provide protection when commercial relationships do not go as planned.
The most effective way to avoid costly disputes is to negotiate carefully, document clearly, and perform faithfully.
A publication of Edidiong Akpanuwa & Co.
If you found this article helpful, subscribe to our FREE Legal Intelligence Newsletter for practical insights on business law, corporate governance, regulatory compliance, investment readiness, and other legal issues affecting SMEs and businesses.
To subscribe, simply send an email to info@eacattorneys.com with the subject line “Newsletter Subscription”, and we’ll add you to our mailing list at no cost.