One of the most common misconceptions in business is that a contract only becomes important when a dispute arises. In reality, by the time a dispute reaches a courtroom, the parties are often left to live with the consequences of what was drafted, omitted, or misunderstood at the negotiation stage.
For foreign investors, Nigerians in the diaspora, SMEs, startups, lenders, contractors, suppliers, and project developers operating in Nigeria, engaging legal counsel before entering into contractual relationships is not merely a legal formality—it is a critical risk-management strategy.
This reality is underscored by the Supreme Court’s decision in ETHIOPIAN AIRLINES v. POLARIS BANK LTD & ANOR (2025) LPELR-80188(SC), where the Court reaffirmed that a breach of contract occurs when a party, without lawful justification, fails, neglects, or refuses to perform its contractual obligations, renders itself incapable of performing those obligations, or backs away from performing a material term of the agreement.
The principle, as reiterated by the Court, demonstrates why businesses must pay close attention to contractual rights and obligations long before disputes arise.
The Cost of Poorly Structured Contracts
Many commercial disputes are not caused by bad intentions. They are often the result of poorly drafted agreements, vague obligations, unrealistic expectations, inadequate risk allocation, or the absence of proper legal advice during negotiations.
A contract may appear straightforward at the time of execution. However, when performance issues arise, parties frequently discover that critical issues were never properly addressed.
Questions such as the following often become contentious:
- What exactly was each party required to do?
- When was performance due?
- What happens if a party defaults?
- What remedies are available?
- Can the agreement be terminated?
- How will disputes be resolved?
A well-structured contract should answer these questions before problems emerge.
Why Diaspora Investors Need Legal Guidance
Many Nigerians in the diaspora invest in real estate, agriculture, manufacturing, hospitality, technology ventures, and family-owned businesses in Nigeria.
Frequently, investments are made through relatives, business partners, consultants, or local representatives.
While trust remains important, trust alone is not a substitute for legal protection.
Without properly drafted agreements, diaspora investors may face disputes relating to:
- Mismanagement of funds.
- Failure to deliver agreed projects.
- Breach of partnership obligations.
- Unauthorised transactions.
- Failure to account for investments.
- Disagreements regarding ownership and profit-sharing.
A lawyer helps ensure that contractual arrangements adequately protect the investor’s interests and provide enforceable remedies if obligations are not performed.
Why Foreign Investors Should Never Rely Solely on Commercial Negotiations
Foreign investors entering the Nigerian market often focus on business opportunities, market potential, and regulatory compliance. However, contractual risk is equally important.
A lawyer can assist in:
- Identifying legal and commercial risks.
- Negotiating protective contractual provisions.
- Structuring dispute resolution mechanisms.
- Ensuring compliance with Nigerian laws.
- Protecting intellectual property and confidential information.
- Drafting enforceable termination and exit provisions.
The objective is not merely to complete the transaction but to reduce the likelihood of future disputes.
Why SMEs Need Lawyers Before Problems Arise
Many SMEs engage suppliers, distributors, contractors, consultants, and customers on the basis of verbal understandings or template agreements downloaded from the internet.
This approach can expose a business to significant legal and financial risks.
A lawyer can help SMEs:
- Draft legally enforceable agreements.
- Clearly define obligations and performance standards.
- Minimise ambiguities that often lead to disputes.
- Protect business assets and confidential information.
- Establish mechanisms for recovering losses arising from breach.
The cost of obtaining legal advice at the outset is often significantly lower than the cost of litigation arising from an avoidable dispute.
A Lawyer’s Role Is Not Limited to Litigation
Many businesses mistakenly engage lawyers only after a dispute has occurred.
However, the most valuable legal services are often preventive rather than reactive.
An experienced commercial lawyer can assist with:
- Contract negotiation.
- Contract drafting and review.
- Risk assessment.
- Transaction structuring.
- Regulatory compliance.
- Due diligence.
- Corporate governance.
- Dispute prevention.
The goal is to identify and manage risks before they become liabilities.
What Sophisticated Investors Do Differently
Private equity funds, multinational corporations, development finance institutions, and institutional investors rarely execute significant agreements without legal review.
They understand that contracts are not simply documents; they are risk-allocation tools.
Before committing capital, sophisticated investors typically ensure that:
- Rights and obligations are clearly defined.
- Default provisions are comprehensive.
- Remedies are enforceable.
- Dispute resolution mechanisms are effective.
- Commercial risks are appropriately allocated.
This approach significantly reduces uncertainty and enhances investment protection.
Key Takeaway
The Supreme Court’s decision in ETHIOPIAN AIRLINES v. POLARIS BANK LTD & ANOR (2025) LPELR-80188(SC) serves as a powerful reminder that contractual obligations carry legal consequences. A party that fails, neglects, refuses, or becomes incapable of performing a material contractual obligation may face liability for breach.
For foreign investors, Nigerians in the diaspora, SMEs, developers, lenders, contractors, and business owners, the lesson is clear: do not wait until a dispute arises before seeking legal advice.
Engaging a lawyer at the negotiation and drafting stage can help identify risks, strengthen contractual protections, reduce the likelihood of disputes, and safeguard the commercial objectives that motivated the transaction in the first place.
In business, the most expensive contract is often the one that was signed without proper legal review.
A publication of Edidiong Akpanuwa & Co.
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