business law · 2018. 3. 8. · iii f o r e w o r d f foundation level business law the business...

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Business Law

I C A NI C A NI C A NI C A NI C A N

The Institute of Chartered Accountants of NigeriaThe Institute of Chartered Accountants of NigeriaThe Institute of Chartered Accountants of NigeriaThe Institute of Chartered Accountants of NigeriaThe Institute of Chartered Accountants of Nigeria

Foundation level

FOUNDATION LEVEL: BUSINESS LAW

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First edition published byThe Institute of Chartered Accountants of NigeriaPC 16, Idowu Taylor StreetVictoria IslandLagos, NigeriaEmail: [email protected]

ISBN 978-978-53303-4-2

© The Institute of Chartered Accountants of Nigeria, December 2014

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording,scanning or otherwise, without the prior permission in writing of The Institute of CharteredAccountants of Nigeria, or as expressly permitted by law, or under the terms agreed with theappropriate reprographics rights organisation.

You must not circulate this book in any other binding or cover and you must impose the samecondition on any acquirer.

NoticeThe Institute of Chartered Accountants of Nigeria has made every effort to ensure that at the timeof writing the contents of this study text are accurate, but neither the Council of the Institute ofChartered Accountants of Nigeria, nor its management or employees shall be under any liabilitywhatsoever for any inaccurate or misleading information this work could contain.

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F o r e w o r d

FFFFFFoundation level

Business LawBusiness LawBusiness LawBusiness LawBusiness Law

The business environment has been undergoing rapid changes caused, in the main,

by globalisation and advancement in Information Technology. The impact of these

changes on the Finance function and the skills set needed by professional Accountants

to perform their various tasks have been profound. These developments have made it

inevitable for the Institute’s syllabus and training curriculum to be changed to align

its content with current and future needs of the users of Accounting services.

Although the Institute of Chartered Accountants of Nigeria (ICAN) traditionally changes

its syllabus and training curriculum every five years, it had to embark on a

comprehensive review of its 2010 Syllabus in 2012, that is, barely two years into the

syllabus! Through a World Bank-sponsored twinning programme with the Institute of

Chartered Accountants in England and Wales (ICAEW), the Project Implementation

Committee, the Examinations and Students Affairs Committees worked assiduously

to produce a new 3-level, 16-subject ICAN syllabus. As approved by the Council,

Examinations under the new syllabus will commence with the November 2014 diet.

It is instructive to note that the last two syllabus review exercises were accompanied

with the publication of study packs. Indeed, when the first and second editions of

study packs were produced, the performances of professional examination candidates

significantly improved. In an effort to consolidate on these gains and to further enhance

the success rates of students in its qualifying examinations, the Council approved that

a new set of learning materials (study packs) be developed for each of the new subjects.

The Council also resolved to wholly finance the project since it was outside the scope

of the World Bank grant. Although these learning materials may be regarded as the

third edition, they are completely different in content, innovation and quality.

While ICAEW developed the Case Study learning material, eleven of the new learning

materials were contracted to Emile Woolf International, UK. Also, renowned writers

and reviewers which comprised eminent scholars and practitioners with tremendous


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experiences in their areas of specialisation, were sourced locally to develop learning

materials for four of the new subjects because of their local content. In effect, for the

first time, there are now ICAN learning materials (study packs) for Case Study and

Business Law. The 16 subjects are as follows:

FOUNDAFOUNDAFOUNDAFOUNDAFOUNDATION LEVELTION LEVELTION LEVELTION LEVELTION LEVEL1. Quantitative Techniques in Business EWI2. Financial Accounting EWI3. Management Information EWI4. Business Law Locally developed5. Business and Finance EWI

SKILLS LEVELSKILLS LEVELSKILLS LEVELSKILLS LEVELSKILLS LEVEL6. Financial Reporting EWI7. Audit and Assurance EWI8. Taxation Locally developed9. Performance Management EWI10. Management, Governance and Ethics EWI11. Public Sector Accounting and Finance Locally developed

PROFESSIONAL LEVELPROFESSIONAL LEVELPROFESSIONAL LEVELPROFESSIONAL LEVELPROFESSIONAL LEVEL12. Corporate Reporting EWI13. Advanced Audit and Assurance EWI14. Strategic Financial Management EWI15. Advanced Taxation Locally developed16. Case Study ICAEW

As part of the quality control measures, the output of the writers and reviewers were

subjected to further comprehensive review by an editorial board.

Although the study packs were specially produced to assist candidates preparing for

the Institute’s Professional Examinations, we are persuaded that students of other

professional bodies and tertiary institutions will find them very useful.

Isma’ila M. Zakari, Isma’ila M. Zakari, Isma’ila M. Zakari, Isma’ila M. Zakari, Isma’ila M. Zakari, BSc, mni, FCA Mr Mr Mr Mr Mr. Sunday A. Bammeke, . Sunday A. Bammeke, . Sunday A. Bammeke, . Sunday A. Bammeke, . Sunday A. Bammeke, BSc, FCA

Chairman, Professional ExaminationsChairman, Professional ExaminationsChairman, Professional ExaminationsChairman, Professional ExaminationsChairman, Professional Examinations Chairman, Students’ AffairsChairman, Students’ AffairsChairman, Students’ AffairsChairman, Students’ AffairsChairman, Students’ Affairs

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A c k n o w l e d g e m e n t

AAAAAFoundation level


The Institute is deeply indebted to the underlisted locally-sourced rewriters, reviewers

and members of the editorial board for their scholarship and erudition which led to

the successful production of these new study packs. They are:

TaxationTaxationTaxationTaxationTaxation

1. Enigbokan, Femi Writer/Lead Reviewer

2. Clever, Tony Writer

3 Kajola, Sunday Writer

Advanced TaxationAdvanced TaxationAdvanced TaxationAdvanced TaxationAdvanced Taxation

1. Sobande, David Writer/Lead Reviewer

2. Owoyele, Olusola Writer

3. Egbedina, Olayide Writer

Public Sector Accounting and FinancePublic Sector Accounting and FinancePublic Sector Accounting and FinancePublic Sector Accounting and FinancePublic Sector Accounting and Finance

1. Osonuga, Timothy Writer/Lead Reviewer

2. Taiwo, Rafiu Writer

3. Agbeyangi, Babatunde Writer

4. Oladeji, Sunday Reviewer

5. Aregbeyen, Omo Writer

6. Adebayo, Ademola Writer


1. Oladele, Olayiwola.O. Writer/Lead Reviewer

2. Emiaso, Miakpo Writer

3. Olaiya, Marian Writer

4. Oresanya, Lekan Writer


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The Institute also appreciates the services of its staff and the typesetter, Ogunbiyi

Babatunde Julius, that provided secretarial support.

Editorial BoardEditorial BoardEditorial BoardEditorial BoardEditorial Board

Ismaila Muhammadu Zakari, B.Sc, FCA, mni 2nd DVP/Chairman,

Sunday Abayomi Bammeke, B.Sc, FCA Council member

Abel Aig. Asein, B.Sc, MSc, MBA, ACA Deputy Registrar, Technical Services

John Irabor Evbodaghe, MBA, FCA Director, Examinations

I. B. Momoh, FCA Assistant Director, Prof. Exams

Folake Olawuyi, BA. M.Sc Assistant Director, Student Affairs

Rotimi A. Omotosho, Rotimi A. Omotosho, Rotimi A. Omotosho, Rotimi A. Omotosho, Rotimi A. Omotosho, FCA

Registrar / Chief Executive

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AC Appeal Cases

A.G.M. Annual General Meeting

All E.R. All England Report

All NLR All Nigeria Law Report

CAC Corporate Affairs Commission

CAMA Companies and Allied Matters Act

Cap Chapter

CEO Chief Executive Officer

Ch Chancery

ChD Chancery Division

ICPC Independent Corrupt Practices and Other Related Offences

Commission

JCA Justice of Court of Appeal

JSC Justice of Supreme Court

K.B. King’s Bench

LFN Laws of the Federation of Nigeria

N.M.L.R Nigerian Monthly Law Report

NWLR Nigeria Weekly Law Report

WNLR Western Nigeria Law Report

L i s t o f A b b r e v i a t i o n s

LLLLLFoundation level



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(A)(A)(A)(A)(A) EXAMINAEXAMINAEXAMINAEXAMINAEXAMINATION QUESTION FORMATION QUESTION FORMATION QUESTION FORMATION QUESTION FORMATION QUESTION FORMATTTTT

1. Each paper in Foundation level shall consist of two sections A and B

Section A:Section A:Section A:Section A:Section A: Shall comprise twenty (20) compulsory multiple-choicequestions which shall cover the entire contents of thesyllabus. This section shall make up 20% of the total marks.

Section B:Section B:Section B:Section B:Section B: Shall comprise six open-ended questions (essay,computational or scenario-based) carrying 20 marks eachof which candidates will be required to answer any 4.

2. Skills and Professional levels shall comprise open-ended questions(essay, scenario-based or computational) only as follows:

Section A:Section A:Section A:Section A:Section A: One (1) compulsory question of 30 marks.Section B:Section B:Section B:Section B:Section B: Three (3) questions of 20 marks each out of which a

candidate is expected to attempt any two (2).Section C:Section C:Section C:Section C:Section C: Three (3) questions of 15 marks each out of which a

candidate is expected to attempt any two (2).

(B)(B)(B)(B)(B) UNITSUNITSUNITSUNITSUNITS 99999

(C)(C)(C)(C)(C) CONTENTSCONTENTSCONTENTSCONTENTSCONTENTS

PurposePurposePurposePurposePurposeBusiness finance professionals are expected to have a sound foundation in lawthat is relevant to businesses and their operations. Professional accountantsneed a strong background in company law and law relevant to public sectorentities. All business professionals also need knowledge of how laws affectthem personally and in their own employment and business activities.

S y l l a b u s & E x a m i n a t i o n Q u e s t i o n s F o r m a t

SSSSSFoundation level



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Content and CompetencesContent and CompetencesContent and CompetencesContent and CompetencesContent and Competences

AAAAA THE LEGAL AND COURTHE LEGAL AND COURTHE LEGAL AND COURTHE LEGAL AND COURTHE LEGAL AND COURT SYSTEMST SYSTEMST SYSTEMST SYSTEMST SYSTEMS 40%40%40%40%40%(a) Sources of Nigerian Law(b) The distinction between civil law, criminal law, case law and

statute(c) Hierarchy of Courts

BBBBB COMPCOMPCOMPCOMPCOMPANY AND INSOLANY AND INSOLANY AND INSOLANY AND INSOLANY AND INSOLVENCVENCVENCVENCVENCYYYYY

1.1.1.1.1. Company lawCompany lawCompany lawCompany lawCompany law(a) Identify, state and explain the nature as well as types of, and the

differences between a l partnership and a company(b) State and explain the way in which a company and partnership

may be formed including the preparation of the documents ofincorporation including memorandum and articles of associationand agreements in partnership

(c) Identify the procedure for management of a partnership includingthe rights and duties of partners, their relationship inter se andwith third parties as well as dissolution of partnership

(d) State and explain procedure for incorporation including pre-incorporation contracts, promoters and their duties, theconsequences of incorporation and lifting the veil of incorporation

(e) State and explain the procedures for the issue of shares anddebentures (corporate bonds), Identify and explain the ways inwhich the capital of a company is maintained and protectedincluding laws relating to distribution of profits

(f) State and explain the duties of directors including fiduciary andother duties, identify and state the powers of directors

(g) and how they may be appointed, re-appointed, removed or inany other way cease office

(h) Identify and state the requirements for share transfer anddisclosure of ownership

(i) Identify and explain how shareholders can influence thecomposition of the board and strategy or decisions of a company

(j) Identify and state how meetings of stakeholders can berequisitioned and how voting operates

(k) Identify the rights of shareholders to challenge the managementof a company

(l) Explain on issues bothering on notices, meetings and othersecretarial practices, record keeping and filing and the practicalissues that relate to them

(m) Identify and state the consequences of a breach of duty by adirector

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(n) Identify and state the duties, powers and responsibilities of acompany auditor including the basic steps to appoint and removeand auditor and how he may resign

(o) Identify and explain how a company may be wound up.

2.2.2.2.2. Law of InsolvencyLaw of InsolvencyLaw of InsolvencyLaw of InsolvencyLaw of Insolvency(a) Identify and state the differences between the types of insolvency,

liquidation and receivership including the rights of creditors andthe shareholders

(b) Identify and explain the consequences of insolvency(c) Identify and explain the nature of and difference between fixed

and floating charge

CCCCC CRIMINAL LAWCRIMINAL LAWCRIMINAL LAWCRIMINAL LAWCRIMINAL LAW 25%25%25%25%25%

Criminal law regulating businesses and professionalCriminal law regulating businesses and professionalCriminal law regulating businesses and professionalCriminal law regulating businesses and professionalCriminal law regulating businesses and professionalaccountants:accountants:accountants:accountants:accountants:(a) Identify, contrast and explain laws, ethics and ethical codes(b) Identify and state the basic laws relating to theft, fraud and

deception(c) Identify and state the basic laws relating to bribery(d) Identify and state the basic laws relating to money laundering(e) Identify and state the basic laws relating to negotiable

instruments(f) Identify situations relating to data protection and computer

misuse(g) Electronic evidence(h) Explain the role of an Accountant as an expert witness in

Computer Fraud Situations

D.D.D.D.D. LAW OF COMMERCIAL TRANSACTIONSLAW OF COMMERCIAL TRANSACTIONSLAW OF COMMERCIAL TRANSACTIONSLAW OF COMMERCIAL TRANSACTIONSLAW OF COMMERCIAL TRANSACTIONS 35%35%35%35%35%

1.1.1.1.1. Law Of ContractLaw Of ContractLaw Of ContractLaw Of ContractLaw Of Contract

(a) Identify and explain how a contract may be made and how it canbe enforced.

(b) Identify and explain the circumstances in which a contract maybe terminated and the remedies for a breach of contract.

(c) Nature and framework of contract.(d) Enforceability of e-contracts.

2.2.2.2.2. AgencyAgencyAgencyAgencyAgency

(a) State and explain the nature of an agency relationship.(b) Identify situations where agency exists.(c) Identify and explain the duties, rights and legal capacity of an

agent.

SYLLABUS & EXAMINATION QUESTIONS FORMAT


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3.3.3.3.3. LLLLLaw of Taw of Taw of Taw of Taw of Tortsortsortsortsorts

(a) Identify and explain negligent actions or omissions and theirconsequences.

(b) Identify and explain vicarious liability.

4.4.4.4.4. Sale of GoodsSale of GoodsSale of GoodsSale of GoodsSale of Goods

Identify goods and explain the duties and rights of a seller and buyer aswell as passing of property.

5.5.5.5.5. Hire PurchaseHire PurchaseHire PurchaseHire PurchaseHire Purchase

Explain Hire purchase as well as the duties of the parties to it.

6.6.6.6.6. InsuranceInsuranceInsuranceInsuranceInsurance

Explain their nature of Insurance contract, insurable interest, subrogationand contribution as well as assignment of policy.

7.7.7.7.7. Banking and Negotiable InstrumentsBanking and Negotiable InstrumentsBanking and Negotiable InstrumentsBanking and Negotiable InstrumentsBanking and Negotiable Instruments

(a) Explain the duties of banks and other financial institutions aswell as the powers and duties of the Central Bank of Nigeria(Reference to the Central Bank Act as well as banks and otherFinancial Institutions Act.

(b) Explain types of negotiable instruments and the duties andliabilities of parties to a bill.

E.E.E.E.E. EMPLOYMENT LAWEMPLOYMENT LAWEMPLOYMENT LAWEMPLOYMENT LAWEMPLOYMENT LAW

(a) Identify situations and state the law relating to employment,including contracts, duties and rights, dismissal, unfair dismissaland other claims.

(b) Skills and analysis in context level.

FFFFF..... LLLLLAAAAAW OF TRUSTS & ADMINISTRAW OF TRUSTS & ADMINISTRAW OF TRUSTS & ADMINISTRAW OF TRUSTS & ADMINISTRAW OF TRUSTS & ADMINISTRATION OF ESTTION OF ESTTION OF ESTTION OF ESTTION OF ESTAAAAATETETETETE

(a) Explain creation of trusts, the duties, powers, rights and accountsof trustees as well as the rights of beneficiaries.

(b) Explain the investments authorized by the Trustee InvestmentAct.

(c) Distinguish between executors and administrators and explaintheir duties.

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Table of Contents

TTTTTFoundation level


Title ..................................................................................................................................i

Foreword ....................................................................................................................... iii

Acknowledgement ........................................................................................................ v

List of Abbreviations .....................................................................................................vii

Syllabus and Examination Questions Format ................................................................ ix

Table of Contents ......................................................................................................... xiii

CHAPTER 1: THE NIGERIAN LEGAL SYSTEM SOURCES OF LAWCHAPTER 1: THE NIGERIAN LEGAL SYSTEM SOURCES OF LAWCHAPTER 1: THE NIGERIAN LEGAL SYSTEM SOURCES OF LAWCHAPTER 1: THE NIGERIAN LEGAL SYSTEM SOURCES OF LAWCHAPTER 1: THE NIGERIAN LEGAL SYSTEM SOURCES OF LAW.......................................................................................... 111111.0 Purpose ........................................................................................... 21.1 Introduction ..................................................................................... 21.2 Law and its Sources......................................................................... 2

1.2.1 Meaning of Law................................................................... 21.3 Sources of Nigerian Law.................................................................. 21.4 The Common Law ............................................................................ 3

1.4.1 Nature and Development of the Common Law..................... 31.5 Doctrines of Equity .......................................................................... 4

1.5.1 Meaning, Nature and Development of Equity ...................... 41.5.2 Equitable Remedies ............................................................ 41.5.3 Remedies Developed Recently ............................................ 41.5.4 Maxims of Equity ................................................................ 5

1.6 Statutes of General Application (SOGA) .......................................... 51.6.1 English Laws extending to Nigeria ...................................... 5

1.7 Nigerian Legislation ....................................................................... 61.7.1 The Constitution................................................................... 61.7.2 Acts ..................................................................................... 71.7.3 Decrees ............................................................................... 71.7.4 Laws.................................................................................... 71.7.5 Edicts .................................................................................. 71.7.6 Bye Laws ............................................................................. 7


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1.8 Customary Law ................................................................................ 81.8.1 Meaning, Characteristics, Validity and Proof of Customary Law.81.8.2 Validity of Customary Law ................................................... 81.8.3 Repugnancy Test ................................................................. 81.8.4 Incompatibility Test ............................................................. 91.8.5 Public Policy Test ................................................................. 91.8.6 Proof of Customary Law ....................................................... 9

1.9 Judicial Precedent or Case Law ..................................................... 101.9.1 Ratio Decidendi and Obiter Dictum................................... 101.9.2 Types of Precedents ........................................................... 101.9.3 Terminologies Used in Precedents. .................................... 111.9.4 Advantages of Judicial Precedent ..................................... 111.9.5 Disadvantages of Judicial Precedent................................. 111.9.6 Application of the Doctrine of Judicial Precedent

within the Nigerian Court System...................................... 121.9.7 Classification of Courts ...................................................... 12

1.10 Hierarchy of Courts ........................................................................ 121.10.1 The Supreme Court ............................................................ 131.10.2 The Court of Appeal ........................................................... 131.10.3 Federal High Court ............................................................ 131.10.4 The State High Court .......................................................... 141.10.5 Sharia Court of Appeal ...................................................... 141.10.6 Customary Court of Appeal ................................................ 151.10.7 National Industrial Court ................................................... 151.10.8 Magistrates/District Courts ................................................ 151.10.9 District Courts .................................................................... 151.10.10 Customary Courts/Area Courts ........................................... 16

1.11 International Law .......................................................................... 161.12 Legislative Process ........................................................................ 161.13 Division of Legislative Powers between the Federal and

the State Government .................................................................... 181.14 Distinctions Between Civil Law and Criminal Law ......................... 181.15 Worked Examples .......................................................................... 19

1.15.1 Questions............................................................................ 191.14.2 Suggested Solutions ........................................................... 20

CHAPTER 2: COMPCHAPTER 2: COMPCHAPTER 2: COMPCHAPTER 2: COMPCHAPTER 2: COMPANY LANY LANY LANY LANY LAAAAAWWWWW: TYPES AND FORMA: TYPES AND FORMA: TYPES AND FORMA: TYPES AND FORMA: TYPES AND FORMATION OF BUSINESSTION OF BUSINESSTION OF BUSINESSTION OF BUSINESSTION OF BUSINESSORGANIZAORGANIZAORGANIZAORGANIZAORGANIZATIONTIONTIONTIONTION ............................................................................................................................................................................................................................................................................................................................................................................. 2323232323

2.0 Purpose ......................................................................................... 242.1 Introduction ................................................................................... 242.2 Types of Business Organizations ................................................... 242.3 Sole Proprietorship ........................................................................ 242.4 Partnership.................................................................................... 25

2.4.1 Rules for Determining the Existence of Partnership........... 252.4.2 Types of Partnership .......................................................... 272.4.3 Formation of Partnership ................................................... 27

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2.4.4 The Relationship, Rights and Duties of Partners ................ 292.4.5 Dissolution of Partnership ................................................. 312.4.6 On application by partner the court

may decree dissolution: .................................................... 312.4.7 The Effect of Dissolution .................................................... 322.4.8 Application of Partnership Property on Dissolution ........... 322.4.9 Distinction between a Partnership and a Company ........... 33

2.5 Company ....................................................................................... 342.5.1 The Corporate Affairs Company ......................................... 342.5.2 Functions of the Corporate Affairs Commission .................. 35

2.6 Functional Classification of Companies ......................................... 352.6.1 Private Company ............................................................... 352.6.2 Public Company ................................................................ 362.6.3 Promoters .......................................................................... 362.6.4 Duties of a Promoter .......................................................... 362.6.5 Remedies for Breach of Promoter’s Duties ........................ 372.6.6 Pre-incorporation Contract ................................................ 38

2.7 Procedure for Formation of Company............................................. 382.7.1 Documents of Incorporation .............................................. 392.7.2 The Memorandum of Association ...................................... 392.7.3 The Articles of Association ................................................. 402.7.4 Grounds upon which the CAC may refuse

to Register the Documents of a Proposed Company ........... 402.7.5 The Effects of the Registered Documents ........................... 40

2.8 Consequences of Incorporation ...................................................... 402.9 Worked Examples .......................................................................... 45

2.9.1 Questions .......................................................................... 452.9.2 Suggested Solutions .......................................................... 46

CHAPTER 3: MANAGEMENT AND FLOTCHAPTER 3: MANAGEMENT AND FLOTCHAPTER 3: MANAGEMENT AND FLOTCHAPTER 3: MANAGEMENT AND FLOTCHAPTER 3: MANAGEMENT AND FLOTAAAAATION OF A COMPTION OF A COMPTION OF A COMPTION OF A COMPTION OF A COMPANYANYANYANYANY .......................................................................................... 51515151513.0 Purpose ......................................................................................... 523.1 Introduction ................................................................................... 523.2 Exercise of Management Powers ................................................... 523.3 The Powers of the Board ................................................................ 523.4 The Powers of the General Meeting................................................ 533.5 Meetings of A Company and Notices of Meetings ........................... 533.6 Types of Meetings .......................................................................... 54

3.6.1 Statutory Meeting (S.211-212, CAMA) ............................... 543.6.2 Annual General Meeting (S. 213-214, CAMA).................... 543.6.3 Extraordinary General Meeting (S.215, CAMA).................. 553.6.4 Persons Entitled to Notice of a General Meeting ................ 55

3.7 Annual Returns of Companies ....................................................... 563.8 Appointment, Status and Duties of Company Directors.................. 56

3.8.1 Appointment of Directors .................................................. 563.8.2 Persons Disqualified from being Directors ........................ 573.8.3 Remuneration of Directors ................................................ 57

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3.8.4 The Managing Director ...................................................... 583.8.5 Removal of Directors ......................................................... 583.8.6 Proceedings of Directors and Requisition of Meeting......... 59

3.9 Status and Duties of Directors ....................................................... 593.9.1 Status of Directors ............................................................. 593.9.2 Duties of Directors ............................................................. 59

3.10 Enforcement of the Duties of Directors orIntervention in the Case of Breach of their Duties .......................... 613.10.1 Shareholders’ Intervention to Challenge

the Management of a Company ......................................... 623.11 Company Secretary and Secretarial Obligations ........................... 63

3.11.1 Qualifications of Company Secretary................................. 633.11.2 Duties of a Company Secretary .......................................... 643.11.3 Removal of a Company Secretary ...................................... 64

3.12 Company Record Keeping and Filing ............................................ 653.10.1 Financial Statements and Returns .................................... 653.10.2 Financial Statement.......................................................... 65

3.13 Company Audit .............................................................................. 663.13.1 Appointment and Qualification of Auditor ........................ 663.13.2 Duties of Auditor ............................................................... 673.13.3 Removal of Auditor ........................................................... 683.13.4 Liability of Auditor ............................................................ 68

3.14 Company Capital and Securities .................................................... 683.14.1 Definition of Share Capital ................................................ 683.14.2 Definition of Securities ...................................................... 693.14.3 Definition of Share ............................................................ 693.14.4 Types or Classes of Shares ................................................. 703.14.5 Authorized Share Capital (Nominal Share Capital) ........... 703.14.6 Authorized Minimum Capital ............................................ 713.14.7 Transfer of Shares ............................................................. 713.14.8 Capacity to Transfer Shares .............................................. 713.14.9 Mode of Transfer of Shares ............................................... 713.14.10 Transmission of Shares ..................................................... 73

3.15 Maintenance of Capital ................................................................. 733.15.1 The Rule Against Reduction of Capital............................... 733.15.2 Permitted Cases of Capital Reduction ................................ 743.15.3 Treatment of Creditors on Reduction of Capital .................. 743.15.4 The Rule Against Payment of Dividends out of Capital ...... 743.15.5 Acquisition of Own share by the Company ........................ 75

3.16 Debentures .................................................................................... 763.16.1 Creation of Debentures ...................................................... 763.16.2 Types of Debentures .......................................................... 77

3.17 Winding Up of a Company ............................................................. 783.17.1 Winding Up by the Federal High Court .............................. 783.17.2 Voluntary Winding Up ....................................................... 793.17.3 Winding Up Subject to the Supervision of the Court ........... 80

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3.18 Worked Examples .......................................................................... 803.18.1 Questions............................................................................ 803.18.2 Suggested Solutions .......................................................... 81

CHAPTER 4: INSOLCHAPTER 4: INSOLCHAPTER 4: INSOLCHAPTER 4: INSOLCHAPTER 4: INSOLVENCVENCVENCVENCVENCY LY LY LY LY LAAAAAWWWWW ......................................................................................................................................................................................................................................................................................................................................................... 85858585854.0 Purpose ......................................................................................... 864.1 Introduction ................................................................................... 864.2 Meaning and Types of Insolvency .................................................. 86

4.2.1 Tests for Insolvency in Nigeria ........................................... 864.2.2 Main Types of formal Procedures available for

Companies in Financial Difficulties in Nigeria. ................. 874.2.3 Receivership ..................................................................... 874.2.4 Powers of Receiver/Manager ............................................. 894.2.5 Agency of the Receiver ...................................................... 914.2.6 Duties of Receiver and Manager ....................................... 924.2.7 Preparation and filing of Account ...................................... 924.2.8 Realization of Debenture Holder’s Security ....................... 934.2.9 Distribution of Proceeds .................................................... 944.2.10 Institution of Proceedings .................................................. 94

4.3 Scheme of Arrangement and Compromises ................................... 944.3.1 Arrangement ..................................................................... 944.3.2 Compromise ...................................................................... 95

4.4 Fixed and Floating Charge ............................................................ 954.4.1 Charges Securing Debentures ........................................... 954.4.2 Fixed Charge ..................................................................... 964.4.3 Floating Charge................................................................. 984.4.4 Advantages of the Floating Charge ................................... 994.4.5 Legal Consequences of Creating a Floating Charge ......... 100

4.5 Worked Examples ........................................................................ 1014.5.1 Questions ........................................................................ 1014.5.2. Suggested Solutions ........................................................ 102

CHAPTER 5: CRIMINAL LAWCHAPTER 5: CRIMINAL LAWCHAPTER 5: CRIMINAL LAWCHAPTER 5: CRIMINAL LAWCHAPTER 5: CRIMINAL LAW ........................................................................................................................................................................................................................................................................................................................................................................1031031031031035.0 Purposes...................................................................................... 1045.1 Introduction ................................................................................. 1045.2 Criminal Law, Ethics and Ethical Codes ....................................... 1045.3 Theft ............................................................................................ 105

5.3.1 Taking ............................................................................. 1055.3.2 Converting ....................................................................... 1055.3.3 The Element of Fraud ...................................................... 1055.3.4 Things Capable of being Stolen ....................................... 1065.3.5 Punishment ..................................................................... 106

5.4 Fraud........................................................................................... 1075.4.1 False Pretences ............................................................... 1075.4.2 Cheating .......................................................................... 107

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5.4.3 Obtaining Property or Credit by means of DishonoredCheque ............................................................................ 107

5.4.4 Forgery ............................................................................ 1085.4.5 Fraudulent False Accounting ........................................... 108

5.5 Bribery ........................................................................................ 1095.5.1 Elements common to sections 98 and 116 of the

Criminal Code .................................................................. 1095.6 Money Laundering ...................................................................... 110

5.6.1 Limitation of Amount of Cash Payment............................ 1105.6.2 Identification of Customers .............................................. 1115.6.3 Special Surveillance of Certain Transactions ................... 1115.6.4 Mandatory Disclosure by Financial Institutions .............. 1125.6.5 Surveillance of Bank Account .......................................... 1135.6.6 Offences .......................................................................... 113

5.7 Electronic Evidence ..................................................................... 1145.7.1 Admissibility of Statement in Documents Produced

by Computers ........................................................................ 1145.7.2 Admissibility of Documents Generated by e-mail ........... 1165.7.3 Admissibility of Evidence from Website Posting and

Web Pages ....................................................................... 1175.7.4 Admissibility of Evidence from GSM Telephone ............... 1175.7.5 Admissibility of Evidence from Automated Teller

Machines (ATMs) .................................................................... 1185.7.6 E-Signatures ................................................................... 1185.7.7 Proof of Electronic Signatures ......................................... 1185.7.8 Admissibility of Tapes and other Sound Recordings ........ 1195.7.9 The Role of an Accountant as an Expert witness in

Computer Fraud Situations .............................................. 1205.8 Work Examples............................................................................ 121

5.8.1 Questions ........................................................................ 1215.8.2 Suggested Solutions ........................................................ 121

CHAPTER 6: LAW OF CONTRACTCHAPTER 6: LAW OF CONTRACTCHAPTER 6: LAW OF CONTRACTCHAPTER 6: LAW OF CONTRACTCHAPTER 6: LAW OF CONTRACT .....................................................................................................................................................................................................................................................................................................................................1231231231231236.0 Purpose ....................................................................................... 1246.1 Introduction ................................................................................. 1246.2 Definition and Elements of Contract ............................................ 124

6.2.1 Definition of contract ....................................................... 1246.2.2 Elements of Contract ........................................................ 1256.2.3 Offer and Acceptance ...................................................... 125

6.3 Privity of Contract ........................................................................ 1336.3.1 Exceptions to Rule of Privity of contract ........................... 133

6.4 Terms of Contract ......................................................................... 1346.5 Exemption Clauses in Contract .................................................... 1356.6 Vitiating Elements in Contract ..................................................... 1366.7 Discharge of Contract .................................................................. 1386.8 Remedies for Breach of Contract .................................................. 139

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6.9 E-contract .................................................................................... 1416.9.1 Offer ................................................................................ 1416.9.2 Acceptance .................................................................... 1416.9.3 Consideration and Performance ..................................... 1416.9.4 Liability and Damages .................................................. 1416.9.5 Digital Signatures ......................................................... 142

6.10 Types of E-contracts ..................................................................... 1426.11 Chapter Review ........................................................................... 1436.12 Worked Examples ........................................................................ 143

6.12.1 Questions ........................................................................ 1436.12.2 Suggested Solutions ........................................................ 143

CHAPTER 7: AGENCCHAPTER 7: AGENCCHAPTER 7: AGENCCHAPTER 7: AGENCCHAPTER 7: AGENCYYYYY ....................................................................................................................................................................................................................................................................................................................................................................................................................................1451451451451457.0 Purpose ....................................................................................... 1467.1 Introduction ................................................................................. 146

7.1.1 Effects of Agency ............................................................. 1467.1.2 Agency Distinguished from other Similar Transactions ... 146

7.2 Capacity ...................................................................................... 1477.3 Classes of Agents ......................................................................... 1477.4 Creation of Agency ....................................................................... 1487.5 Forms of Authority ....................................................................... 1497.6 Rights and Duties of Parties ........................................................ 150

7.6.1 Rights of an Agent ........................................................... 1507.6.2 Duties of an Agent ........................................................... 1517.6.3 Rights and Duties of the Principal ................................... 151

7.7 Effects of Contracts made by Agents ............................................ 1517.8 Termination of Agency ................................................................. 152

7.8.1 Acts of the Parties ............................................................ 1527.8.2 Operation of Law ............................................................. 152

7.9 Chapter Review ........................................................................... 1527.10 Work Examples............................................................................ 152

7.10.1 Questions ......................................................................... 1527.10.2 Suggested Solutions ........................................................ 153

CHAPTER 8: LCHAPTER 8: LCHAPTER 8: LCHAPTER 8: LCHAPTER 8: LAAAAAW OF TORW OF TORW OF TORW OF TORW OF TORTSTSTSTSTS ........................................................................................................................................................................................................................................................................................................................................................................1551551551551558.0 Purposes...................................................................................... 1568.1 Introduction ................................................................................. 1568.2 Classification of Torts ................................................................... 1568.3 Capacity in Tort ............................................................................ 1578.4 Forms of Liability in Tort .............................................................. 1578.5 Negligence .................................................................................. 158

8.5.1 Duty of care ..................................................................... 1598.5.2 Breach of Duty of Care ..................................................... 1608.5.3 Damage .......................................................................... 160

8.6 Product Liability .......................................................................... 1618.7 Chapter Review ........................................................................... 161

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8.8 Worked Examples ........................................................................ 1628.8.1 Questions ........................................................................ 1628.8.2 Suggested Solutions ........................................................ 162

CHAPTER 9: SALE OF GOODSCHAPTER 9: SALE OF GOODSCHAPTER 9: SALE OF GOODSCHAPTER 9: SALE OF GOODSCHAPTER 9: SALE OF GOODS ......................................................................................................................................................................................................................................................................................................................................................... 1651651651651659.0 Purpose ....................................................................................... 1669.1 Introduction ................................................................................. 1669.2 Goods Defined ............................................................................. 1679.3 Sale of Goods and other Forms of Contracts Distinguished .......... 167

9.3.1 Contract of Sale and Hire Purchase ..................................... 1679.3.2 Contract of Sale and Pledge ................................................ 1679.3.3 Contract of Sale and Bailment ............................................ 1679.3.4 Contract of Sale and Mortgage ............................................ 168

9.4 Elements of Sale of Goods ........................................................... 1689.4.1 Implied Terms of Contract of Sale of Goods. ........................ 168

9.5 Transfer of Property ..................................................................... 1709.6 Property and Possession .............................................................. 170

9.6.1 Transfer of ownership or property in goods ......................... 1709.7 Reservation of Right of Disposal.................................................. 1719.8 The Consequence of Sale ............................................................. 1729.9 Transfer of Title ........................................................................... 1729.10 Performance of the Contract ......................................................... 1739.11 Rights of a Seller ......................................................................... 1739.12 Rights of a Buyer ......................................................................... 1759.13 Chapter Review ........................................................................... 1759.14 Worked Examples ........................................................................ 176

9.14.1 Questions.......................................................................... 1769.14.2 Suggested Solutions ......................................................... 176

CHAPTER 10: HIRE PURCHASECHAPTER 10: HIRE PURCHASECHAPTER 10: HIRE PURCHASECHAPTER 10: HIRE PURCHASECHAPTER 10: HIRE PURCHASE ............................................................................................................................................................................................................................................................................................................................................... 17717717717717710.0 Purpose ....................................................................................... 17810.1 Introduction ................................................................................. 17810.2 Nature of Hire Purchase .............................................................. 17810.3 Elements of a Hire Purchase Agreement ..................................... 179

10.3.1 Passing of Ownership ....................................................... 18010.3.2 Relevant Proportion Principle ........................................... 180

10.4 Duties and Rights of Parties Under A Hire Purchase Contract ...... 18010.4.1 Duties of the Owner .......................................................... 18010.4.2 Rights of the Owner .......................................................... 18110.4.3 Duties of the Hirer ............................................................ 181

10.5 The Third Party in a Hire Purchase Contract................................. 18110.6 Rights of the Owner and the Hirer against Third Party ................ 18210.7 Termination of Hire Purchase Agreement .................................... 18210.8 Remedies for Breach of Hire Purchase Agreement ...................... 183

10.8.1 Remedies available to the owner ..................................... 18310.8.2 Remedies available to the hirer ....................................... 183

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10.9 Chapter Review ........................................................................... 18310.10 Worked Examples ........................................................................ 183

10.10.1 Questions ....................................................................... 18310.10.2 Suggested Solutions ....................................................... 184

CHAPTER 11: INSURANCECHAPTER 11: INSURANCECHAPTER 11: INSURANCECHAPTER 11: INSURANCECHAPTER 11: INSURANCE ....................................................................................................................................................................................................................................................................................................................................................................................... 18518518518518511.0 Purpose ....................................................................................... 18611.1 Introduction ................................................................................. 186

11.1.2 Insurance Distinguished from Assurance ......................... 18611.1.3 Formalities ....................................................................... 186

11.2 Marine Insurance ........................................................................ 18711.3 The Proposal Form....................................................................... 18711.4 Utmost Good Faith ....................................................................... 188

11.4.1 Material Facts ................................................................... 18811.5 Insurable Interest ........................................................................ 18911.6 Subrogation ................................................................................ 19011.7 Indemnity.................................................................................... 19011.8 Double Insurance and Contribution ............................................. 19111.9 Assignment of Insurance Policies ................................................ 192

11.9.1 Legal and Equitable Assignment ...................................... 19311.9.2 Notice of Assignment ........................................................ 193

11.9.3 Acknowledgement of Notice ........................................................ 19411.10 Chapter Review ............................................................................ 19411.11 Worked Examples ........................................................................ 194


CHAPTER 12: BANKINGCHAPTER 12: BANKINGCHAPTER 12: BANKINGCHAPTER 12: BANKINGCHAPTER 12: BANKING ........................................................................................................................................................................................................................................................................................................................................................................................................... 19919919919919912.0 Purpose ....................................................................................... 20012.1 Introduction ................................................................................. 20021.2 Bank and the Banker ................................................................... 20012.3 Banking Business ........................................................................ 20112.4 Bank Customer ............................................................................ 202

12.4.1 Duties of Bank to Customer ............................................... 20212.4.2 Duties of Customer to the Bank ......................................... 204

12.5 Rights of the Bank ....................................................................... 20412.6 Statutory Duties of Licensed Banks.............................................. 20412.7 The Central Bank of Nigeria ........................................................ 20712.7.1 Objects of the Central Bank of Nigeria ......................................... 20812.7.2 Statutory Powers of the Central Bank of Nigeria .......................... 20812.8 Worked Examples ........................................................................ 209

12.8.1 Questions.......................................................................... 20912.8.2 Suggested Solutions ........................................................ 210

CHAPTER 13: NEGOTIABLE INSTRUMENTSCHAPTER 13: NEGOTIABLE INSTRUMENTSCHAPTER 13: NEGOTIABLE INSTRUMENTSCHAPTER 13: NEGOTIABLE INSTRUMENTSCHAPTER 13: NEGOTIABLE INSTRUMENTS ...........................................................................................................................................................................................................................................21321321321321313.0 Purposes...................................................................................... 214

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13.1 Introduction ................................................................................. 21413.2 Types of Negotiable Instruments.................................................. 21413.3 Attributes of Negotiable Instruments ........................................... 21513.4 Definition of Bills of Exchange .................................................... 21613.5 Parties to a Bill of Exchange ........................................................ 21713.6 Distinctions Between order and Bearer Bills ............................... 21713.7 Acceptance Bill ............................................................................ 218

13.7.1 General Acceptance .......................................................... 21813.7.2 Qualified Acceptance ........................................................ 21813.7.3 Examples of Qualified Acceptance ................................... 21813.7.4 Presentation for Acceptance.............................................. 218

13.8 Endorsement of a Bill .................................................................. 21913.8.1 Requisites of a Valid Endorsement ................................... 219

13.9 Negotiation of a Bill .................................................................... 22013.10 Capacities and Liabilities of Parties to a Bill ............................... 22013.11 Liabilities of Parties .................................................................... 22113.12 Signatures ................................................................................... 22113.13 Forged Signatures ....................................................................... 22213.14 Holder of a Bill of Exchange ........................................................ 222

13.14.1 Rights of a Holder ........................................................... 22213.14.2 Holder for Value .............................................................. 22213.14.3 Holder in Due Course ...................................................... 22213.14.4 Meaning of a holder in due course .................................. 223

13.15 Discharge of a Bill ....................................................................... 22313.16 Dishonour of Bills ........................................................................ 224

13.16.1 Notice of Dishonour ........................................................ 22413.17 Noting and Protesting ................................................................. 22413.18 Chapter Review ........................................................................... 22513.19 Worked Examples ........................................................................ 225


CHAPTER 14: CHEQUESCHAPTER 14: CHEQUESCHAPTER 14: CHEQUESCHAPTER 14: CHEQUESCHAPTER 14: CHEQUES ........................................................................................................................................................................................................................................................................................................................................................................................................... 22722722722722714.0 Purpose ....................................................................................... 22814.1 Introduction ................................................................................. 22814.2 Parties to a Cheque ...................................................................... 22814.3 Difference between Cheques and Bill of Exchange ...................... 22914.4 Types of Cheques.......................................................................... 229

14.4.1 Bearer Cheque .................................................................. 22914.4.2 Order Cheque .................................................................... 23014.4.3 Crossed Cheque ................................................................. 23014.4.5 Types of Crossing............................................................... 230

14.5 Effect of A ‘Not Negotiable’ Crossing ............................................ 23114.6 Effect of An “Account Payee Only” Crossing ................................. 23214.7 Material Alterations .................................................................... 23214.8 Forged Cheques ........................................................................... 232

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14.9 Promissory Notes ......................................................................... 23214.9.1 Promissory Notes and Bills of Exchange Differentiated .... 233

14.10 Holder ........................................................................................ 23314.11 Countermand of Payment ............................................................ 233

14.11.1 Who may Countermand Payment of a Cheque? ............... 23414.12 Chapter Review ........................................................................... 23414.13 Worked Examples ........................................................................ 234


CHAPTER 14: EMPLOYMENT LAWCHAPTER 14: EMPLOYMENT LAWCHAPTER 14: EMPLOYMENT LAWCHAPTER 14: EMPLOYMENT LAWCHAPTER 14: EMPLOYMENT LAW ...........................................................................................................................................................................................................................................................................................................................23723723723723715.0 Purpose ....................................................................................... 23815.1 Introduction ................................................................................. 23815.2 Meaning of Employment ............................................................. 238

15.2.1 Control Test ....................................................................... 23915.2.2 Some Control Text ............................................................. 239

15.3 Formation of a Contract of Employment....................................... 24015.4 Forms of Contract ......................................................................... 24015.5 Terms of a Contract of Employment.............................................. 24015.6 Probationary Period..................................................................... 24115.7 Duration ...................................................................................... 24115.8 Duties of an Employee................................................................. 24115.9 Duties of an Employer ................................................................. 24215.10 Termination of Contract ............................................................... 244

15.10.1 The Case of Civil Servants ............................................... 24515.10.2 Dismissal of an employee .............................................. 24515.10.3 Interdiction ..................................................................... 245

15.11 Worked Examples ........................................................................ 24615.11.1 Questions ....................................................................... 24615.11.2 Suggested Solutions ....................................................... 246

CHAPTER 15: ADMINISTRACHAPTER 15: ADMINISTRACHAPTER 15: ADMINISTRACHAPTER 15: ADMINISTRACHAPTER 15: ADMINISTRATION OF ESTTION OF ESTTION OF ESTTION OF ESTTION OF ESTAAAAATES AND TRUSTSTES AND TRUSTSTES AND TRUSTSTES AND TRUSTSTES AND TRUSTS ............................................................................................... 24924924924924916.0 Purposes...................................................................................... 25016.1 Introduction ................................................................................. 25016.2 Wills ........................................................................................ 25116.3 Intestacy...................................................................................... 25116.4 Letters of Administration ............................................................. 251

16.4.1 Need for Letters ................................................................ 25216.4.2 Types of Letters ................................................................. 253

16.5 Administrators ............................................................................ 25416.6 Executors ..................................................................................... 25416.7 Duties and Rights of Personal Representatives ............................ 25416.8 Trusts ........................................................................................ 25616.9 Definition of Trust ........................................................................ 25616.10 Uses of Trusts .............................................................................. 25616.11 Essential Elements of Trusts ......................................................... 257

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16.12 Classification of Trusts ................................................................. 25716.13 Private Trusts .............................................................................. 25816.14 Public Trusts ................................................................................. 25816.15 Creation of Trusts .......................................................................... 25916.16 Duties and Powers of Trustees ...................................................... 26016.17 Powers ........................................................................................ 26416.18 Rights of Beneficiaries under A Trust............................................ 26416.19 Appointment of Trustees .............................................................. 26516.20 Termination of Trusteeship ........................................................... 26516.21 Chapter Review ............................................................................ 26616.22 Worked Examples ........................................................................ 266


APPENDIX I: STUDY AND EXAMINATION TECHNIQUES ..................................... 271

APPENDIX II: BIBLIOGRAPHY ............................................................................ 277

INDEX ............................................................................................................... 279

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The Nigerian Legal SystemSources of Law

1

CH

APTER

Foundation level

Business Law

Contents

1. Purpose

2. Introduction

3. Law and its Sources

4. Sources of Nigerian Law

5. The Common Law

6. Doctrines of Equity

7. Statutes of General Application (SOGA)

8. Nigerian Legislation

9. Customary Law

10. Judicial Precedent or Case Law

11. Hierarchy of Courts

12. International Law

13. Legislative Process

14. Division of Legislative Powers between the Federal and the State

Government

15. Distinctions between Civil Law and Criminal Law

16. Worked Examples


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1

THE NIGERIAN LEGAL SYSTEMSOURCES OF LAW

1.0 PURPOSEUpon completion of this chapter, readers should be able to:(a) define law;(b) explain the purpose of law;(c) identify the laws applicable in Nigeria;(d) state and explain the forms of legislation in Nigeria;(e) distinguish between criminal and civil proceedings;(f) explain the role of courts in the administration of justice;(g) identify the classification of courts;(h) explain the Jurisdiction and composition of each of the courts;(i) explain the process of commencement end enforcing of action; and(j) distinguish between criminal and civil law.

1.1 INTRODUCTIONIn reality the law covers an enormous range of situations and the legal systemin Nigeria has a variety of courts and methods for dealing with different typesof cases. The purpose of this chapter is to explain what the law is and its role inthe society as well as its various sources. The chapter also examines the variousways by which the laws are interpreted to give meaning to them.

1.2 LAW AND ITS SOURCES

1.2.1 Meaning of LawThere is no single meaning of law that is universally adopted. However,legal theorists have tried to provide same definitions.

John Salmond defines law as being ‘the body of principles recognisedand applied by the state in the administration of justice’. Law can alsobe described as a formal mechanism of social control. It is formalbecause the rules set down in the law can be enforced through the courtsand legal system, while in a broad sense all laws could be said to beinvolved in some area of social control.

1.3 SOURCES OF NIGERIAN LAWSources of law mean (i) the origin of law, and (ii) where law could be found.The sources of Nigerian Law are the Received English Law (consisting of the

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Common Law of England, Doctrines of Equity and Statutes of GeneralApplication), Nigerian Legislation, Customary Law, Judicial Precedents or Case-Law, and International Law (Treaties, Conventions and Protocols). Secondary/subsidiary sources of law include law reports, law textbooks, learned works,etc.

English law is a major source of law by virtue of the fact that Nigeria wascolonised by Britain. English law was first introduced to then Lagos Colony byvirtue of Ordinance 3 of 1863 and was later made applicable to the whole ofNigeria. The English Law that applies in Nigeria consists of the Common Law,the Doctrines of Equity and Statutes of General Application.

1.4 THE COMMON LAWCommon law can be described as the law which was common to the whole ofEngland as opposed to local customs which are peculiar and limited to aparticular area. A more appropriate meaning of the common law is that commonlaw is a law developed from decided cases based on uniform or general customs.The phrase ‘common law’ is still used to distinguish laws that have beendeveloped by judicial decisions, from laws that have been created by statuteor other legislation.

1.4.1 Nature and Development of the Common LawCommon law is said to have been introduced after the Norman Conquestin 1066. The first Norman King, William the conqueror, set up the CuriaRegis (the King’s Court) and appointed his own judges. Persons whohad disputes were encouraged to apply to have the king (or his Judges)decide the matter. In addition to the central court, the judges were sentto major towns to decide all important cases.

Initially the judges would use the local customs or the old Anglo-Saxon laws todecide cases, but over a period of time, the judges on their own returned toWestminster in London to discuss the laws or customs they had used and thedecisions they had made with each other. Gradually, the judges selected thebest customs and these were then applied by all the judges throughout thecountry. This practice had the effect that the law became uniform or ‘common’throughout the whole country, and it is from there that the phrase ‘commonlaw’ seems to have developed.

The common law later developed a rigid system which made it difficult toobtain justice from the courts. Only certain types of case were recognised dueto the problem of inadequate writs. Thus where there was ‘no writ’, there was‘no remedy’. The law was also very technical, if there was an error in theformalities (Writ) the person making the claim would lose the case.

Another major problem was the fact that the only remedy the common lawcourts could give was damages that is an order that the defendant pay a sum



4

of money to the plaintiff (now claimant) by way of compensation, which maynot be suitable in some cases, for example in a case of trespass to land wherean injunction would have been the most appropriate remedy.

The third problem was that the common man was unable to enforce thejudgment in his favour against the noble or aristocrat. This was because “mightwas right.”

1.5 DOCTRINES OF EQUITY

1.5.1 Meaning, Nature and Development of EquityEquity in a broad sense means fairness or whatever is just and ethical.However, in a technical sense, equity is the branch of law administeredby the Court of Chancery before the passing of the Judicature Act of 1873-75 with a view of supplementing the common law rules. Equitydeveloped because of problems in the common law system.

Aggrieved persons who could not obtain justice in the common law courtsappealed directly to the King. Most of these cases were referred to King’sChancellor, who was both a lawyer and a priest, and who became knownas the keeper of the king’s conscience. This was because the Chancellorbased his decisions on principles of natural justice and fairness. Healso developed new remedies which were able to compensate claimantsmore fully than the common law remedy of damages.

1.5.2 Equitable RemediesThe main equitable remedies are:(a) Injunction: This is an order to one of the parties involved in the

case to do something or not to do something.(b) Specific performance: This is an order that a contract should

be carried out as agreed.(c) Rescission: This is a remedy in contract cases and it aims to

return the parties as far as possible to their pre-contractualposition.

(d) Rectification: Under this, the court will order that where amistake has accidentally been made in a document so that it isnot a true version of what the parties agreed, that documentshould be altered to reflect the parties’ intentions.

1.5.3 Remedies Developed RecentlyEven in the twentieth century the courts still developed new equitableremedies. Notable is the freezing order (known as a Mareva Injunction)and the search order (known as an Anton Piller order).

The freezing order can be made where there is a risk that one party in acase will move all their assets out of the Jurisdiction of the court beforethe case against them is tried.

5

The search order allows the claimant to search the defendant’s premisesand remove any documents or other material which could help theclaimant to prove his case. All equitable remedies are discretionaryremedies.

It is important to note that whenever there is a conflict between thecommon and equity, equity prevails. This was decided in the Earl ofOxford’s case (1615).

1.5.4 Maxims of EquityThe exercise of equitable Jurisdiction by the Court of Chancery was basedupon certain general principles, many of which are now embodied inthe maxims of equity. These maxims have played important part in thedevelopment of equity. There are twelve of such maxims, and are asfollows:(a) Equity will not suffer a wrong to be without a remedy;(b) He who comes to equity must come with clean hands;(c) He who seeks equity must do equity;(d) Where the equities are equal, the first in time prevails;(e) Equity follows the law;(f) Delay defeats equity or equity aids the vigilant and not the

indolent;(g) Equality is equity;(h) Equity looks at the intent (substance) not the form;(i) Equity looks on that as done which ought to be done;(j) Equity imputes an intention to fulfil an obligation;(k) Where the equities are equal, the law prevails; and(l) Equity acts in personam

1.6 STATUTES OF GENERAL APPLICATION (SOGA)These are the laws of general application that were in force in England on orbefore 1 January, 1900. These laws became part of the laws in Nigeria byvirtue of the various adaptation laws. They remain laws in Nigeria untilrepealed by a particular Nigerian Legislation on the particular subject-matter.Examples of such laws are Infant Reliefs Act 1874, the Partnership Act 1890,The Sale of Goods Act 1893, Wills Act 1837, Bill of Exchange Act 1882,Conveyancing Act 1881 and Statutes of Frauds 1677 and so on. Statutes ofGeneral Application are not applicable when there is a local statute on thesubject.

1.6.1 English Laws extending to NigeriaThese are laws made specifically for Nigeria by English Parliamentbetween 1900 and 1 October 1960. Examples of these laws are theCopyright Act 1911 (later repealed by the Copyright Decree 1970), theCriminal Code, the Penal Code, and the Independence Act 1960.



6

1.7 NIGERIAN LEGISLATIONNigerian Legislation include the Constitution of the Federal Republic of Nigeria,Acts, Decrees, Laws, Edicts and Bye laws.

1.7.1 The ConstitutionThe Constitution the Federal Republic of Nigeria is the supreme law ofthe land. To this effect, any law that contradicts the Constitution is null,void and of no effect to the extent of the contradiction or inconsistency.The Constitution has the following characteristics:

(a) Supremacy: This has three aspects which are as follow:(i) Section 1 of the Constitution provides that the constitution

shall be supreme and its provisions shall have bindingforce on all authorities and persons through the FederalRepublic of Nigeria.

(ii) No part of the Federal Republic of Nigeria shall begoverned except in accordance with the Constitution,

(iii) Sub-section 3 states that if any other law is inconsistentwith this constitution, the constitution shall prevail andthat other law shall to the extent of its inconsistency benull, void and of no effect;

(b) Written and Rigid: It is a written constitution and the procedurefor its amendment is so special that it is not easy to amend it.The 1999 constitution can only be amended by two-third majorityof the National Assembly supported by at least two-third majorityof the state Houses of Assemblies, thus making the constitution arigid constitution whose amendment is cumbersome;

(c) Federalism: It is a federal constitution that divides the powers ofgovernment between the Federal Government and the States ofthe Federation. The Federal Government has the power to legislateon the matters in the Exclusive Legislative List of the Constitutionwhile both the Federal and the State governments may legislateon the matters on the Concurrent Legislative List. Federal lawsare called Acts while States’ are called Laws. If a State Lawcontradicts a Federal Act on the same subject, the Federal Actprevails;

(d) Separation of Powers: To avoid arbitrariness, the Constitutionseparates the powers of Government among the three branchesof government namely the Executive, Legislative and Judicialbranches. None of these branches may exercise the powers of theothers. Conversely, they act as checks and balances to each other;

7

(e) Rule of Law: The Constitution has governance according to lawas one of its cardinal characteristics and principles. This prohibitsarbitrariness. The principle of rule of law has two broad aspects(i) Nemo Judex in causa sua – a person shall not be the judge inhis own case, and (ii) Audi alteram partem – a person shall notbe condemned without hearing.

(f) Fundamental Human Rights: Chapter IV of the Constitution makeprovisions for fundamental rights which every Nigerian citizenis entitled to enjoy, some of these rights include:(i) Right to Life;(ii) Right to dignity of human person;(iii) Right to personal liberty;(iv) Right to fair hearing;(v) Right to private and family life;(vi) Right to freedom of thought, conscience and Religion;(vii) Right to freedom of expression and the press;(viii) Right to peaceful assembly and association;(ix) Right to freedom of movement; and(x) Right to freedom against discrimination.

Any citizen whose right is infringed upon can approach either a StateHigh Court or the Federal High Court for redress under the FundamentalRights Enforcement Procedure Rules.

1.7.2 ActsThese are laws passed by the National Assembly which is composed ofthe Senate and the House of Representatives, in a democraticgovernment.

1.7.3 DecreesThese are enactments made by the Federal Military Government duringMilitary regime.

1.7.4 LawsThese are laws enacted by the House of Assembly of a State in ademocratic government.

1.7.5 EdictsThese are laws made by the military government of a state during amilitary regime.

1.7.6 Bye LawsThese are laws made by the Local Government Councils both duringdemocratic and military regimes.



8

1.8 CUSTOMARY LAW

1.8.1 Meaning, Characteristics, Validity and Proof of Customary Law.Customary law can be described as a body of rules regarded as obligatoryby members of a particular community. Customary law varies from onecommunity to another.

There are two types of customary law namely: (i) Ethic customary law,which is indigenous and is applicable to members of a particular ethnicgroup or community and (ii) Islamic customary law, which is based onthe Islamic faith and is applicable to members of the Islamic faith.Customary law has the following characteristics:

(a) it is largely unwritten with the exception of Islamic law;(b) members of the community or group to which it relates generally

consider it as binding as such it is often described as a ‘mirror ofaccepted usage’;

(c) It is established by proof through assessors or authoritative booksif it has not been so used by the court and judicially noticed; and

(d) it is largely flexible as Osborne C. J. observed in the case of Lewisv Bankole that ‘one of the most striking features of customarylaw is its flexibility, customary law appears to subject itself tomotive of expediency without losing its character as a custom.

1.8.2 Validity of Customary LawIt is not automatic that all customs would be recognised by the courts aslaw in Nigeria. Before a custom becomes law and is recognised by thecourts, the customary law must pass the validity tests laid down by law.The three validity tests which every customary law must are:(a) The repugnancy test;(b) Incompatibility test; and(c) Public policy test.

1.8.3 Repugnancy TestEvery applicable customary law must not be repugnant to natural justice,equity and good conscience. The term natural justice in a broad sensemeans ‘fair hearing’. Equity in a broad sense means fairness.

Any customary law which is barbaric and falls below civilized standardof behaviour would be held to invalid as contrary to natural justice. Therepugnancy test has been applied in a number of cases such as: Edet vEssien, (1932), the fact of which was that Essien married X after payingdowry on her. Later X deserted Essien and (without a refund of the dowrypaid by Essien) married Edet. Two children were born out of therelationship between X and Edet. Essien claimed those children on thebasis of an existing custom that provided that as long as the dowry paid

9

on a woman has not being refunded, any children born by that womanbelonged to the former husband whose dowry has not been refunded.The court held that such custom would not be enforced because it wasrepugnant to natural justice, equity and good conscience.

See also Re: Effiong Attah, where the court held that a custom wherebythe former owner of a servant was entitled to administer the personalproperty of the deceased servant would fail the repugnant test not onlybecause it was unfair to the biological children of the servant but alsobecause it sanctions the institution of slavery which is consideredbarbaric and uncivilised.

1.8.4 Incompatibility TestEvery applicable customary law must not be incompatible either directlyor by implication with any law for the time being in force. That is, a ruleof customary law which conflicts with an existing law would not beenforced. For example in Adesubokan v Yunusa (1971), the courtrefused to enforce an Islamic rule on inheritance because in thatparticular case, it conflicted with an existing law i.e. the Wills Act 1837.

1.8.5 Public Policy TestSection 14(3) of the Evidence Act provides that every applicablecustomary law must not be contrary to public policy. From the authorityof decided cases such as Alake v Pratt (1955), Cole v Akinyele, forexample, the courts have refused to enforce certain rules of customarylaw because, in the opinion of the court, it would encourage promiscuity,which is contrary to public good, in particular the practice of legitimationof a child born outside wedlock by acknowledgement of his paternity bythe father.

1.8.6 Proof of Customary LawCustomary law is a question of fact as such it must be proved by anyonealleging its existence. A further indication of the direction of developmentof customary is stated in Angu v Atta (1916) 24-28, 43 thus “As is thecase of all customary law, it has to be proved in the first instance bycalling witnesses acquainted with the native customs until the particularcustoms have, by frequent proof in the courts become so notorious thatthe courts take judicial notice of them”.

Thus, the existence of customary law may be proved in any of thefollowing ways:(i) Direct oral evidence: this involves calling as witnesses people

like Chiefs, Elders etc.Who are considered to be custodians of the particular custom.

(ii) Documentary Evidence: This involves tendering as evidence,books, manuscripts, or research findings of people who are



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considered experts and knowledgeable in the custom intendedto be proved.

(iii) Judicial Notice: In trying to prove a custom by judicial notice, aperson is simply asking the court to accept the custom as existingbecause a higher or coordinate court had in previous proceedingsrepeatedly accepted the custom as existing.

1.9 JUDICIAL PRECEDENT OR CASE LAWJudicial precedent refers to the source of law where past decisions of the judgescreate law for future judges to follow. This source of law is also known as case-law. Judicial precedent is based on the lati