Material Breach

Well drafted contracts reduce the argument by defining the triggers.

Rather than leaving termination to a bare reference to material breach, the clause lists specific events entitling termination: failure to pay within a stated number of days of the due date, failure to meet a defined service level in three consecutive months, insolvency, change of control, breach of a confidentiality or intellectual property obligation, and loss of a licence necessary to perform.

That converts a judgment call into a checklist.

Cure periods are the second mechanism. A clause typically requires the innocent party to give written notice specifying the breach and allowing a period, commonly fourteen or thirty days, for it to be remedied. Only if it is not cured does the right to terminate arise. Some breaches are stated to be incapable of cure.

Following that process precisely is essential. A party who terminates without giving the notice the contract required has terminated wrongfully, whatever the underlying breach.

Affirmation is the third point. An innocent party who continues performing and accepting performance after a repudiatory breach may be held to have affirmed the contract and lost the right to terminate for it.

The practical Nigerian risk is termination by frustration rather than by analysis.

A relationship deteriorates. Deliveries are late, quality slips, invoices are disputed. One party sends a message saying the contract is terminated, stops performing, and engages somebody else. The other party sues, and the question is whether the breaches relied on were material and whether the contractual process was followed.

Where it was not, the terminating party is the one in breach and is facing a claim for the balance of the contract.

The discipline is unglamorous. Identify the specific breaches with dates. Check what the termination clause actually requires. Serve the notice it specifies, in the manner it specifies, to the address it specifies. Allow the cure period. Only then terminate, in writing, citing the clause.

The notices clause matters here more than anywhere else in the contract. A termination notice sent by WhatsApp where the contract required delivery to a stated address may be ineffective, and the contract continues while the terminating party believes it has ended.

Where the relationship is finished but the breach is arguable, negotiating a termination by agreement is frequently cheaper than terminating unilaterally and litigating about whether it was justified.

Three routes out of a contract, with different requirements and different costs.

A minor breach gives the innocent party a claim for damages. The contract continues, and terminating on the strength of it is wrongful.

A material breach, once established and once the contractual process has been followed, entitles the innocent party to terminate and to claim damages including for loss of the bargain.

Termination for convenience is a contractual right to end the agreement without any breach at all, on notice, usually with payment for work done and sometimes for wind down costs. Where a contract contains one, it is often the safer route, because it requires no argument about whether a breach was material.

A party wanting out of a Nigerian contract should check first whether it contains a convenience right. Using it costs a notice period and removes the litigation risk entirely.

Materiality is a matter of judgment, so the parties can reasonably disagree and the outcome is uncertain until a court decides.

Cure periods also delay the exit, and a party dealing with a supplier who has already failed must give them another thirty days.

Proving loss is separate. Establishing the breach does not establish the damages, and the innocent party still has to prove what it cost them and to mitigate.

And termination does not end everything. Confidentiality, intellectual property, indemnity and dispute resolution provisions normally survive, and the contract should say which do.