Pricing, payment and financingFixed-price and labour-and-cost-plus contracts
Does the law in your country have different provisions for ‘fixed-price’ contracts and ‘labour-and-cost-plus’ contracts?
There is no distinction between fixed-price contracts and labour-and-cost-plus contracts in Nigerian statutes.Price increases
Does the builder have any statutory remedies available to charge the buyer for price increases of labour and materials despite the contract having a fixed price?
There are no statutory remedies available to a builder to charge the buyer for price increases in labour and materials where parties have agreed a fixed price. Where the builder is desirous of charging the buyer for price increases of labour and materials in a fixed-price contract, a clause to that effect is usually inserted in the contract.Retracting consent to a price increase
Can a buyer retract consent to an increase in price by arguing that consent was induced by economic duress?
In Nigeria, a contract will be vitiated where one of the parties successfully establishes that the contract or a portion of it was agreed under duress. The party alleging duress will be required to establish the duress by leading evidence in that regard. Therefore, a buyer may be able to retract consent to an increase in price where it can be proved that such consent was induced by economic duress. It has been held that a party who entered into a contract under duress may either affirm or avoid such a contract after the duress has ceased. Failure to avoid such a contract will render him or her bound by the contract as he or she will be deemed to have ratified the contract.Exclusions of buyers’ rights
May the builder and the buyer agree to exclude the buyer’s right to set off, suspend payment or deduct certain amounts?
Yes, the parties may choose to exclude the buyer’s right to set off, suspend payment or deduct certain amounts. This is premised on the parties’ freedom to contract.Refund guarantees
If the contract price is payable by the buyer in pre-delivery instalments, are there any rules in regard to the form and wording of refund guarantees? Is permission from any authority required for the builder to have the refund guarantees issued?
There are currently no rules guiding the form and wording of refund guarantees. However, a refund guarantee would generally be required to be in writing, by deed and signed by the guarantor. In addition, under the Banks and Other Financial Institutions Act 2010, where a shipbuilder seeks financial guarantee from a bank, the bank is required to obtain the permission of the Central Bank of Nigeria in order to issue the refund guarantee.Advance payment and parent company guarantees
What formalities govern the issuance of advance payment guarantees and parent company guarantees?
In Nigeria, advance payment guarantees are usually issued by insurance companies or banks. Under the Insurance Act 2003 and the National Insurance Commission Guidelines on Insurance Premium Collection and Remittance 2013, an insurance company will not issue an advance payment guarantee unless the premium in that regard has been paid. All other requirements prescribed by the insurance company must also be fulfilled.
In the case of an advance payment guarantee issued by a bank, the approval of the Central Bank of Nigeria is required prior to the issuance of the guarantee.
Regarding the issuance of parent company guarantees, a board resolution of the parent company approving the issuance of advance payment guarantee will be required.
In addition to the foregoing, the advance payment guarantee and parent company guarantee must be in writing, by deed and signed by the guarantor.Financing of construction with a mortgage
Can the builder or buyer create and register a mortgage over the vessel under construction to secure construction financing?
In Nigeria, there is a register for ships under construction. However, while a mortgage may be created over a ship registered in Nigeria or a share in such a ship, it does not appear that a mortgage can be created and registered over a ship under construction.
Law Stated DateCorrect On
Give the date on which the information above is accurate.
* This chapter is correct as at March 2019.