Commercial contracts are the foundation of most business relationships. From supplier agreements and service contracts to partnership and distribution arrangements, contracts define rights, obligations, risk allocation, and remedies. In Nigeria’s commercial environment, poorly drafted or informal contracts are a leading cause of disputes, revenue loss, and operational disruption.

Many businesses rely on generic templates or verbal agreements, particularly in the early stages. While this may seem efficient, it exposes businesses to significant legal and commercial risk. A well-drafted contract is not merely a legal formality; it is a strategic tool that protects value and clarifies expectations.

One critical issue in commercial contracts is scope of work clarity. Contracts must clearly define the services or goods to be provided, performance standards, timelines, and deliverables. Ambiguity in scope often leads to disagreements, delayed performance, or non-payment disputes.

Payment terms are another frequent source of conflict. Nigerian businesses commonly face delayed or disputed payments due to unclear pricing structures, invoicing procedures, or payment timelines. Contracts should specify payment amounts, currency, due dates, interest on late payments, and consequences of default.

Risk allocation is central to contract drafting. Clauses dealing with indemnities, limitation of liability, and warranties determine who bears responsibility when things go wrong. Without careful drafting, businesses may unknowingly assume excessive risk, including liability for losses beyond their control.

Termination provisions are equally important. Contracts should clearly state when and how parties may terminate, notice requirements, and post-termination obligations. Poorly drafted termination clauses can trap businesses in unprofitable relationships or expose them to claims for wrongful termination.

Dispute resolution clauses also deserve careful attention. Litigation in Nigeria can be lengthy and costly. Many commercial contracts now provide for arbitration or alternative dispute resolution to achieve faster and more confidential outcomes. Choosing the right dispute resolution mechanism can significantly reduce business disruption.

Regulatory compliance should also be reflected in contracts. Businesses operating in regulated sectors must ensure contracts align with licensing conditions, data protection obligations, and sector-specific regulations. Non-compliant contracts may be unenforceable or attract regulatory sanctions.

Another common oversight is failure to update contracts as businesses grow. Agreements that were suitable at an early stage may no longer reflect operational realities, regulatory requirements, or risk exposure. Periodic contract reviews help ensure continued relevance and protection.

Ultimately, strong commercial contracts provide certainty, reduce disputes, and support sustainable growth. Businesses that invest in proper contract drafting and review are better positioned to manage risk, protect revenue, and maintain stable commercial relationships. In Nigeria’s dynamic business environment, contracts should be treated as strategic assets, not afterthoughts.