Study Notes: The Law of Contract in Ghana (Christine Dowuona-Hammond)

NATURE AND ESSENCE OF CONTRACT

• Definition of Contract: An agreement consisting of an exchange of promises recognized by law as giving rise to enforceable rights and obligations. Sir Frederick Pollock defines it as "a promise or set of promises which the law will enforce."

• American Restatement (Second) of Contracts (1981): Defines it as a promise for the breach of which the law gives a remedy, or the performance of which the law recognizes as a duty.

• Key Issues in Contract Cases:

  1. What exactly is the promise (Terms of the contract)?

  2. Does the promise create a legal duty (Formation/Execution)?

  3. What remedy should be given for breach?

• The Bargain Aspect: Common law emphasizes the "bargain" concept. A "bare" or "naked" promise (one with no exchange) is generally unenforceable. Obligations are undertaken voluntarily rather than imposed by law.

ASCERTAINING THE FACT OF AGREEMENT

• Nature and Test of Agreement: Earlier views suggested a "meeting of minds" (consensus ad idem). Modern law uses an Objective Test.

• The Objective Test: Intentions are judged by the reasonable meaning of words and conduct from the perspective of an objective bystander.

  • P. Y. Atta & Sons Ltd v. Kingsman Enterprises Ltd: The Supreme Court of Ghana held that where terms are unambiguous, the ordinary meaning prevails. In conflicts, the objective meaning to a reasonable person considering the whole document and conduct is paramount.

  • Smith v. Hughes: If A leads B to reasonably believe A is accepting B's offer, A is bound even if they did not subjectively intend to accept.

• Ambiguity and Mutual Mistake:

  • Raffles v. Wichelhaus: Two ships named "Peerless." If the description is latently ambiguous and parties mean different things, there is no contract.

  • Falck v. Williams: An unpunctuated telegram in code was capable of two meanings. Held: No contract due to lack of one reasonable objective meaning.

• Snapping up Offers: If an offeree knows the offer does not represent the real intention of the offeror (e.g., a pricing error), the court will not allow the offeree to enforce it (Hartog v. Colin & Shields).

OFFER AND ACCEPTANCE

• Offer: A statement/conduct indicating willingness to contract on specific terms, with the intent that it becomes binding upon acceptance.

• Invitation to Treat: Distinguished from an offer by its lack of finality; it is an attempt to initiate the bargaining process.

  • Tender Notices: Generally invitations to treat (Spencer v. Harding). Tenders submitted are offers. Acceptance can result in a Standing Offer (convertible to specific contracts via orders) or a Requirements Contract (Perbi v. Attorney General).

  • Display of Goods: Shop displays and self-service shelves are invitations to treat (Fisher v. Bell; Pharmaceutical Society of GB v. Boots).

  • Advertisements: Generally invitations to treat (Partridge v. Crittendon) unless clear, explicit, and leaving nothing for negotiation (Lefkowitz v. Great Minneapolis Surplus Stores).

  • Auctions: Notice of auction is an intention to sell. A bid is an offer. The fall of the hammer is acceptance. In "without reserve" auctions, the auctioneer makes a collateral contract to sell to the highest bona fide bidder (Warlow v. Harrison).

• Acceptance: Final and unqualified expression of assent.

  • Counter-Offers: Varies the terms of the offer; acts as a rejection and kills the original offer (Hyde v. Wrench).

  • Inquiry: A mere request for information does not destroy the offer (Stevenson, Jacques & Co. v. McLean).

• Communication of Acceptance: Generally must be brought to the offeror's notice (Entores Ltd v. Miles Far East Corp).

  • Postal Rule: Acceptance is effective at the moment of posting (Adams v. Lindsell). Only applies to post/telegrams; not instantaneous communication (telex, phone, fax).

  • Electronic Transactions Act, 2008 (Act 772): Governs e-contracts. Despatch occurs when it enters a system outside the originator's control. Receipt occurs when it enters a designated system.

  • Silence: Cannot be imposed as acceptance (Felthouse v. Bindley), except where the offeror waives communication and the offeree intends to accept.

INTENTION TO CREATE LEGAL RELATIONS

• Domestic/Social Setting: Presumption that no legal relations were intended.

  • Balfour v. Balfour: Spousal allowances usually aren't contracts.

  • Merritt v. Merritt: Presumption is rebutted if spouses are separating/separated.

  • Simpkins v. Pays: Presumption is rebutted in joint competitions with shared expenses.

• Commercial Agreements: Presumption that legal relations are intended.

  • Honourable Pledge Clauses: Parties can expressly exclude legal jurisdiction (Rose & Frank Co v. Crompton Bros).

CAPACITY TO CONTRACT

• Minors (Infants): Common law age is 21 years in Ghana (though defined as 18 for welfare).

  • Necessaries: Binding on minors if suitable to their station in life and actual requirements at delivery (Nash v. Inman). Minor only pays a reasonable price.

  • Beneficial Contracts of Service: Binding if on the whole for the minor's benefit (Doyle v. White City Stadium).

  • Trading Contracts: Never binding on minors (Mercantile Union v. Ball).

  • Voidable Contracts: Binding unless repudiated (leases, shares, land).

  • Non est factum: Literate persons signing without reading are usually bound (L'Estrange v. Graucob) unless they prove the document was fundamentally different and they weren't negligent (Saunders v. Anglia Building Society).

  • Illiterates: In Ghana, there is no presumption of understanding. The literate party must prove the document was explained (Atta Kwamin v. Kufour; Illiterates' Protection Ordinance).

• Mentally Incompetent/Drunken Persons: Contract is voidable if they didn't understand the nature of the act AND the other party knew of their condition (Imperial Loan Co v. Stone; Matthews v. Baxter).

CONSIDERATION

• Definition: The price for which the promise of the other is bought. May be a benefit to the promisor or a detriment to the promisee (Curie v. Misa).

• Rules Guidelines:

  • Past Consideration: Generally not sufficient (Roscorla v. Thomas) unless requested by promisor with understanding of payment (Lampleigh v. Brathwaite).

  • Adequacy: Court does not judge the value; a "peppercorn" is sufficient (Chappell & Co. Ltd v. Nestle Co. Ltd).

  • Ghana Contracts Act, 1960 (Act 25) modifications:

    • Section 8(1): A promise to keep an offer open for a specified time is binding without consideration.

    • Section 8(2): A promise to waive a debt or part of a debt is binding without consideration.

    • Section 9: Performance of a pre-existing legal or contractual duty can be sufficient consideration.

    • Section 10: Consideration need not move from the promisee (third-party payment is valid).

• Promissory Estoppel: Equitable doctrine preventing a party from going back on a promise to suspend strict rights if the other party relied on it and it's inequitable to resile (High Trees Case). Usually used as a "shield, not a sword."

TERMS OF CONTRACT

• Conditions: Essential terms. Breach allows repudiation and damages (Poussard v. Spiers).

• Warranties: Subsidiary terms. Breach allows damages only (Bettini v. Gye).

• Innominate Terms: Nature depends on the effect of the breach. If breach deprives the party of substantially the whole benefit, treat as condition (Hong Kong Fir Shipping).

• Implied Terms:

  • By Court: Necessary for "business efficacy" (The Moorcock) or the "officious bystander" test.

  • By Custom: Must be notorious, certain, and reasonable (Hutton v. Warren).

  • By Statute: e.g., Sale of Goods Act (merchantable quality, fitness for purpose).

• Exclusion Clauses: Purport to limit liability.

  • Incorporation: Must be done before/at the time of contract (Olley v. Marlborough Court). If onerous, needs a "red hand"/explicit notice (Thornton v. Shoe Lane Parking).

  • Construction: Contra Proferentem rule (construed against the party relying on it).

  • Fundamental Breach: Modern rule is construction; there's no absolute rule that fundamental breach cannot be excluded, but it must be clearly worded (Photo Production v. Securicor).

PRIVITY OF CONTRACT

• Common Law: Only parties to a contract can sue/be sued (Dunlop v. Selfridge).

• Ghana Contracts Act (Act 25) Reforms:

  • Section 5(1): A contract purporting to confer a benefit on a third party can be enforced by them.

  • Exceptions: Resale price maintenance and third parties trying to rely on a principal's exclusion clause (vicarious immunity abolished).

MISTAKE

• Common Mistake: Both parties make the same mistake.

  • Res Extincta: Subject matter doesn't exist (Void).

  • Res Sua: Buyer already owns the property (Void).

  • Quality: Only void if thing is "essentially different" (Bell v. Lever Bros).

• Unilateral Mistake: One party is mistaken; regarding identity, if it's face-to-face, presumption is you intended to deal with the person present (Lewis v. Averay).

• Remedies in Equity: Rescission, Refusal of Specific Performance, or Rectification (fixing a document to match oral agreement).

DURESS AND UNDUE INFLUENCE

• Duress: Illegitimate pressure or threats to person/property/economic interest (North Ocean Shipping).

• Undue Influence: Improper pressure in relationships of trust.

  • Presumed: Parent/Child, Solicitor/Client, etc. (Not Husband/Wife).

• Unconscionability: Equitable relief for harsh bargains against disadvantaged/elderly/illiterate parties (CFC Construction v. Attitsogbe).

ILLEGALITY

• Types: Contrary to public policy (sexual immorality, corruption, perverting justice) or prohibited by statute.

• Restraint of Trade: Prima facie void unless reasonable between parties and in the public interest (Nordenfelt).

• Recovery: Generally in pari delicto potior est conditio defendentis (no recovery if equally at fault).

  • City & Country Waste Ltd v. AMA (2008): Ghana Supreme Court adopted a discretionary approach to allow recovery/compensation to avoid unjust enrichment even in illegal contracts.

DISCHARGE OF CONTRACT

• By Performance: Must be precise and exact (Cutter v. Powell). Exceptions: Substantial performance, Divisible contracts, or acceptance of partial performance (Quantum Meruit).

• By Breach: Anticipatory breach allows immediate suit (Hochester v. De La Tour).

• By Frustration: Unforeseen event makes performance impossible or radically different (Taylor v. Caldwell).

  • Not just hardship or increased cost (Barclays Bank v. Sakari).

  • Consequences (Act 25): Sums paid are recoverable; sums payable cease; court can allow recovery of expenses incurred.

REMEDIES FOR BREACH

• Damages: Aim is to put plaintiff in position they would be in if contract was performed (KLM v. Farmex).

• Remoteness (Rules in Hadley v. Baxendale):

  1. Natural losses (General damages).

  2. Losses from special circumstances known to parties (Special damages).

• Mitigation: Duty to take reasonable steps to reduce loss (Attitsogbe v. P&T Corp).

• Specific Performance: Equitable order to perform act. Granted only if damages are inadequate (e.g., land or unique goods).

• Injunction: Prohibitory (don't do act) or Mandatory (undo act). Not granted for personal services if it forces a person to work or starve.