Dispute Resolution Clauses in Contract Drafting in Ghana By Seth Doe Esq

Introduction

In the realm of contract law, disputes are not only possible but often inevitable, regardless of the intention and goodwill of the contracting parties. Recognising this reality, the prudent lawyer must anticipate potential disagreements and provide within the contract a roadmap for their resolution. This is the role of dispute resolution clauses. In Ghana, as in many other common law jurisdictions, the effectiveness of such clauses depends on clarity, enforceability, and consistency with both national and international legal frameworks. This article examines dispute resolution clauses in Ghanaian contract law, explores their legal implications, and offers practical guidance on drafting effective provisions.

1. Legal Framework Governing Dispute Resolution in Ghana

Ghana operates a dual legal system that combines statutory law with customary law, with the 1992 Constitution serving as the supreme law. Contract law is largely rooted in common law principles inherited from English law, but it is also shaped by statutes such as the Contracts Act, 1960 (Act 25), the Alternative Dispute Resolution Act, 2010 (Act 798), and the Courts Act, 1993 (Act 459). The ADR Act, 2010 provides a comprehensive framework for arbitration, mediation, and other alternative dispute resolution mechanisms. It not only encourages parties to adopt non-litigious means of resolving disputes but also confers legal effect on agreements to arbitrate or mediate.

2. What is a Dispute Resolution Clause?

A dispute resolution clause is a contractual provision that stipulates how disputes arising from or relating to the contract will be resolved. It typically specifies the forumwhether courts, arbitration, or mediationthe governing law, the seat of arbitration, the language of proceedings, and the procedures and timelines to be followed. Such clauses are integral to risk management, particularly in commercial agreements where parties may be located in different jurisdictions.

3. Forms of Dispute Resolution in Ghanaian Contracts

Litigation
Traditionally, parties in Ghana have relied on the formal court system to resolve contractual disputes. While litigation remains available, it is often time-consuming, expensive, and public. Where parties fail to include a dispute resolution clause, litigation becomes the default mechanism. For example, in a commercial lease agreement between a Ghanaian property company and a foreign logistics firm, the omission of an arbitration clause led to a protracted three-year court battle, resulting in reputational damage and significant legal costs.

Arbitration
Arbitration has become a popular alternative in Ghana, largely due to its binding nature, confidentiality, and relative speed. The ADR Act, 2010 governs arbitration and is closely aligned with the UNCITRAL Model Law. An effective arbitration clause typically specifies the number of arbitrators, the method of their appointment, the seat of arbitration (which determines the procedural law), and the applicable substantive law. For example, a well-drafted clause might state: “Any dispute arising out of or in connection with this Agreement shall be finally resolved by arbitration under the Alternative Dispute Resolution Act, 2010 (Act 798). The seat of arbitration shall be Accra, Ghana. The tribunal shall consist of one arbitrator appointed jointly by the parties.” In practice, such clauses have proven effective. For instance, in a joint venture between a Ghanaian mining company and a South African partner, a carefully drafted arbitration clause enabled the parties to resolve a complex dispute in under six months, thereby preserving their business relationship.

Mediation
Mediation is a non-binding process in which a neutral third party facilitates a mutually acceptable resolution. Under the ADR Act, Ghanaian courts are empowered to refer parties to mediation, further strengthening its role in dispute resolution. A typical mediation clause might provide: “The parties shall endeavour to resolve any dispute amicably through mediation under the rules of the Ghana Arbitration Centre. If the dispute is not resolved within 30 days, it shall be referred to arbitration in accordance with this Agreement.” Mediation is particularly well-suited to contracts involving ongoing relationships, such as employment, partnerships, or franchising, where preserving the relationship may be as important as resolving the dispute itself.

4. Drafting Considerations for Dispute Resolution Clauses

When drafting a dispute resolution clause, precision is essential. Poorly drafted clauses often lead to confusion, jurisdictional disputes, or even unenforceability. Clarity and completeness are therefore critical. For instance, a vague clause stating, “Any dispute shall be resolved by arbitration or other means,” is inadequate and likely to cause disputes about the method of dispute resolution itself. A more robust version would specify that, “Any dispute arising out of or relating to this Agreement shall be resolved by arbitration administered by the Ghana Arbitration Centre in accordance with its Rules.”

A well-drafted clause should also clearly identify the governing law of the contract, the forum for resolution such as an arbitration tribunal or a court and the applicable procedural rules. In cross-border contracts, this is particularly important, as illustrated by a dispute between a Ghanaian cocoa exporter and a European distributor. Because the parties failed to specify the seat of arbitration, parallel proceedings were initiated in Ghana and Switzerland, undermining the enforcement of the arbitral award.

Multi-tiered dispute resolution clauses, which require parties to attempt resolution through negotiation, then mediation, and finally arbitration, are also increasingly common. For example, a clause may state: “In the event of any dispute, the parties shall first attempt to resolve the matter through good faith negotiations. If the matter is not resolved within 14 days, it shall be submitted to mediation under the rules of the Ghana Arbitration Centre. Failing which, the dispute shall be resolved by arbitration.” While effective, such clauses must be carefully drafted to avoid uncertainty or the risk of being deemed unenforceable.

5. Enforceability of Dispute Resolution Clauses in Ghana

Ghanaian courts generally uphold valid dispute resolution clauses, unless compelling reasons exist to disregard them. Section 6 of the ADR Act allows courts to stay proceedings and refer matters to arbitration where a valid arbitration agreement is in place. The judiciary has demonstrated strong support for this principle. In Micheletti & Co. v. Prime Gold Ltd [2016], the Court of Appeal upheld an arbitration clause and dismissed an attempt by the plaintiff to litigate in court, affirming the mandatory nature of arbitration agreements under Act 798. However, Ghanaian courts will intervene if an arbitration agreement is vague or incomplete, if the subject matter is non-arbitrable (as in criminal or matrimonial disputes), or if a party was coerced into agreeing.

6. Dispute Resolution in Public Contracts and PPPs

Public contracts and public-private partnerships (PPPs) often implicate significant state interests and are subject to additional legal requirements. Dispute resolution in such contracts must comply with the Public Procurement Act, 2003 (Act 663) and Ghana’s PPP Policy Framework. Frequently, these frameworks mandate arbitration under specific institutions such as the Ghana Arbitration Centre or, in contracts involving foreign investment, under international bodies such as the International Chamber of Commerce (ICC).

7. Recommendations for Practitioners

Practitioners drafting dispute resolution clauses in Ghana should bear several considerations in mind. First, clauses should be tailored to the specific contract rather than borrowed from generic templates, taking into account the nature of the parties, the subject matter, and the likely location of disputes. Second, lawyers should engage in scenario analysis to evaluate where disputes may arise and whether the chosen mechanism offers enforceability, speed, and neutrality. Third, consistency is vital: dispute resolution clauses must align with governing law and jurisdiction clauses to avoid contradictions. Fourth, contracts should include cost-sharing provisions to specify how the costs of mediation or arbitration will be allocated, thereby preventing secondary disputes. Finally, practitioners should educate clients, many of whom may be unfamiliar with ADR, about the benefits and consequences of these mechanisms before finalising the contract.

Conclusion

Dispute resolution clauses are not mere formalities but essential tools of contract risk management. In Ghana, the legal infrastructure provides robust support for mechanisms such as arbitration and mediation, and it is the responsibility of the drafting lawyer to ensure that these clauses are clear, enforceable, and suitable for the contractual relationship at hand. As Ghana increasingly positions itself as a hub for regional trade and investment under the AfCFTA regime, the sophistication and enforceability of dispute resolution clauses will only grow in importance. Lawyers must therefore approach the drafting of such provisions with foresight and precision, recognising that they safeguard not only the interests of the contracting parties but also the credibility of Ghana’s commercial legal environment.