BUSINESS COMPILATION RESERVED. Contract 1

HOW TO ENTER A LEGALLY BINDING CONTRACT UNDER GHANAIAN LAW.

By Seth Doe Esq and Phillipa Hagan.

A contract is a legally enforceable agreement under Ghanaian law formed when the parties reach consensus ad idem, meaning a true meeting of the minds. Ghana’s contract law is derived from common law doctrine and refined by the Contracts Act 1960 Act 25. Courts assess the presence and quality of offer, acceptance, intention to create legal relations, capacity and consideration to determine whether an agreement is enforceable.

OFFER

An offer is a clear and final expression of willingness to be bound once accepted. It must identify essential terms and leave nothing further for negotiation. An offer is distinguished from a mere invitation to treat which is an open statement in words, writing or conduct that seeks to invite people to make valid offers such as an advertisement, tender notice or pricelist.

The Supreme Court’s decision in NTHC Ltd v Antwi [1]is instructive. The company issued letters to employees stating that its Board had approved the sale of staff bungalows and that each occupant had the first option to purchase at a specified price within a stated time. The Court held that this communication was a binding offer because the terms were definite and a reasonable offeree would interpret the letter as expressing an intention to be bound upon acceptance. The case confirms that a communication with clear and complete terms may amount to a firm offer. Therefore once the terms were accepted by the plaintiff, it concluded a binding contract.

ACCEPTANCE

Acceptance is the unqualified assent to the terms of the offer and must be communicated to the offeror. An acceptance can be made in words, writing or by conduct and is usually communicated to the offeror when it is received by the offeror. The offeror can prescribe the means of acceptance or even waive the requirement of communication of acceptance.The rule is that the acceptance must be complete and unqualified. Therefore any  attempt to vary the terms of the original offer amounts to a counteroffer, which nullifies the original offer.

In NTHC Ltd v Antwi the plaintiff accepted the stated price in writing and merely asked for payment instructions. The Supreme Court held that her response was a valid acceptance because it did not alter the offer and was properly communicated. A request for information is not a counteroffer. The contract became binding upon the delivery of her acceptance letter.

Fofie v Zanyo [2] demonstrates the importance of communication. The plaintiff claimed to have accepted an offer to purchase a building, but never communicated that acceptance. The court held that acceptance requires positive expression through words, writing or conduct and must be received by the offeror. Since the plaintiff’s acceptance remained internal, no contract was formed.

Under the Electronic Transactions Act, offers and acceptances may be communicated electronically, and an electronic communication is deemed received when it enters the addressee’s designated information system, or if none is designated, when it enters an information system of the addressee [3]

INTENTION TO CREATE LEGAL RELATIONS

A legally binding contract must be intended to create legal rights and obligations. Commercial agreements carry this intention by presumption. Domestic or social arrangements (between friends, family members and loved ones) do not, unless clear evidence shows otherwise.

In Balfour v Balfour [4]a husband promised to pay his wife monthly support while working abroad. When the payments stopped, the wife sued. The court held that domestic promises between spouses are generally not intended to have legal effect. Ghanaian courts apply the same reasoning when assessing similar domestic arrangements.

CAPACITY

Minors(children), persons of unsound mind and persons so intoxicated that they cannot understand the nature of the agreement may lack contractual capacity. Nonetheless, a minor may be bound by contracts for necessaries, beneficial contracts and transactions entered into on their behalf transparently.

Lartey v Bannerman[5] illustrates this principle in the context of land transactions. The plaintiff was a minor for whom her father negotiated the purchase of a house. He informed the seller from the outset that he was acquiring the property for his daughter and all documentation was prepared in her name. When the seller tried to avoid the transaction, the court held that the sale was enforceable. Land transactions presume full capacity unless proven otherwise, and a minor may acquire property through a legitimate representative. The case demonstrates the willingness of equity to protect minors in beneficial property transactions.

CONSIDERATION

Consideration refers to something of value exchanged between the parties. It may be a benefit, a detriment, a promise, an act or a forbearance. Under Ghanaian law, sufficiency rather than adequacy or equivalence of consideration  is required.

Adjabeng v Kwabla[6] illustrates this principle. A farmer sold his land to the defendant for forty pounds. The farmer’s son later challenged the transaction as inadequate and unfair. The court held that the father freely agreed to the price and received exactly what he bargained for. Since the agreement was voluntary and the consideration was sufficient, the court declined to set it aside. The case demonstrates that the adequacy of consideration is not the measure of validity.

Kessie v Charmant[7] also sheds light on sufficiency when a public officer is involved. A Ghanaian ambassador used his official position to secure business opportunities for private individuals in return for shares and a directorship. Even though these benefits constituted valuable consideration, the court held that consideration given in exchange for misuse of public office is tainted by illegality and cannot ground an enforceable contract. Thus consideration must be sufficient but must also not offend public policy.

UNCONSCIONABILITY AND INEQUALITY OF BARGAINING POWER

Courts may intervene where agreements are so one sided that enforcement would be inequitable, particularly where one party exploits another’s vulnerability.

CFC Construction Ltd v Attitsogbe[8] recognises this principle. The court explained that a contract may be set aside where a party in a significantly weaker bargaining position such as an elderly person, a disabled person, an illiterate person or a person of limited means is subjected to harsh or oppressive terms. The decision emphasises that overwhelming economic pressure or exploitation of vulnerability may render the agreement unconscionable and therefore unenforceable. The doctrine serves as a safeguard against inequitable bargains.

COERCION AND DURESS

A contract must be entered voluntarily. Where consent is secured through threats, illegitimate pressure or misuse of state authority, the resulting agreement is voidable.

Hemans v Coffie[9] is the leading Ghanaian authority. A contractor owing money to creditors was arrested by several police officers following a complaint by the creditors. He was detained and told he would not be released unless he sold his house to pay the debt. The court held that it is unconstitutional and unlawful to imprison a person solely for inability to pay a debt. The correct process for enforcing a debt is civil action. The agreement extracted under such pressure was tainted by duress and therefore unenforceable. This case underscores Ghana’s constitutional protection against coercion in private debt transactions.

ILLEGALITY AND PUBLIC POLICY

A contract will not be enforced where its formation, purpose or performance violates public policy or involves unlawful conduct.

Kessie v Charmant[10] stands as a clear example. A public officer used state office to secure private benefit. The court held that such conduct violates public policy and that any agreement founded on the misuse of public authority is void. This decision reinforces the principle that contracts that undermine public administration or facilitate corruption will not be upheld.

ILLUSTRATIVE CHECKLIST FOR ASSESSING CONTRACT VALIDITY AND ENFORCEABILITY

The following questions provide a practical framework for determining whether an enforceable contract has arisen under Ghanaian law.

The first inquiry is whether a valid offer was made, which requires determining whether one party expressed a clear and definite willingness to be bound and whether the essential terms were identified. NTHC Ltd v Antwi is helpful in making this assessment.

The next step is to determine whether acceptance was properly made and communicated and whether it matched the offer without qualification. The reasoning in Fofie v Zanyo is useful here.

Intention must also be examined. Commercial arrangements generally carry legal intention while domestic ones do not unless evidence shows otherwise, as in Balfour v Balfour.

Capacity is another essential factor. Parties must be of full age and sound mind. Where minors are involved, consideration must be given to whether the arrangement was beneficial, as in Lartey v Bannerman.

Consideration must have been exchanged and must be sufficient. Adequacy is not required, as confirmed in Adjabeng v Kwabla, but the consideration must not involve illegality or misuse of public office, as shown in Kessie v Charmant.

Finally, the agreement must be free from coercion, duress, unconscionability and illegality. Hemans v Coffie demonstrates that agreements extracted through threats or unlawful pressure cannot be upheld, and CFC Construction Ltd v Rees shows that oppressive or one sided bargains may be set aside. Public policy considerations are also central to determining whether an agreement should be enforced.

When these factors are examined together, they provide a comprehensive method for determining whether a contract is valid, enforceable and consistent with Ghanaian law.

ILLUSTRATIVE CASE STUDIES FOR PRACTICE

Case Study One

Ama owns a catering business and emails Kofi stating that she is prepared to supply one thousand lunch packs every Friday for one month at a total price of ten thousand cedis and invites him to accept by the end of the week. Kofi responds immediately accepting all the terms and only asks whether payment should be by bank transfer or cheque. Ama later claims the question prevented acceptance.

This scenario engages offer and acceptance. Ama’s message is a clear offer because it identifies the quantity, price and time frame. Kofi’s reply is a valid acceptance, since a request for information does not negate assent. This reflects the reasoning in NTHC Ltd v Antwi. The contract is binding.

Case Study Two

Kojo is seventeen. His aunt buys a parcel of land on his behalf and the seller issues a handwritten receipt in Kojo’s name. Later the seller refuses to complete the transfer, claiming the price was too small and that Kojo lacked capacity.

This scenario mirrors Lartey v Bannerman and Adjabeng v Kwabla. A minor may acquire land through a transparent representative. The adequacy of the price is irrelevant since sufficiency, not equivalence, is required. The seller must complete the sale.

Case Study Three

Mensah owes a supplier twenty thousand cedis. Instead of filing a civil claim, the supplier arranges for two police officers to threaten him with detention unless he transfers his delivery truck as payment. Out of fear, Mensah signs the document.

This scenario reflects Hemans v Coffie. Agreements signed under the threat of unlawful arrest are tainted by duress and are voidable. Consideration cannot validate a contract grounded in illegality or misuse of state authority, consistent with Kessie v Charmant. Mensah is entitled to relief.

[1] NTHC Ltd v Antwi[2009] GHASC 5

[2] Fofie v Zanyo[1992] 2 GLR 475 (SC)

[3] Electronic Transactions Act, 2008 (Act 772), section 19

[4] Balfour v Balfour[1919] 2 KB 571 (CA)

[5] Lartey v Bannerman[1976] 2 GLR 461 (CA)

[6] Adjabeng v Kwabla[1960] GLR 37 (HC)

[7] Kessie v Charmant[1973] 2 GLR 194 (HC)

[8] CFC Construction Co. (WA) Ltd v Attitsogbe [2006] GHASC, Civil Appeal No. J4/21/2004

[9] Hemans v Coffie[1997–98] 1 GLR 144 (SC)

[10] Kessie v Charmant[1973] 2 GLR 194 (HC)