Consideration Under Contract Law in Ghana: Meaning, Principles, and Legal Requirements

1. INTRODUCTION AND THEORETICAL FOUNDATION

Meaning of Consideration

Consideration is the value exchanged between contracting parties that makes a promise 

In Ghanaian contract law, consideration performs three essential functions:

1. It distinguishes legally binding contracts from social or gratuitous promises
2. It demonstrates reciprocity between the parties
3. It provides evidence of intention to create legal relations

Without consideration, most agreements remain morally binding only and not legally enforceable unless saved by statute or equity.

Classical Definition of Consideration

The leading authority is:

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd

Facts in Full

Dunlop manufactured motor tyres. It entered into agreements with wholesalers under which wholesalers were required not to sell tyres below a fixed minimum price known as the recommended retail price.

The wholesalers sold tyres to retailers including Selfridge. Dunlop instructed wholesalers to impose the same resale restriction on retailers. Selfridge agreed with the wholesaler not to sell below the recommended price.

Selfridge later sold tyres at prices lower than those fixed by Dunlop.

Dunlop sued Selfridge directly, seeking to enforce the price restriction.

Legal Issues

1. Whether Dunlop could enforce the pricing agreement against Selfridge
2. Whether there was valid consideration between Dunlop and Selfridge
3. Whether Dunlop was a party to the contract with Selfridge

Court’s Reasoning

The House of Lords examined the contractual chain:

• Dunlop sold tyres to wholesalers
• Wholesalers sold tyres to Selfridge
• Money was paid by Selfridge to wholesalers
• No money or goods passed between Dunlop and Selfridge

There was no direct contractual relationship between Dunlop and Selfridge. Dunlop had not given any value to Selfridge.

Since consideration must move between the contracting parties, Dunlop had no enforceable rights against Selfridge.

Judicial Definition of Consideration

Lord Dunedin defined consideration as:

An act or forbearance of one party, or the promise thereof, which is the price for which the promise of the other is bought.

Legal Principle Established

1. Consideration is the price paid for a promise
2. Only parties who provide consideration can enforce contracts under common law
3. A third party who gives nothing cannot sue

Ghanaian Relevance

This principle formed the foundation of consideration doctrine but has been modified by Sections 9 and 10 of the Contracts Act, 1960 (Act 25).

2. GHANAIAN JUDICIAL APPROACH TO CONSIDERATION

Marfo v Adusei

Facts in Full

The defendant owned farmland which he intended to sell to the plaintiff. After negotiations, both parties agreed to postpone the sale for one year.

There was no payment made, no deposit paid, and no additional obligation undertaken by the plaintiff.

After three months, the defendant sold the farmland to a third party.

The plaintiff sued for breach of contract, arguing that there was an agreement to postpone the sale.

Legal Issue

Whether the agreement to delay the sale was supported by consideration and therefore legally enforceable.

Court’s Reasoning

The court acknowledged that:

• There was an agreement to delay the sale
• However, the plaintiff gave nothing in exchange
• The defendant received no benefit
• The plaintiff suffered no agreed detriment

The defendant merely restrained himself from selling his own land, while the plaintiff gave no corresponding value.

Decision

The court held that the agreement lacked consideration and was therefore unenforceable.

Principle Established

A bare promise unsupported by any exchange of value does not create a binding contract under Ghanaian law.

Illustration

If A agrees not to sell his land for six months but B gives nothing in return, the promise is not enforceable.

TYPES OF CONSIDERATION

3. EXECUTORY CONSIDERATION

Executory consideration exists where both parties exchange promises to perform acts in the future.

Characteristics

1. Performance has not yet occurred
2. Mutual promises create immediate legal obligations
3. The exchange itself is sufficient

NTHC v Antwi

Facts in Full

The National Trust Holding Company offered staff members the opportunity to purchase company bungalows.

The company wrote to Antwi offering to sell a bungalow at a fixed price with payment terms.

Antwi accepted the offer and promised to pay according to the agreed schedule.

At the time of acceptance:

• No payment had been made
• No property had been transferred

Later, the company attempted to withdraw from the transaction.

Legal Issue

Whether a binding contract existed even though neither party had yet performed.

Court’s Reasoning

The court held that:

• The company promised to sell the bungalow
• Antwi promised to pay the purchase price
• Both promises were exchanged simultaneously
• Each promise constituted consideration for the other

Decision

A binding executory contract existed.

Principle Established

Mutual promises to perform future obligations constitute valid consideration.

Illustration

A promises to supply cement next month. B promises to pay on delivery. The contract is binding immediately.

4. EXECUTED CONSIDERATION

Executed consideration arises where one party performs an act in return for the other party’s promise.

This commonly occurs in unilateral contracts.

Carlill v Carbolic Smoke Ball Company

Facts in Full

Carbolic Smoke Ball Company advertised that it would pay £100 to any person who:

1. Used its smoke ball product three times daily for two weeks
2. Still contracted influenza

The advertisement stated that £1,000 had been deposited in a bank to demonstrate seriousness.

Mrs Carlill bought the product, used it exactly as instructed, and later contracted influenza.

She claimed the reward.

Company’s Defence

1. The advertisement was mere sales puff
2. No acceptance was communicated
3. There was no intention to contract
4. It was an offer to the whole world

Court’s Reasoning

The court held that:

• The advertisement was clear and definite
• The deposit of money showed serious intention
• Performance was the mode of acceptance
• Mrs Carlill provided consideration by using the product and suffering inconvenience

Decision

The company was bound to pay compensation.

Principle Established

In unilateral contracts, performance of the required act constitutes both acceptance and executed consideration.

Ghanaian Application

Reward advertisements, whistleblower rewards, promotional incentives are governed by this principle.

5. PAST CONSIDERATION

Past consideration occurs when an act is completed before a promise is made.

The general rule is that past consideration is not valid.

Roscorla v Thomas

Facts in Full

The plaintiff bought a horse from the defendant. Payment was completed and the transaction was finalized.

After the sale, the defendant promised that the horse was sound and free from defects.

Later, the plaintiff discovered that the horse was diseased and sued.

Legal Issue

Whether the later promise was supported by consideration.

Court’s Reasoning

The payment had already occurred before the promise was made. The plaintiff gave nothing new in exchange for the later assurance.

Decision

The promise was unenforceable because the consideration was past.

Principle Established

A promise made after performance has been completed is not binding.

EXCEPTIONS TO PAST CONSIDERATION

Lampleigh v Brathwaite

Facts in Full

Brathwaite was accused of murder and faced execution. He requested Lampleigh to obtain a royal pardon on his behalf.

Lampleigh undertook long journeys and successfully secured the pardon.

Afterwards, Brathwaite promised to pay Lampleigh £100.

Brathwaite later refused to pay.

Legal Issue

Whether the later promise was enforceable.

Court’s Reasoning

The court held that:

• The act was done at Brathwaite’s request
• Payment was implied from the beginning
• The later promise merely quantified remuneration

Decision

The promise was enforceable.

Principle Established

Where an act is done at the promisor’s request with expectation of payment, past consideration becomes valid.

Re Casey’s Patent (Stewart v Casey)

Facts in Full

Work was done in managing patent rights. After the work was completed, a promise was made to share profits.

Because it was done in a commercial environment with implied payment expectations, the promise was enforceable.

FORMS OF CONSIDERATION

BENEFIT OR ADVANTAGE

Hasnem Enterprises v IBM World Trade Corporation

Facts in Full

The seller sold a printer with a two-year free maintenance warranty.

The buyer defaulted on instalment payments and used third-party technicians.

Later, the buyer demanded free repairs.

Court’s Reasoning

The warranty benefit was conditional on compliance with payment obligations.

By breaching the contract, the buyer lost entitlement to the benefit.

Principle Established

Contractual benefits depend on performance of obligations.

DETRIMENT OR LOSS

Acheampong v Acheampong

Facts in Full

The husband married the wife under customary law and promised to marry her under ordinance law.

After several years, he failed to perform.

The wife sued for breach.

Court’s Reasoning

The wife had relied on the promise and suffered loss including lost opportunities and emotional and economic detriment.

Decision

Damages were awarded.

Principle Established

Suffering detriment based on reliance can constitute consideration.

FORBEARANCE

Hamer v Sidway

Facts in Full

An uncle promised his nephew $5,000 if he refrained from drinking alcohol, smoking, gambling, and swearing until age 21.

The nephew complied fully.

The uncle died. His estate refused to pay.

Court’s Reasoning

The nephew gave up legal rights at the request of the uncle.

Decision

Forbearance constituted valid consideration.

ADEQUACY AND SUFFICIENCY

Adjabeng v Kwabla

Facts in Full

A farmer sold land cheaply. His son challenged the transaction.

Court’s Reasoning

Courts do not evaluate economic fairness where parties voluntarily agreed.

Chappell v Nestle

Facts in Full

Nestle required money plus chocolate wrappers to obtain music records.

Court’s Reasoning

Wrappers had promotional value. They constituted valid consideration.

STATUTORY REFORMS UNDER ACT 25

Section 8(1) Promise to Keep Offer Open

Unlike common law, Ghana recognizes this promise as binding even without consideration.

Section 8(2) Waiver of Debt

Promise to forgive debt is enforceable without new consideration.

CONSIDERATION AND EXISTING DUTIES

Collins v Godefroy

Witness demanded payment for court attendance.

Under Ghana law, Section 9 allows duty to be consideration unless illegal.

Glasbrook Bros v Glamorgan Council

Extra police protection justified payment.

Kessie v Charmant

Abuse of public office invalidates contract.

Stilk v Myrick

No extra consideration for existing duty.

Hartley v Ponsonby

Extra danger and workload created valid consideration.

Shadwell v Shadwell

Third-party contractual duty constituted valid consideration.

CONSIDERATION MOVING FROM PROMISEE

Tweddle v Atkinson

Third party beneficiary could not sue.

Ghanaian Position

Section 10 of Act 25 allows enforcement even if consideration moved from another person.

PROMISSORY ESTOPPEL

Promissory estoppel arises where parties enter into a subsequent agreement whereby one party suspends his strict contractual rights under the existing contract for a limited time period without the provision of any fresh consideration by the promisor for this promise. 

Lord Denning in Combe v Combe

The principle, as I understand it, is that where one party has by his words or conduct made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him; but he must accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported by any consideration.

For promissory estoppel to arise:

• There must be an existing contractual relationship between the parties
• A clear unequivocal promise
• Reliance
• It is suspensory not permanent
• It would be unequitable for the promisor to go back on his promise

Central London Property Trust v High Trees House

Facts in Full

Landlord reduced rent during war due to hardship.

After war ended, landlord restored full rent.

Court’s Reasoning

Reduced rent applied only during abnormal conditions.

Principle Established

Promissory estoppel suspends rights temporarily.

Tullow Ghana Limited v Sky Limit Structure Builders Co. Limited

Facts in Full

The appellant entered into an precontractual agreement with the respondent for the supply of crane and forklift services subject to the approval of the appellant’s partners. Subsequently, the appellant terminated the precontract citing non-compliance with technical standards. The respondent had taken steps in preparation of the contract. One of the issues for determination was whether or not the respondent was entitled to damages based on promissory estoppel. 

Court Reasoning

Promissory estoppel applies to prevent unfair withdrawals and entitles the aggrieved party to compensatory damages to restore the to the position they would have been in had the contract been performed.

Peter Adjei v Lorient KAL Ghana Ltd

Facts In Full

The plaintiff entered into an agreement with the defendant to sublease their property to the defendant. Consideration was to be paid in two tranches. The first tranche was paid and the plaintiff handed over ownership of the property to the defendant. 

Time fell due for the payment of the second tranche of consideration but the defendant defaulted. The plaintiff sued inter alia, that the defendant had breached the contract by failing to pay the remainder of the consideration. The defendant argued that the plaintiff had misrepresented the size of the property upon which the second consideration payment was meant to be paid. The contract was unconscionable and they were not liable to pay the consideration agreed upon. 

Court Reasoning

The court found on evidence that the agreement for the payment of consideration was not based on the size of the property. The court held that there had been a breach of the agreement. 

FINAL SUMMARY TABLE

Area	Rule	Authority
Definition	Exchange of value	Dunlop v Selfridge
Bare promise	Unenforceable	Marfo v Adusei
Executory	Exchange of future promises	NTHC v Antwi
Executed	Performance equals consideration	Carlill
Past consideration	Invalid	Roscorla v Thomas
Prior request exception	Valid	Lampleigh v Brathwaite
Adequacy	Courts ignore fairness	Adjabeng v Kwabla
Commercial benefit	Sufficient	Chappell v Nestle
Offer open Ghana	Binding	Act 25 s8(1)
Debt waiver Ghana	Binding	Act 25 s8(2)
Existing duties Ghana	Sufficient	Act 25 s9
Third-party benefit	Enforceable	Act 25 s10
Promissory estoppel	Suspensory	High Trees