Discharge by Breach Under Contract Law in Ghana: Meaning, Types, and Legal Consequences

1. INTRODUCTION: MODES OF DISCHARGE OF CONTRACT

A contract may be discharged when parties are released from their contractual obligations. Under Ghanaian contract law and common law principles, discharge may occur by:

1. Agreement
2. Performance
3. Breach
4. Frustration

This topic focuses on discharge by breach, which is the most litigated method of discharge in commercial practice.

2. MEANING OF BREACH OF CONTRACT

A breach of contract occurs where a party:

1. Expressly indicates unwillingness or inability to perform contractual obligations, or
2. Fails in fact to perform the obligations when performance becomes due

The law applies an objective test in determining breach. The court considers what a reasonable person would conclude from the conduct, statements, or omissions of the defaulting party.

Meaning of Contractual Terms

Only legally enforceable obligations constitute contractual terms. These obligations must:

• Be voluntarily agreed
• Be free from vitiating factors
• Be sufficiently certain
• Be legally binding

Performance and Breach Relationship

Performance discharges contractual obligations. Where performance is incomplete or defective, the shortfall constitutes a breach.

The gap between expected performance and actual performance forms the basis for damages.

3. TYPES OF BREACH OF CONTRACT

Breach may be classified into:

1. Actual breach
2. Anticipatory breach
3. Fundamental breach
4. Minor breach

This lecture concentrates primarily on anticipatory breach and repudiatory breach because of their relevance to discharge.

ANTICIPATORY BREACH

4. MEANING OF ANTICIPATORY BREACH

Anticipatory breach occurs where a party clearly indicates before the due date of performance that he will not perform his contractual obligations.

This indication may be made by:

• Express words
• Written notice
• Conduct that makes performance impossible
• Clear repudiation of contractual responsibility

The key element is that the intention not to perform must be clear and unequivocal.

Frost v Knight (1872)

Facts Explained

The defendant promised to marry the claimant when the defendant’s father died. Before the father died, the defendant informed the claimant that he had changed his mind and would never marry her.

The claimant sued immediately for breach of contract.

The defendant argued that there was no breach because the father was still alive and performance was not yet due.

Legal Issue

Whether a party can sue for breach of contract before the time fixed for performance.

Court’s Reasoning

The court held that the defendant’s statement amounted to a clear repudiation of the contract. The law does not require the innocent party to wait until the time of performance where the other party has already demonstrated that performance will not occur.

Decision

The claimant was entitled to sue immediately.

Principles Established in Frost v Knight

1. Where a party clearly indicates unwillingness to perform before performance is due, this constitutes anticipatory breach.
2. The innocent party may treat the contract as terminated and sue immediately.
3. The innocent party may also elect to keep the contract alive and wait for performance.

Hochster v De La Tour (1853)

Facts Explained

The defendant employed the plaintiff as a courier for a European tour scheduled to begin on 1 June. On 15 May, the defendant informed the plaintiff that he would no longer require his services.

The plaintiff sued on 22 May.

The defendant argued that there was no breach because performance was not due until 1 June.

Legal Issue

Whether repudiation before the commencement date constitutes breach.

Court’s Reasoning

The court held that the repudiation itself was a breach. The plaintiff should not be forced to wait until the date of performance to seek legal remedy.

Decision

The plaintiff’s action succeeded.

Principle Established

Anticipatory breach entitles the innocent party to sue immediately for damages.

Illustration

If A promises to marry B under the ordinance and subsequently marries C under customary law, this conduct effectively demonstrates A’s intention to breach the contract on the basis that ordinance marriage does not allow for a polygamous marriage. 

5. ASSESSMENT OF DAMAGES IN ANTICIPATORY BREACH

Courts assess damages on a case-by-case basis, taking into account the following:

A. Preparation Costs

Whether the innocent party incurred expenses in preparation for performance.

Example: Purchase of materials, booking of services, mobilisation costs.

B. Nature of Obligations

The seriousness and complexity of the obligations repudiated.

C. Timing and Circumstances

Whether the breach occurred close to the performance date or far in advance.

D. Special Circumstances

Whether the defaulting party knew of special circumstances making the loss foreseeable.

Once repudiation is accepted and legal action commenced, the defaulting party cannot secretly perform and claim compliance.

6. REPUDIATION AND ACCEPTANCE OF BREACH

Where anticipatory breach occurs, the innocent party has three options:

1. Accept the breach and sue immediately
2. Reject the breach and wait for performance
3. Continue performance and claim payment where justified

Each option carries legal consequences.

Re Timber & Transport Co Ltd; Zastava v Bonsu

Facts Explained

A Ghanaian timber company and a foreign company entered into a merger agreement. Clause 15 provided that neither party could petition for winding up of the company for ten years.

Despite this clause, the foreign company filed a petition to wind up the company.

Legal Issue

Whether the contract was still binding and whether the innocent party could treat the agreement as terminated.

Court’s Reasoning

The court held that where a party clearly demonstrates an intention not to be bound by the contract, the innocent party may treat the contract as terminated.

The breach was fundamental because it attacked the foundation of the agreement.

Decision

The innocent party was entitled to treat the contract as discharged.

Principle Established

Where breach goes to the root of the contract, the innocent party may terminate and seek remedies.

Hasnem Enterprises v IBM World Trade Corporation

Facts Explained

The plaintiff purchased a photocopier from the defendant. The defendant had maintained the machine free of charge for years.

The plaintiff later defaulted on outstanding payments and engaged a third party to service the machine. When the machine broke down again, the defendant refused to provide free service.

The plaintiff sued alleging breach.

Legal Issue

Whether the defendant was liable for refusing to continue servicing.

Court’s Reasoning

The court held that the plaintiff breached first by:

1. Failing to settle outstanding bills
2. Allowing third parties to service the machine contrary to the maintenance arrangement

This breach went to the root of the contract and entitled the defendant to repudiate.

Decision

The defendant was not liable.

Principle Established

A party who commits a fundamental breach cannot complain when the other party treats the contract as terminated.

REFUSAL TO ACCEPT ANTICIPATORY BREACH

7. KEEPING THE CONTRACT ALIVE

An innocent party may refuse to accept repudiation and wait until performance becomes due.

However, this choice carries risks.

Avery v Bowden (1856)

Facts Explained

A ship charter contract required loading at a port unless war broke out. The defendant informed the ship owner that loading would not occur due to anticipated war.

The ship owner refused to treat this as breach and kept the ship at the port.

Before loading commenced, war broke out, making the contract illegal and frustrating performance.

Legal Issue

Whether the defendant was liable for damages.

Court’s Reasoning

The court held that the plaintiff elected to keep the contract alive. The subsequent outbreak of war frustrated the contract and discharged both parties.

Decision

The defendant was not liable.

Principle Established

If the innocent party keeps the contract alive, he risks losing remedies if frustration intervenes.

CONTINUING PERFORMANCE AFTER BREACH

8. PERFORMING AND CLAIMING PAYMENT

In certain circumstances, the innocent party may continue performing and claim payment.

Two strict conditions apply:

1. Performance must be possible without cooperation from the repudiating party
2. There must be a legitimate interest in performance beyond mere accumulation of damages

White v McGregor

Facts Explained

The plaintiffs supplied advertising litter bins. They contracted with the defendants to install bins carrying advertisements.

Before performance, the defendants cancelled the contract.

The plaintiffs had already manufactured the bins and printed adverts. They proceeded to install the bins and sued for payment.

Legal Issue

Whether the plaintiffs were entitled to continue performance and claim payment.

Court’s Reasoning

The court held that:

• The plaintiffs could perform independently
• They had legitimate commercial interest
• Stopping performance would cause greater loss

Decision

The plaintiffs were entitled to payment.

Principles Established

The innocent party may perform and claim payment only if:

1. Performance does not require cooperation
2. There is legitimate interest in continuing

Kumasi Metropolitan Assembly and Waste Management v Messrs Freko FD Enterprise Ltd

Facts

The appellant contracted the respondents to build, operate and transfer 20-seater water closet facilities at 61 designated sites in Kumasi. Contract was finalized in 2004. The respondent completed and operated only 16 facilities by 2012 with others partially completed and unstarted. The respondent alleged breaches by the appellant. The appellant denied these breaches. The court had to determine, inter alia, whether the appellant repudiated the contract or breached its obligations. 

Court Reasoning

A party alleging repudiation must prove a fundamental breach going to the root of the contract and intention not to perform future obligations. Affirmation of the contract by the innocent party after breach negates repudiation. Specific performance and damages require the claimant to have clean hands and to have performed or be ready to perform obligations.

Holding

The court found that the respondent was in breach of fundamental contractual obligations including failure to complete the construction within six months etc. 

The appellant did not repudiate the contract, rather the appella t by its actions affirmed the contract despite the breaches. 

RELIEFS AVAILABLE TO THE AGGRIEVED PARTY

9. REMEDIES FOR BREACH

When breach occurs, the innocent party may seek:

A. Damages

Compensation for losses suffered.

Includes:

• General damages
• Special damages

B. Termination

Where breach is fundamental, the contract may be discharged.

C. Quantum Meruit

Claim for reasonable payment for work already done.

D. Specific Performance

Court order compelling performance in appropriate cases.

E. Injunction

Court order restraining wrongful conduct.

10. CONCLUSION

Discharge by breach is governed by objective standards of conduct and intention. The law balances:

• Protection of innocent parties
• Commercial certainty
• Fairness in enforcement

The election made by the innocent party after repudiation determines the legal outcome.

SUMMARY TABLE

Topic	Legal Rule	Authority
Meaning of breach	Failure or refusal to perform	General principle
Anticipatory breach	Early repudiation actionable	Frost v Knight
Immediate action	Sue before performance date	Hochster v De La Tour
Fundamental breach	Allows termination	Zastava v Bonsu
Prior breach bars claim	Defaulting party loses protection	Hasnem v IBM
Keeping contract alive	Risk of frustration	Avery v Bowden
Continue performance	Only with legitimate interest	White v McGregor
Damages assessment	Case by case	Common law
Quantum meruit	Payment for work done	Equitable principle