Contract Notes

Sybil Danita Quaye Contract Dimidium Facti Qui Coepit Habet
The nature and essence of contract

Sir Fredrick Pollock states that the most popular and exact description of contract that can be given is one which defines a contract
as a promise or set of promises which the law will enforce. The American restatement (second) of contracts (1981) defines a contract
as a promise or a set of promise for the breach of which the law gives a remedy or the performance of which the law in some way
recognizes a duty. This definition recognizes three important elements of a contract.
• Promise-helps to determine the terms of the contract which defines the scope of the contractual liabilities undertaken by
the parties to the contract
• Legal duty-involves determination of whether the essentials of the formation of the contracts have been complied with such
as to make the parties’ promises legally enforceable
• Remedy-in the event of a breach of failure of the other party to perform the contractual duty, the final issue is what kind of
remedy should be given to the aggrieved party.
Contract law only enforces promises which are made as part of a bargain. That is an agreement of two or more persons to exchange
promises or exchange appraise for a performance. A promise for which nothing has been given or promised in exchange is not
enforceable as a contract
Contractual obligations are not imposed by the law but are a rather undertaken by the contracting parties voluntarily. Promise refers
to any statement or undertaking about existing facts.
Elements of a valid contract
• Offer and acceptance-the most usual way to make a bargain is for one party to propose the terms or conditions on which he
is prepared to transact with the other party and for the other party to accept, modify or reject them. In determining whether
or not a contract has been made, the court usually begin by looking out for a promise by one party which usually takes the
form of an offer and a corresponding acceptance of the offer by the other party
• Intention to create legal relations- the parties must clearly manifest an intention that their agreement or exchange of
promises was intended to have legal consequences or to be legally enforceable.
• Capacity to contract-issues arise when the ability of one or both parties to assume contractual obligations is limited but the
law to ensure their protection for policy reasons. Such special categories of persons whose capacity to contract is limited by
statute or under common law include mentally incompetent persons, infants and drunkards.
• Consideration- the promise is to be enforced must be supported by consideration unless the agreement is in form of a deed,
that is if it is in writing, signed and attested. This element of consideration in the determination of whether or not a valid
contract has been made. The court would enforce a contract if the party can show that he/she had given something of value
in exchange for the promise made to him/her. Consideration may being the form of a return promise or actual performance
of a stipulated act.
The concept of agreement is the basis of every agreement. Agreement may be made wholly or partly in writing, orally, by conduct or
by a combination of all three.
Nature and test of agreement
In determining whether or not their policies have come to an agreement the courts lay particular emphasis on external appearance
rather than the actual intent or state of mind of the parties. The basic principle is that an agreement is not a mental state but rather
an act and therefore a matter of inference from conduct. In ascertaining the existence of an agreement, therefore, the parties are to
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be judged not by what they had in mind but rather what can be objectively inferred from what they have said, written or done. It is
a fundamental common law that the test of an agreement is an objective one and not a subjective one. It is premised on the judgment
of intention from the reasonable meaning of the words and conduct of a person as opposed to his actual intentions. P. Y ATTA &
SONS LTD V KINGSMAN ENTERPRISES LTD
Where there is no ambiguity in the words or conduct of the parties and any reasonable observer of the promisor’s conduct would
have supposed and the promisor did suppose that the promisor was making a particular promise, the promisor will be bound by the
promise.
TAMPLIN V JAMES
The def attended an auction at which a certain property called the ‘ship Inn’ was put up for sale as Lot 1. The particulars of the sale
and plan which was openly displayed at the auction showed clearly the extent and dimensions of the property. The def made a private
offer for the lot and it was accepted. He later refused to complete the contract on the basis that he was under a mistaken belief that
the property included adjacent plots because he had known the property since his infancy and had always observed that the Inn and
the two adjacent plots had always been occupied by the same tenants. Held-the def was bound by the contract ad there were no
ambiguity in the plans
Where the words and/ or the conduct are ambiguous the courts may declare that there is no contract.
RAFFLES V WICHELHAUS,
There was a written agreement for the sale of 125 bills of cotton by the plaintiff to the defendant. The contract stated that the cotton
was to arrive ‘ex peerless from Bombay’. Unknown to both parties, there were to ship called ‘peerless’ arriving from Bombay, one
was leaving Bombay in October, the other in December. The seller’s cotton was in the December Peerless. The buyer assumed it was
on the October Peerless. The buyer refused to accept the cargo. Held– it was open to the def to show that the contract was
ambiguous and that he had intended the October ship.
FALCK V WILLIAMS
In determining whether or not the parties are agreed, the courts have held that where one party is misled by the conduct of the
other party into misunderstanding the nature of the offer, the party whose conduct misled the other may not be able to enforce
contract in the sense in which he intended it.
SCRIVEN BROS V HINDLEY & CO
The defendants bid at an auction for two lots, believing them both to be hemp. It turned out that Lot A was hemp but Lot B was tow,
a commercially inferior commodity of a much lower value. Defendant’s mistake arose from the fact that both lots were sold under
the same shipping mark, ‘SL’. It was established by the evidence that hemp and tow were never landed from the same ship under
the same shipping mark. The auctioneer knew that the buyer was mistaken, but he thought they were simply mistaken as to the
value of the tow. Defendant refused to pay for the tow. HELD: The court held that the plaintiffs could not enforce the contract since
the plaintiff’s conduct had contributed to the defendant’s mistake. The plaintiffs could only succeed if the defendants were estopped
from relying on what was now found o be the truth and this was not the case.
Where the offeree knows that the offer as stated does not represent the real intention of the offeror but seeks to take advantage of
the error the court would not allow the offeree to enforce the contract-HARTOG V COLIN & SHIELDS
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Where one party is mistaken only about the quality of the subject matter and that mistake was not caused by the other party, the
court would uphold the contract in spite of that party’s unilateral and undisclosed mistake-SMITH V HUGHES
The def wrote to the plf that he would like to buy the whole quantity of oats after a sample had been showed to him by the plf. The
plf delivered a portion of the oats to the def and the def refused to accept it saying the oats were new. The plf refused to take the
oats back and sued. Held- the two minds were not ad idem as to the age of the oats but they were certainly ad idem to the sale and
purchase of them.
Where the parties have agreed with respect to the same terms on the same subject matter, it is irrelevant that in entering the contract
they were both influenced by some misunderstanding or mistaken assumption with regard to the quality or value of the subject
matter-FREDERICK E ROSE (LONDON) LTD V WILLIAM H PIM JNR & CO. LTD,
The plfs received an order for Moroccan horse beans described here as feveroles. The plfs did not know what feveroles were and
asked the defs who responded that feveroles were the same as horse beans. The plfs therefore entered into a contract with the def
for the purchase of horse beans. Upon delivery, it was found out that the horse beans were not feveroles. The plfs brought an action
for damages for breach of warranty. Held- the parties agreed on a contract for the sale of goods by description namely horse beans.
Once they had done that, nothing in their minds could make the contract a nullity from the beginning.
ADDISON V A/S NORWAY CEMENT EXPORT LTD
Offer and acceptance

An offer may be defined as a statement or conduct indicating a willingness to contract on terms stated which can reasonably be
inferred from conduct and made with the intention that it will become binding as soon as it is accepted. It can also be defined as an
indication in words by conduct by an offeror that he or she is prepared to be bound by a contract in the terms expressed in the offer,
if the offeree communicates to the offeror his or her acceptance of those terms. This is distinguished from an invitation to treat which
constitutes an attempt to initiate the bargaining process by soliciting or attracting offers from the party to whom it is addressed-
NTHC LTD V ANTWI. It was said in this case that an offer has to be definite and final and must not leave significant terms open for
negotiation. The difference between the two is that an invitation to treat lacks the finality which gives a capacity to the offeree to
transform the offer into a contract by mere communication of his/her assent to its terms. Common examples of ‘invitations to treat’
include tender notice, display of goods in a shop with prices attached, circulation of catalogues or price lists, auction notices and
advertisement of goods or services in the newspaper.
Tenders
Tender notices are a notices stating that goods are to be sold by tender and inviting people to submit tenders for their purchase. This
is an invitation to treat and not an offer which is deemed to have been accepted when a person submits the highest tender-
SPENCER V HARDING
The plf advertised for tenders for the supply of stores. The def submitted a tender stating. ‘I undertake to supply the company for 12
months with such quantities from time to time. The company replied by letter accepting the tender and subsequently placed various
orders. The company later placed an order for goods which the company refused to supply. The company sued for breach of contract.
Held- the tender was a standing offer which was converted into a series of contracts by subsequent orders by the company. The
placing of the order precluded the possibility of revocation by the def.
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The acceptance of a tender would normally conclude a contract between the invitor and the party who submits the winning tender.
However it has been noted that whether the acceptance of the tender will result in a binding contract between the parties depends
on the nature and wording of the invitation. Where the invitation does not include any definite promise but, but simply states that
the invitor will buy goods from the tendering party as and when it sees fit to order such goods, an acceptance of such tender may
not immediately result in a binding contract between the parties. If subsequent to an acceptance of the tender, the invitor places an
order for a specified quantity of the goods from the tendering party his order will then constitute an acceptance of the offer resulting
in a conclusion of the a contract between the parties. In this situation the tender constitutes a standing offer which subsists for a
period and is capable of recurrent acceptances during the period of its existence, each acceptance resulting in a separate contract.
GREAT NORTHERN RAILWAY V WITHAM,
PERBI V AG
The gov’t of Ghana advertised for tenders by the supply of food items to a hospital for a fixed period of five months. The plfs accepted
the tender and supplied the required items as and when demanded. The agreement stated that each party was free to terminate the
agreement by giving a month’s notice in writing. The gov’t gave two days’ notice of its intention to terminate the agreement before
the expiration of the five months. The plf sued for breach of contract. Held- by making a firm promise to purchase all its requirements
of food items from the tenderer, the hospital had concluded a binding contract to purchase form the latter all specified items that
the hospital had need for in the designated period.
Display of goods for sale
It is a well-established principal that a display of goods in a shop with prices marked is not an offer binding the shopkeeper to sell at
those prices. It is merely an invitation to treat and it is the customer who offers to buy the goods, of which the shopkeeper may or
may not accept. FISHER V BELL,
PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V BOOTS CASH CHEMIST (SOUTHERN) LTD
The defendant, a chemist had a “self-service” shop where customers were allowed to walk in, select items of their choice to which
was put into a receptacle and brought to the cashier where a registered pharmacist would supervise the transaction. The registered
pharmacist was to prevent customers from picking up drugs that were listed as poisons in the Pharmacy and Poison Act. The
Pharmaceutical Society of Great Britain sued the Boots Cash Chemist with the allegation that their action violates the section 18 of
the Pharmacy and Poison Act. Held- a customer picking up a drug from a shelf was not an acceptance of an offer to sell drugs, but
rather their offer to buy drugs which was accepted after the pharmacist had supervised the exchange of money and approved the
choice of drugs
Advertisements
Generally advertisements in newspapers advertising the availability of goods for sale are deemed to be invitations to treat and not
contractual offers. PATTRIDGE V CRITTENDON. However whether the advertisement constitutes an offer depends on the wording of
the advertisement. A unilateral offer made by way of advertisement would qualify as a contractual offer-LEFKOWITZ V GREAT
MINNEAPOLIS SURPLUS STORE
Circulation of catalogues and price lists
The circulation of catalogues and price lists is generally considered as an invitation to treat. This is because otherwise would make
the seller bound to supply once the order is made even though his stock has depleted. GRAINGER & SON V GOUGH
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Auction sales
Generally, an auctioneer can only offer goods for sale by auction with the consent of the owner. The law requires that there must be
a notice announcing the sale, which must contain a clear description of the goods to be sold and give particulars of the quality and
quantity of the goods. A notice advertising an auction sale is merely a statement of an intention to sell and not a binding contract.
In the absence of fraud, an intending purchaser had no right to sue for the withdrawal of such items. HARRIS V NICKERSON
Kinds of auction sales
They are auction sale subject to a reserve price and auction sale without reserve price. An auction sale subject to a reserve price
means there is a specific price below which the vendor will not sell the goods. The vendor can bid once only, openly at the beginning
of the auction before any other bid is made. Secondly the auctioneer is not bound to sell the goods to the highest bidder if his bid is
below the notified reserved price. This is so even if the auctioneer accidentally knocks down the goods to him.
An auction sale without a reserved price means that there is no minimum price below which the seller will not sell the goods. The
law states that the highest bidder will be entitled to buy the goods at the price bid whether the auctioneer accepts his bid or not.
Also, neither the owner nor his agent can bid at the auction and the auctioneer cannot knowingly accept such bid. WARLOW V
HARRISON
Bilateral and unilateral contracts
A unilateral contract is formed where a promisor makes a promise in exchange for the actual performance of an act by the promise
as opposed to a counter promise. It is described as unilateral because only the offeror makes a promise. The offeree is not required
to make a promise but rather to perform the stipulated act. It is only when the stipulated act is performed that the offeror becomes
contractually bound to fulfill his promise.
A bilateral contract is formed when one party makes a promise in exchange for a return promise from the other party.
General offers
Unilateral offers are often created by general offers. A general offer is an offer made to the public at large or to a particular person
by way of public notice. There are two kinds. The one that can be accepted by one person-usually the first in time to perform the
stipulated act. The second one can be accepted by many. An example is found in the cases of CARLIL V CARBOLIC SMOKEBALL CO
The def advertised that they will pay £100 to anyone who contracted influenza after using their medical preparation in accordance
with the prescribed instructions for a fortnight. The plf used the smokeball in accordance with the instructions but caught the
influenza within the prescribed period. Held- the advertisement constituted an offer made to the public and that the offer was made
to the limited public who came forward to perform the conditions of the offer on the faith of the advertisement.
A performance cannot be properly be said to constitute an acceptance of an offer if it was made in ignorance of the offer-GIBBONS
V PROCTOR
A police officer supplied information for which a reward had been offered; he was not aware of the offer at the time that he gave the
information but he had become aware of the offer by the time the information reached the relevant party. Held- an offeree must
know of the offer at the time of the alleged acceptance. The plf became aware of the offer before the information got to the relevant
authority.
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Also when two persons make identical offers to each other simultaneously (cross offers), neither party knowing of the other’s offer
at the time of making his own the two offers do not constitute a contract-TIN V HOFFMAN
Acceptance
To constitute a contract, an offer must have been accepted by the person to whom it was made. Whether an offer is duly accepted
is a question of fact. Acceptance has to be final and unqualified expression of assent to the terms of an offer. Acceptance may be by
words, conduct or writing.
Acceptance by conduct-BROGDEN METROPOLITAN RAILWAY CO
Acceptance and counter-offers
A reply or response which varies the terms of the offer produces terms different from those indicated in the offer amounts in law to
a counter-offer and not an acceptance. A counter-offer constitutes a rejection of the original offer and amounts to making a new
offer by the offeree. It operates to destroy or nullify the original one such that it cannot be subsequently be accepted.
HYDE V WRENCH,
The def offered to sell his farm to the plf for £1000; the plf offered £950. The def rejected the plf’s offer. Later the plf offered
£1000. The def refused to sell and the plf sued for breach of contract. Held- there was no valid binding contract between the
parties. In making an offer to buy the property for £950, the plf had made a counter offer which effectively rejected the def’s
original offer. At the plf could not revive the original offer by tendering an acceptance of it.
DEEGBE V NSIAH & ANTONNELI
The plaintiff (D), a legal practitioner, was a tenant in the house of the defendant (N). In April 1977 N sold the house to the co-
defendant (A). On 31 May 1977 a firm of solicitors acting on behalf of A gave D notice to vacate the house on or before 31 August
1977. On 10 August 1977 D brought an action for specific performance of an alleged contract by N to sell the house to him for ¢65,000.
In an accompanying statement of claim he deposed that N had before the sale to A made an oral offer to sell the house to him and
that he had subsequently accepted the offer by a letter he wrote to N a copy of which he attached to his statement of claim. In a
section of that letter he had implored N to “consider a serious reduction in the price quoted” for the house. N denied making any
offer to D. Held- Acceptance must be an absolute and unqualified acceptance of all the terms of the offer. A qualified acceptance
operated as a rejection of the offer.
Counter-offer and inquiry
A mere inquiry or request for further information does not destroy the original offer-STEVENSON V McLEAN
Communication of acceptance
Acceptance has no effect unless and until it is communicated to the offeror or otherwise brought to his notice- FOFIE V ZANYO.
The def offered in a letter to sell a building to the plf. The plf contended that he accepted the offer and made instalment payment of
the purchase price. The defs denied that the plf accepted the offer and contended that the payments were in relation to an earlier
ten-year tenancy granted to the plf. Held- there was no evidence that the plf had communicated his acceptance to the def. The plf’s
acceptance was therefore a mere mental acceptance and that was not enough to constitute an acceptance.
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Also where a contract is made by means of instantaneous forms of communication, the contract becomes complete only when the
acceptance is actually communicated to or received by the offeror. ENTORES LTD V MILES FAR EAST CORPORATION. Since
communications by telex or telephone are virtually instantaneous the postal rule does not apply.
For acceptance to be effective it must come from the offeree himself or his authorized agent-POWELL V LEE
Exception to the general rule on communication of acceptance
Where the terms of the offer expressly or impliedly waive or dispense with the requirement of communication, the acceptance will
be deemed to be effective even if it is not brought to the notice of the offeror. Generally in general offer or offers for unilateral
contracts the law implied from the nature of the offer that the requirement of actual communication is waived. CARLIL V CARBOLIC
SMOKEBALL
Acceptance by modern communication methods
Where acceptance is communicated by post, the acceptance is complete and takes effect at the time when the letter of acceptance,
properly addressed is posted.
ADAMS V LINDSELL.
On September 2, the defendant wrote to the plaintiff offering to sell goods asking for a reply "in the course of post". On 5 Sept, the
plaintiff received the letter and sent a letter of acceptance. On 9 Sept, the defendant received the plaintiff's acceptance but on 8 Sept
had sold the goods to a third party. Held- binding contract was made when the plaintiff posted the letter of acceptance on 5 Sept, so
the defendant was in breach of contract.
This is known as the postal rule. Similarly, an acceptance by telegram takes effect when the telegram is handed in for transmission
to the addressee.
Principles to govern the implementation of the postal rule
• The letter of acceptance must have been posted and for this purpose a letter is deemed to have been posted when it is in
control of the post office
• It applies only when it is reasonable to use the post as means of communicating acceptance- HENTHORN V FRASER
• It applies even if the letter of acceptance is delayed or wholly lost in the post and never reaches the offeror-HOUSEHOLD
FIRE AND CARRIAGE ACCIDENT INSURANCE CO V GRANT
• The postal rule can be excluded by the term of the offer-HOLWELL SECURITIES LTD V HUGHES
• The postal rule applies exclusively to acceptance communicated by post or telegram. It does not apply to acceptance made
by telephone, telex, fax or other instantaneous forms of communications.
• It does not apply to letters containing rejections, counter offers or revocation of offers or revocation of acceptances. Such
responses become legally effective only upon actual communication to the party to whom they are addressed.
Acceptance by electronic mail
An agreement is valid even if it was concluded partly or in whole through an electronic medium. An offer, acceptance or payment of
consideration for the formation of a contract, which is expressed in an electronic record is generally deemed to have been sent or
dispatched at the time that the record enters the information processing system outside the control of the originator. Where the
addressee has designated an information system for the purpose of receiving electronic records, receipt is deemed to occur at the
time when the electronic record enters the designated information system. However if no information system has been designated
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to receive electronic records, receipt is deemed to occur when the electronic record enters am information system of the addressee
through which the addressee retrieves the electronic record.
Prescribed method of acceptance
The offeror is generally entitled to prescribe the method of acceptance in his offer and when he does so, the offeree is required to
comply with such prescribed method. Any other form will not normally be binding on the offeror.
FINANCINGS LTD V STIMPSON.
The defendant at the premises of a dealer signed a form by which he offered to take a car on HP terms from the plaintiffs. He paid a
deposit and was allowed to take the car away. He was dissatisfied with it and returned it to the dealer, saying he did not want it. The
car was stolen from the dealer's premises and damaged. The plaintiffs, not having been told that the defendant had returned the car,
signed the HP agreement. Held- the defendant had revoked his offer by returning the car to the dealer. The terms of the offer made
it clear that acceptance should be made by the signing of the forms by the plf. Therefore giving the hirer the car did not amount to
acceptance.
Where the offeror has prescribed a particular method of acceptance but not in terms insisting that only an acceptance communicated
in that mode will be binding, an acceptance communicated but any other mode which is no less advantageous to the offeror will be
effective to conclude the contract. TINN V HOFFMAN
Prescription of silence as a mode of acceptance
An offeree who does nothing upon receiving an offer which prescribes silence as the mode of acceptance is not bound by any
contract-
FELTHOUSE V BINDLEY
An uncle and nephew entered into negotiations about the sale of a horse. There was a misunderstanding about the price to be paid
for it. The uncle subsequently wrote to the nephew proposing that they split the difference and stating that if he did not hear from
the nephew he would consider the horse sold at that price. Later, the bourse was mistakenly sold by the auctioneer to another party
and the uncle sued. Held- there was no contract because the nephew because had not communicated his acceptance to the offer
and the offeree was not bound by the offeror’s prescription of silence as a mode of acceptance.
Where the offeror has expressly stated that silence would be considered as acceptance, the offeree’s silence in response to the terms
of the offer could be binding on the offeror.
Termination of offers
Generally an offer may be terminated by rejection or counter offer, which had been communicated to the offeror. The
communication to the offeror of an outright rejection or counter offer terminated the power of acceptance and the offered cannot
thereafter accept the offer
• Lapse of time- where there is a time limit for the duration of the offer and there is no acceptance within the specified period
the offer lapses. Where no time limit is fixed for the duration of the offer, the offer lapses after the expiration of a reasonable
time. What is a reasonable time depends on the circumstances of each case and the nature of the transaction. Relevant
factors in determining reasonable time include rapid fluctuations in price, perishable nature of goods involved, mode of
communication of the offer and the customs of the relevant trade.
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ANING V KINGFUL
The def married the plf customarily. They mutually agreed to have a church wedding. Thereafter they lived as husband and
wife for six and a half years. During that period the def was not gainfully employed and so the plf had to feed and maintain
him at her premises. The def secured employment and so after left the plf’s premises. The plf maintained that the def has
refused to marry her under the marriage ordinance and brought an action against him for breach of promise to marry. Held-
a promise to marry generally is in law a promise to marry within a reasonable time
• Revocation of offer- an offer may be revoked at any time before acceptance. Once an offer is effectively revoked, the offeree
cannot thereafter accept it. In some case, the offeror may make an additional promise to keep the offer open for acceptance
by the offeror for a specified period time. Such offers are often referred to as firm offers. At common law, a promise to keep
an offer open for acceptance for a specified time is not binding on the promise in the absence of consideration. ROUTLEDGE
V GRANT . The common law position has however been changed by section 8(1) of the Ghana contracts act 1960 act 25 which
states that a promise to keep an offer open for acceptance for a specified time shall not be invalid as a contract by reason
only of absence of any consideration therefor. For a revocation of offer to be effective, it must actually be brought to the
notice of the offeree. A revocation communicated by post does not take effect until the letter of revocation is actually
received by the offeree. BYRNE & CO V LEON VAN TIENHOVEN. Even though there must be actual communication of
revocation to the offeror, such communication need not come from the offeror himself. It is enough if the offeree receives
notice of the revocation through a reliable third party.
DICKINSON V DODDS
The def made an offer to the plf to sell certain houses, stating that the offer would be left open till Friday. On Thursday
afternoon, the plf was informed by one Berry that the def had sold the house to one Allan. Nevertheless the plf handed the
def an acceptance letter a few minutes before the time limit expired. The def refused to accept it. Held- the offer had been
unequivocally revoke and the revocation had been communicated to the offeree's before his purported acceptance.
Revocation of general offers
In the case of general offers made to the whole world, it is sufficient if the offeror revokes the offer through the same channel as the
offer was made. SHUEY V UNITED STATES. In unilateral offers, the offeror is entitled to revoke the offer at any time before the
stipulated act is completed. Where appropriate, the courts would imply from the offferor’s offer a second promise to the effect that
once the offeree's embarks upon performance the offeror will not revoke the offer. ERRINGTON V ERRINGTON. In LUXOR
(EASTBOURNE) LTD V COOPER, the court refused to imply this second promise as in its opinion there was no grounds for doing so.
Battle of forms
These are printed forms which invariable state the terms on which the offer is made and the acceptance. Often, each party purports
to contract with reference to his own set of standard terms and these terms sometimes conflict. Usually the conflict in the terms of
the offer and acceptance is not realized until after the goods are delivered or after the services have been rendered. The conflicting
terms may relate to issues concerning the supplier’s liability for defects, loss or damaged, variation clauses etc. The task of the court
is to determine whether the parties have entered into a contact and if so what the terms are.
BUTLER MACHINE TOOL CO. V EX-CELL O CORPORATION (ENGLAND) LTD.
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The plaintiffs offered to sell a machine to the defendants. The terms of the offer included a condition that all orders were accepted
only on the sellers' terms which were to prevail over any terms and conditions in the buyers' order. The defendants replied ordering
the machine but on different terms and conditions. At the foot of the order was a tear-off slip reading, "We accept your order on the
Terms and Conditions stated thereon." The plaintiffs signed and returned it, writing, "your official order … is being entered in
accordance with our revised quotation …” Held- in most cases when there is a "battle of forms" there is a contract as soon as the last
of the forms is sent and received without objection being taken to it. Therefore, judgment was entered for the buyers.
Intention to create legal relations

Where the parties have expressly declared or clearly indicated in their agreement an intentional to create legal relations between
them, the agreement will not be enforceable in a court of law, provided that neither the agreement nor the stipulation is itself illegal.
ROSE & FRANK CO V CROMPTON BROS, JONES V VERNON’S POOLS LTD. Sometimes the intention to create legal relations may be
negated by the provision of a statute. Where there is no express exclusion of the intention to create legal relations, the courts
consider the nature of the agreement, its terms and the circumstances surrounding the agreement to determine whether such
intention can be inferred.
HAMMOND V AINOOSON
The plf claimed that he had sent in a pools coupon to the def's who denied has inked received it. The conditions on the pools coupon
stated that the sending of the coupon in respect of the pool should not give rise to any legal relationship, rights or duties
whatsoever…all such arrangements and transactions should be binding in honor only. Held- this express provision prevented any
action in relation to the pools coupon.
Agreements made in the domestic or social setting
Generally engagements of pleasure are not treated as giving rise to enforceable obligations. However the courts apply the objective
test to determine whether there was an intention to create legal relations or not. COWARD V MOTOR INSURERS BUREAU
The plf was pillion passenger on a motor cycle owned and driven by one Cole. There was an accident, caused by Cole’s negligence
which resulted in both of them getting killed. The plf’s widow brought an action against the insurers and it was necessary to decide
on whether there was a legally binding contract between the plf and Cole. Held– the arrangement between the plf and Cole, whereby
the plf paid a weekly sum to Cole for transporting him to and from work was not intended to create legal relations between them.
Agreements entered between husband and wife
It is generally presumed that agreements entered between husband and wife in the domestic setting do not give rise to an intention
to create legal relations. Therefore such agreements are not enforceable in the courts of law.
BALFOUR V BALFOUR.
The def was a civil stationed in Ceylon. His wife alleged that while there were nothing England on leave he promised to pay her £30
a month as maintenance during the time they were forced to live part. She sued for breach of that agreement. Held- no legal relations
were contemplated and so the action must fail.
This presumption however does not apply when the spouses are not living together in amity. This is so especially if the agreement
was designed to deal with the marriage break up.
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MERRITT V MERRITT
The husband left the matrimonial home to live with another woman. The matrimonial home, which was subject to a mortgage was
in the joint names of the husband and wife. The husband and wife met and the husband agreed to pay the wife £40 a month out of
which the wife was to make the outstanding mortgage payments on the house. The wife insisted that the husband put it in writing.
The husband signed a piece of paper stating that he would transfer the house to the wife of she paid off the mortgage. The husband
refused to transfer the house to the wife after she had paid off the mortgage. Held- the parties intended that their agreement would
create legal relations. .
PETTIT V PETTIT
ACHEAMPONG V ACHEAMPONG
The parties were married under customary law. The wife instituted the present action against the husband for a breach of promise
to marry her under the Marriage Ordinance, Cap. 127. Counsel for the defendant raised a preliminary objection as to whether a
spouse married under customary law could while that marriage was subsisting sue the other spouse for breach of promise to marry
under the Ordinance. In resolving the issue the court had to decide whether a spouse married under customary law was capable of
bringing an action in contract or tort against the other spouse. Held- a woman married under the customary law was capable of suing
her husband in contract or tort in the same way as she could sue any other person. The legal fiction that husband and wife were one
in law was not part of the customary law
Agreements entered into between a parent and a child
It is presumed by law that agreements made between a parent and a child within a domestic setting are not intended to create legal
relations.
JONES V PADAVATTON
A mother, Mrs Violet Lalgee Jones, agreed with her daughter, Mrs Ruby Padavatton, that if she would give up her secretary job at the
Indian embassy in Washington DC and study for the bar in England, the mother would pay maintenance (from Trinidad, East Indian
descent). The mother gave monthly payments of 42 pounds and then bought a London house which she lived in and rented out. Then
they had a quarrel while Mrs Padavatton was still completing her bar exams. The mother brought an action for possession of the
house. The daughter argued there was a binding contract that she could stay. Held- there was no binding contract. Although there
would have been a contract if it was not the domestic parties related, there was insufficient evidence to rebut the presumption
against domestic arrangements.
Other domestic arrangements
The court would differ an intention to create legal relations if it is found in that agreement, although made in the domestic setting
has commercial flavor to it.
SIMPKINS V PAYS,
The defendant, her granddaughter, and the plaintiff, a paying lodger shared a house. They all contributed one-third of the stake in
entering a competition in the defendant's name. One week a prize of £750 was won but on the defendant's refusal to share the prize,
the plaintiff sued for a third. Held- the presence of the outsider rebutted the presumption that it was a family agreement and not
intended to be binding. The mutual arrangement was a joint enterprise to which cash was contributed.
PARKER V CLARK, HAMER V SIDWAY

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Commercial agreements
The courts presume that there is an intention to create legal relations. This presumption is only rebutted where the parties expressly
stated in their agreement that it is not to be binding in law or when the parties are able to prove to the contrary.
EDWARDS V SKYWAYS
The plaintiff pilot was made redundant by the defendant. He had been informed by his pilots association that he would be given an
ex gratia payment (ie, a gift). The defendant failed to pay and the pilot sued. The defendant argued that the use of the words "ex
gratia" showed that there was no intention to create legal relations. Held- agreement related to business matters and was presumed
to be binding. The defendants had failed to rebut this presumption.
Capacity to contract
There are certain categories of people who is the opinion of the law do not have full capacity to enter into contractual relations
• Contractual capacity of minors- the common law age of majority for the purpose of contractual liability is 21 years. At
common law contracts entered into between a minor and an adult are not binding on the minor but are binding on the adult
party. Where a minor enters into a contract for the purchase of necessaries, such a contract is binding on the minor and he
is liable to pay reasonable price for the goods. Necessaries refers generally to those things without which a person cannot
reasonably exist including food, clothing, lodging, education, training in a trade and other essential services such as medical
service. It also refers to good suitable to the condition in life of the person to whom they are delivered and to his actual
requirements at the time of delivery. CHAPPLE V COOPER, NASH V INMAN. No contract is binding on a minor if it prejudicial
his interest, even if it would otherwise be valid. This is so even when the goods or services qualify as necessaries.
FAWCETT V SMETHURST.
The infant entered into a contract under which he hired a car for the transport of his luggage. The contract stipulated that
the infant would be absolutely liable for any damage to the car whether by his negligence or not. Held- the contract was not
enforceable against the infant because the terms were harsh and onerous.
The second category of contracts which are generally binding on infants are beneficial contracts of service or apprenticeship
contracts. These contracts are binding on the infant provided that the terms of the contract construed as a whole are
substantially to the benefit of the infant. CLEMENTS V LONDON & NORTHWESTERN RAILWAY,
FRANCESCO V BARNUM.
A girl of fourteen was apprenticed to D for seven years in order to learn to dance. D was not obliged to maintain her, nor did
he have to pay her unless he found engagements for her. Even when engagements were found, the rate of pay was very low.
She could not obtain engagements for herself, nor was she allowed to marry, during the seven years. It was held that the
contract was not binding upon the girl, as it was unreasonable, oppressive and not beneficial to her.
This principle has been applied to contracts which allow the minor to earn a living through the exercise of a professional
occupation.
DOYLE V WHITE CITY STADIUM LTD

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A minor’s contract was subject to the rules of the British Boxing Board of Control. He was disqualified for hitting below the
belt and lost his purse. Held- whilst one clause was disadvantageous, it was still enforceable as on the whole the contract
was beneficial due to the training received
The principle does not extend to trading contracts. Trading contracts entered into by minor do not qualify as necessaries and
are therefore, not enforceable against him, no matter how beneficial the terms may be to him. COWERN V NIELD,
MERCANTILE UNION GUARANTEE CORP LTD V BALL
The third category of contracts binding on the minor are voidable contracts. They are binding on the minor unless and until
he repudiates the contract during his minority or within a reasonable time after attaining majority. Voidable contracts are
contracts by which the minor acquires an interest in some subject matter of a permanent nature, which gives rise to
continuous and recurrent obligations. In Ghana they include lease contracts, contracts affecting land, contracts for the
acquisition of shares and marriage settlement. Where the contract is repudiated he is not ordinarily entitled to avoid liability
for obligations, which have already risen under the contract. He is not entitled upon repudiation to claim money or property
transferred to the other party under such a contract, unless he can establish complete failure of consideration. STEINBERG
V SCALA
Minor’s liability in loan contracts
Generally, a person who lends money to a minor cannot recover it at common law, but can, in equity recover that part of
the loan which was actually used by the minor to purchase necessaries.
Minor’s liability in torts
Minors are liable for their torts. However, where the cause of action arises directly out of a contract which is not binding on
the minor, the minor would not be liable for the tort. FAWCET V SMETHURST. This rule only applied where the breach in
question consists of doing an act which is not contemplated by the contract. In such a case, the cause of action in tort is
deemed to be separate and independent of the contract. BALLET V MINGAY
Fraudulent misrepresentation of age by infant
Where a minor fraudulently misrepresents his age and thereby induces another person to enter into a contract which is
ordinarily unenforceable against the minor, the contract remains unenforceable against the minor despite his fraud and the
minor will not be liable for the tort of deceit wither because the cause of action in tort arises directly out of the contract
which is not binding on the minor. LESLIE LTD V SHEILL. Equity however in certain circumstances intervenes in order to
prevent the minor from benefiting from his own fraud. Where a minor obtains property by means of fraudulent
misrepresentation of his age, he could be compelled to restore that property to the person deceived provided that the
property is identifiable and still in the possession of the minor. This is known as the doctrine of equitable restitution. The
rule is that restitution stops where repayment begins. If he has sold the goods or used or spent the money, he cannot be
compelled to refund an equivalent sum from his own resources.
Minor’s right to enforce contract against adult party
A minor has no capacity to institute an action directly or by himself. He can defend an action only through a guardian ad
litem. Generally, a minor cannot obtain an action of specific performance against an adult party because the remedy is
normally not available against the minor. However where the minor has fully performed his obligations under the contract
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such that there is nothing that the other party can possibly ask a court to specifically decree, the remedy would be available
to the minor party. LARTEY V BANNERMAN
• Contractual capacity of mentally incompetent persons- unsoundness of mind would be a good defense to an action upon a
contract if it could be shown that the def was not of a capacity to contract and the plf knew it- IMPERIAL LOAN CO V STONE.
If it is shown that the mentally incompetent person was incapable of understanding the nature and effect of the contract he
has entered into, the contract is voidable at the instance of the mentally incompetent party only if he can prove that the
other party knew or ought to have known of his mental disability at the time of contracting. The burden of proof have been
held to lie on the mentally incapacitated party. However, a mentally incompetent person will be deemed to be bound by a
contract made by him during a lucid interval even if his disability is not known to the other party. A mentally incompetent
person is liable to pay for necessaries supplied to him, where the supplier expected that the goods would not be paid for,
whether or not the supplier was aware of his disability.
• Contractual capacity of drunken or intoxicated persons- if at the time of the contract, a person was too drunk or intoxicated
as not to know the consequences of his act and his drunkenness was known to the party at the time of contracting, the
contract made will be deemed to be voidable at the instance of the drunken party. The drunken party however has the
option of ratifying the contract when he becomes sober so as to make the contract valid. MATTHEWS V BAXTER. A drunken
person in a contract for necessaries is under the same obligation as an insane person to pay a reasonable sum for the goods
supplied.
Consideration
Consideration is an act of forbearance of one party, of a promise thereof, is the price for which the promise of the other is bought,
and the promise thus given for value is enforceable
Kinds of consideration
• Executed- consists of an act which is performed for a promise. It arises in unilateral contracts. The performance of the act
constitutes an acceptance as well as the consideration.
• Executory- consists of a promise to be performed in the future which is given in return for a counter promise. It arises in
bilateral contracts.
• Past consideration- where the act constituting the consideration or wholly donor the detriment wholly suffered before the
promise is made. At common law, past consideration is not sufficient to support the enforcement of a contract. The rationale
behind this principle is that the promise comes after the act has fully been performed without reference to the promise. The
promise is subsequent and independent of the act. ROSCORLA V THOMAS,
EASTWOOD V KENYON
The plf had been a guardian and agent of the plf while she was a minor and had voluntarily incurred expenses in the
improvement of her property. When the infant came of age she promised to pay the def money she had borrowed for the
improvement of her property. The plf sued to enforce the promise. Held- the moral obligation of the def to fulfill the promise
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was not sufficient consideration and since the acts had been wholly done before the promise was given, the consideration
was past and the promise was therefore enforceable.
Exceptions to past consideration rule
• Act specifically requested by the promisor- if the act was done or the services rendered at the request of the
promisor without any promise of payment at that point, and the promisor subsequently makes a promise to pay for
the service such a promise is enforceable and the act although done in the past would constitute sufficient
consideration. LAMPLEIGH V BRATHWAITE
• Act done by way of business- this exception applies where the act is done or the services are rendered by way of
business and not as an act of friendship. Here, it is assumed that both parties must have understood that the act
would ultimately be paid for. In this case the subsequent promise is treated as an admission of the bargain and
serves to fix the amount of remuneration to be paid. RE CASEY’S PATENT, STEWART V CASEY
Consideration need not be adequate.
The courts will ordinarily not seek to assess the value of the def’s promise and compare it to the value of the act or promise given by
the plf in exchange to determine whether the consideration is adequate. BOLTON V MADDEN, ADJABENG V KWABLA
Forbearance as consideration
Forbearance means refraining from doing what one has a right to do. A promise to forbear or actual forbearance in response to a
request, express or implies form the promisor constitutes valid consideration- DELLE & DELLE V OWUSU- AFRIYIE,
HAMER V SIDWAY
An uncle promised a nephew an infant at the time that if he would refrain from drinking liquor, using tobacco, swearing, and playing
cards for money until he is 21 years old, he will give him £5000 on his 21 st birthday. The nephew complied and later sued to enforce
the promise. Held- the nephew’s forbearance amounted to good consideration.
WHITE V BLUETT
The def had given his father a promissory note for money which he had borrowed from his father. The def failed to honor the note
and the father’s executors brought the action to recover the debt. The def defense was that his father had before his death promised
to waive or forego the debt if in return the son would stop bothering his father with complaints about the distribution of the father’s
estate which the son thought did not favor him. Held- there was no consideration because the son had no right to complain in the
first place since the father was entitled to distribute his property as he wished.
In an agreement to compromise a disputed claim, forbearance to sue in respect of the claim in good consideration.
KWADDEY V OKANTEY
In a land suit previously instituted by the def for the recovery of possession an mesne profits, the then land division of the supreme
court, Accra, gave a judgment of the land court and gave in favor of the def. in further appeal by the plf to the judicial committee of
the privy council, the appeal abated by reason of legislation passed upon Ghana becoming a republic in 1960. The parties made
attempts to settle the case, but negotiations broke down. Subsequently, the def applied to the court for issue of writ of possession
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to execute the judgment of the court of appeal. Held- an agreement to compromise an action may amount to good consideration.
Consequently, the plf was entitled to judgment since the def’s offer to stop further litigation on being £200 was good consideration
from which he could not rescind.
Sufficiency of consideration
Consideration need not be adequate but it must be sufficient. Adequacy refers to the value of the consideration while sufficiency
refers to the validity of the acts or promise which would qualify as consideration for the contract.
Reform of specific rules on consideration by the Ghana contracts act, Act 25
At common law, a promise to keep an offer open for acceptance for a specified period of time is not binding unless it is supported by
consideration. This rule has been amended by section 8(1) of Act 25 which states that a promise to keep an offer open for acceptance
for a specified time shall not be invalid as a contract by reason only of absence of any consideration thereof.
At common law, a promise to waive or forgo a debt or part payment of a debt is not binding on the promisor unless there is fresh
consideration flowing from the promisee. This is the rule in PINNEL’S CASE,
Pinnel sued Cole, in an action of debt upon a bond, for the sum of £8 10s. The defendant, Cole, argued he had, at Pinnel's request,
tendered £5 2s 6d before the debt was due, and the plaintiff had accepted in full satisfaction for the debt. Held- The claimant was
entitled to the full amount even if they agreed to accept less. Part payment of a debt is not valid consideration for a promise to
forebear the balance
FOAKES V BEER
The appellant, owed the respondent, Julia Beer, a sum of £2,090 19s after a court judgment. Beer agreed that she would not take
any action against Foakes for the amount owed if he would sign an agreement promising to pay an initial sum of £500 and pay £150
twice yearly until the whole amount was paid back. Foakes was in financial difficulty and, with the help of his solicitor, drew up an
agreement for Beer to waive any interest on the amount owed. She signed. Foakes paid back the principal but not the interest. Then
Beer sued Foakes for the interest. The question was whether she was entitled to it, despite their agreement that he would not need
to pay it. Held- there was no consideration for the fresh agreement and so the appellant was to pay the interest
However, under Ghanaian law, a promise to waive or forego a debt or part payment of it is binding on the promisor even in the
absence of any fresh consideration in accordance with section 8(2)
Pre- existing legal obligations
At common law, a promise to perform, a pre- existing legal obligation does not constitute sufficient consideration for another
promise.
A pre- existing legal obligation may arise in three different ways.
• Pre-existing legal / public duty- this duty may arise from a public duty imposed on a person by the General law, usually by
virtue of the person’s position, status or employment. At coming law, this will generally not amount to consideration. COLINS
V GODEFROY,
GLASBROK BROS LTD V GLAMORGAN COUNTY COUNCIL
The defendant owners of a colliery asked the police to provide protection during a miner's strike. The police provided
the protection as requested and provided the man power as directed by the defendants although they disputed the
level of protection required to keep the peace. At the end of the strike the police submitted an invoice to cover the
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extra costs of providing the protection. The defendants refused to pay arguing that the police were under an existing
public duty to provide protection and keep the peace. Held- In providing additional officers to that required, the police
had gone beyond their existing duty. They were therefore entitled to payment.
• Pre-existing contractual duty owed to contracting party- this duty arises from an existing contract entered into between
the promisor and the promisee himself. At common law, this does not amount to sufficient consideration. STILK V MYRICK,
HARTLEY V POSONBY. The rule in STILK v MYRICK have been modified to some extent to accommodate modification
agreements if certain conditions exist.
WILLIAMS V ROFFEY BROS & NICHOLLS CONTRACTORS LTD
Half of a ship's crew deserted on a voyage. The captain promised the remaining crew members extra money if they worked
the ship and completed the voyage. The captain then refused to pay up. Held- The crew were entitled to the extra payment
promised on the grounds that either they had gone beyond their existing contractual duty or that the voyage had become
too dangerous frustrating the original contract and leaving the crew free to negotiate a new contract.
• Pre- existing contractual duty owed to third party- this duty arises from an existing contract entered into between the
promising party and a third party. Party A contracts with C to do X. Subsequently A contracts with party B promising to
perform X (which he is already bound to perform under his contract with C). At common law, the performance of a
contractual duty owed to a third party constitutes sufficient consideration for another promise.
SHADWELL V SHADWELL
Mr Shadwell was engaged to marry Ellen Nicholl (this is a binding contract). His Uncle Charles promised £150 a year in a
letter after the marriage. Sadly, Uncle Charles died. Mr Shadwell alleged that his Uncle had not paid in full before the death
and claimed the outstanding money from his Uncle's estate. The estate refused to pay on the ground that Mr Shadwell had
given no consideration for the promise to pay the £150. Held- there was good consideration for the promise by the nephew
marrying Ellen Nicholl, despite the fact that the marriage had already happened when the promise was made
Section 9 of Act 25 states that the performance of an act or promise to perform an act may be sufficient consideration for
another promise notwithstanding that the performance of that act may already be enjoined by some legal duty, whether
enforceable by the other party not. This applies to all the three ways a pre- existing legal duty may arise.
• Pre- existing legal / public duty- KESSIE V CHARMANT
Consideration need not move from the promisee
The general rule at common law is that the consideration must move from the promisee. TWEDDLE V ATKINSON. In Ghana in
accordance to section 10 of the contracts act, no promise shall be invalid by reason only that the consideration for it is supplied by
someone other than the promisee.
The doctrine of promissory estoppel
Sometimes the parties to an existing contract may enter into a subsequent agreement whereby one party agrees to suspend his strict
contractual rights under the existing contract for a limited period of time without the provision of any fresh consideration by the
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promisor for this promise. Such agreements often become necessary in the case of misfortunes, temporary recessions and other
obstacles in economic activity which would disrupt the continued performance of contracts and necessitate the variation of terms of
an existing contract. At common law this promise is not binding in the absence of consideration however under equity a doctrine was
developed to deal with issue. This is the doctrine of promissory estoppels. HUGHES V METROPOLITAN RAILWAY COMPANY,
CENTRAL LONDON PROPERTY TRUST V HIGH TREES HOUSE LTD
In 1937, High Trees House Ltd leased a block of flats in Clapham, London, for a rate £2500/year from Central London Property Trust
Ltd. Due to the conditions during the beginning of World War II occupancy rates were drastically lower than normal. In January 1940,
to ameliorate the situation the parties made an agreement in writing to reduce rent by half. However, neither party stipulated the
period for which this reduced rental was to apply. Over the next five years, High Trees paid the reduced rate while the flats began to
fill, and by 1945, the flats were back at full occupancy. Central London sued for payment of the full rental costs from June 1945
onwards. Held- if Central London had tried to claim for the full rent from 1940 onwards, they would not have been able to. This was
reasoned on the basis that if a party leads another party to believe that he will not enforce his strict legal rights, then the Courts will
prevent him from doing so at a later stage
Scope of the doctrine
The principals is to the effect that of one party to a contract by his words or conduct leads the other party to believe that his strict
rights arising under the contract will not be insisted upon, intending that the other party should action that belief, and he does act
on it, then the first party will not afterwards be allowed to insist on his strict legal rights where it would be inequitable for him to
dose, even though the first party, upon giving reasonable notice, may resume his full legal rights under the contract.
• Existing contractual relationship between the parties-First of all, the doctrine applies where there is an existing contractual
relationship between the two parties and the contract is usually one which gives rise to continuing or recurrent obligations
as seen in the HIGH TREES CASE (the contract was one which gave rise to recurrent obligation to pay rent )
• Clear unequivocal promise- there must be a clear and unequivocal promise or representation, intended to affect the legal
relations of the parties, to the effect that the promisor would not insist on his strict legal rights arising out of the contract.
Such representation or promise may be express or implied as done in HUGHES V METROPOLITAN RAILWAY COMPANY
where the promise was implied from the landlord’s conduct in commencing the negotiations with the tenant.
• Reliance-the promisee must show that he conducted himself or his affairs in reliance on the representation or promise of
the promisor. HUGHES V METROPOLITAN RAILWAY COMPANY
Effect of promise generally suspensory
The doctrine of promissory estoppel operates only to suspend and not wholly extinguish the promisee’s existing obligations or the
promisor’s legal rights. The promisor upon giving reasonable notice, may resume the rights which he had suspended and revert to
the original terms of the contract. TOOL METAL MANUFACTURING CO LTD V TUNGSTEN ELECTRIC COMPANY
Circumstances must be inequitable
The principle would only apply if it would be inequitable for the promisor’s to go back on his promise and insist on his strict legal
rights under the contract.
D & C BUILDERS V REES
Mr Rees instructed the claimant to do some building work at his home to the value of £746. Mr Rees paid £250 on account and the
claimant reduced the bill by £14 and there was a sum owing of £482. The claimant wrote to the defendant several times pressing for
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payment but was unsuccessful there had been no complaints as to the workmanship at this time. The claimant at the time was in
dire financial need and the business was verging on bankruptcy a fact that Mrs Rees was aware of. The defendant telephoned the
home and Mrs Rees answered, she made complaints about the work and said she would give them £300 in satisfaction of the whole
debt. The defendant refused and said he would take the £300 and give her a year to clear the balance. He called at the house to
collect the money but Mrs Rees remained firm that she would only pay £300 and demanded that the defendant wrote on the receipt
'in completion of the account' otherwise she would pay him nothing. The defendant needed the money immediately so reluctantly
agreed to write this on the receipt but stated he fully intended to pursue the balance as the money paid did not cover the costs he
had incurred. He subsequently brought an action to recover the balance. The defendant sought to rely on estoppel relying on the
written receipt as demonstrating a promise to accept the lesser sum. Held- The claimants were successful. Mrs Rees could not rely
on estoppel as there was no true agreement to accept less and because Mrs Rees had taken advantage of the builder's position and
mislead them as to her financial position.
Doctrine does not create entirely new rights where none existed before
It doesn't create new contractual rights in the absence of consideration based on the fact that one party makes promise which the
other must rely on –COMBE V COMBE, TSEDE V NUBUASA
Terms of contract
The terms of a contract define the scope and extent of the obligations undertaken by the parties to the contract. In the course of
negotiations leading to the formation of the contract, the parties involved may make a number of statements. If a statement forms
an integral part of a contract it is said to be a term of the contract such that when it is breached, the innocent party is entitled to sue
for damages for breach of contract. A statement made which does not qualify as a contractual term is said to be a mere
representation. A mere representation is one that induces the other party to enter into a contract, but does not form part of the
contract itself. A distinction between the two is important because the consequences are different. The law classifies the terms of a
contract into conditions, warranties and I nominate terms.
Ascertaining the terms of a contract
Generally, a party can only sue for damages of breach of contract if the statement in question constitutes a term of the contract. If
the statement is a mere representation, and it turns out to be false, the party misled by it may be entitled to certain remedies
depending on whether the breach is innocent, negligent or fraudulent, but the innocent party cannot sue for breach of contract
because the statement is not a term of the contract.
Test for ascertaining the terms of an oral contract
Whether a statement is term of the contract or a mere representation depends on whether the parties intended it to be a contractual
term. The test is one of contractual intention and therefore an objective one. The intention of the parties can only be deduced from
the totality of the evidence. In making the statement, the level of importance attached to the statement in question is of significance.
BANNERMAN V WHITE
The claimant agreed by contract to purchase some hops to be used for making beer. He asked the seller if the hops had been treated
with sulphur and told him if they had he wouldn't buy them as he would not be able to use them for making beer if they had. The
seller assured him that the hops had not been treated with sulphur. In fact they had been treated with sulphur. Held- The statement
that the hops had not been treated with sulphur was a term of the contract rather than a representation as the claimant had
communicated the importance of the term and relied on the statement. His action for breach of contract was successful.
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Where the party to whom the statement was made was given an opportunity to make an independent investigation or verify the
statement that would be clear evidence that the party making the statement was not warranting its accuracy and this may lead to an
inference that the statement was not intended to a be a term of the contract.
ECAY V GODFREY
The defendant sold a boat to the claimant. He stated that as far as he was aware the boat was sound and free from vice but advised
the claimant to have it surveyed. The boat turned out to be defective. Held- The statement that the boat was sound was merely a
representation. The statement was not sufficiently emphatic to amount to a term and the advice to have the boat surveyed
demonstrated the defendant did not wish the claimant to rely on the statement.
Determining factors which are considered by the courts in ascertain gin the terms of the contract include
• Relative means of knowledge of parties- where the party who made the statement had special knowledge, skill or expertise
regarding the matter in question, as compared to the other party, the courts are more willing to infer an intention that the
statement would constitute a term of the contract. However where both parties have the same means of knowledge about
the matter and they are aware of this, it is improbable that a statement made will qualify as a term of the contract. OSCAR
CHESS V WILLIAMS. This case contrasted with DICK BENTLEY PRODUCTION LTD V HAROLD SMITH LTD. Even where a party
expresses an opinion on a matter, the fact of his superior knowledge or means may result in an inference that he was
warranting that he had reasonable grounds for the opinion he expressed.
ESSO PETROLEUM V MARDON

Mr Mardon entered a tenancy agreement with Esso Petroleum in respect of a new Petrol station. Esso's experts had
estimated that the petrol station would sell 200,000 gallons of petrol. This estimate was based on figures which were
prepared prior to planning application. The planning permission changed the prominence of the petrol station which would
have an adverse effect on the sales rate. Esso made no amendments to the estimate. The rent under the tenancy was also
based on the erroneous estimate. Consequently it became impossible for Mr Mardon to run the petrol station profitably. In
fact, despite his best endeavors the petrol station only sold 78,000 gallons in the first year and made a loss of £5,800. The
Court of Appeal held that there was no action for misrepresentation as the statement was an estimate of future sales rather
than a statement of fact. However, the claimant was entitled to damages based on either negligent misstatement at common
law or breach of warranty of a collateral contract.
• Reliance at the time of contracting- the court would seek to establish whether the statement was designed to be part of the
contract and not merely an incident in the preliminary negotiations. Thus the smaller the interval between the statement
and the time of contracting, the more likely it is that one was relying on the statement.
BANNERMAN V WHITE
The claimant agreed by contract to purchase some hops to be used for making beer. He asked the seller if the hops had been
treated with sulphur and told him if they had he wouldn't buy them as he would not be able to use them for making beer if
they had. The seller assured him that the hops had not been treated with sulphur. In fact they had been treated with sulphur.
Held- The statement that the hops had not been treated with sulphur was a term of the contract rather than a representation
as the claimant had communicated the importance of the term and relied on the statement. His action for breach of contract
was successful.
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• Reduction of terms into writing- where the parties later reduced their oral agreement into writing, the omission or exclusion
of an oral statement from the written document may lead to the inference that the parties did not intend it to be a term of
the contract.
ROUTLEDGE V MCKAY
The claimant acquired a Douglas BSA motorcycle and sidecar by exchanging another motorcycle and paying £30. The
registration documents stated that it was a 1942 model and this is what the defendant stated the year of the motorcycle to
be when the claimant came to look at it. The motorcycle was in fact a 1936 model but had been modified and re-registered
by a previous owner. The purchaser went away to think about it and then returned a few days later a written agreement was
produced to the effect of the exchange which ended with the words "It is understood that when the £30 is paid over that
this transaction is closed". Held- The statement was a representation and not a contractual term. The registration document
was not prima facie evidence of a contractual term. Neither party was an expert and there was a lapse of time between the
making of the statement and entering the contract giving the claimant the opportunity to check the statement.
Collateral contracts
A collateral contract is one which exists side by side with another contract the consideration for which is the entering into of that
contract. DE LASSALE V GUILDFORD. A collateral contract may exist even if it directly contradicts the express term of the main
contract.
CITY AND WESTMINSTER PROPERTIES LTD V MUDD.
The defendant, who had been a tenant of the premises for six years, had resided at the shop. When the lease fell for renewal, the
plaintiffs inserted a clause for use of the premises to be for business purposes only. The defendant asked if he could sleep there, was
told that he could and he signed the lease. Even though this assurance contradicted the lease, evidence of it was held admissible to
prove a collateral contract which the tenant could plead in answer to a claim for breach of contract.
This principle may be applied even where the party receiving the assurance or collateral promise is not a party to the main contract
entered into.
SHANKLIN PIER LTD V DETEL PRODUCTS LTD
Shanklin Pier Ltd hired a contractor to paint Shanklin Pier. They spoke to Detel Products Ltd about whether a particular paint was
suitable to be used, and Detel assured them that it was, and that it would last for at least seven years. On the basis of this conversation
Shanklin Pier Ltd instructed the contractors to use a particular paint, which they did. The paint started to peel after three months,
and Shanklin Pier attempted to claim compensation from Detel Products. Held- if a direct contract of purchase and sale of [the paint]
had then been made between the plaintiffs and the defendants, the correct conclusion on the facts would have been that the
defendants gave to the plaintiffs the warranties substantially in the form alleged in the statement of claim
Written contracts
Where the parties have formally recorded the whole of their agreement in writing, the written document is prima facie is taken to
be the whole contract. The terms are therefore limited to the contents of the written document and nothing more. Extrinsic evidence
will not be admitted to add to, vary or contradict the terms of the written agreement. This is known as the parole evidence rule.
MOTOR PARTS TRADING CO V NUNOO,
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WILSON V BROBBEY.
In an action to recover the value of goods credited to the def by the plf, the plf tendered in evidence, signed but the def. although
the def, who was literae, admitted signing the document, he contended that he signed it as a guarantor on behalf of one to whom
the goods were supplied and not as a purchaser and that in fact he did not read the document. He sought to join A as co-def. Held-
that where parties had embodied the terms of their contract, in a written document, extrinsic or oral evidence would be admissible
to add to vary, subtract from or contradict the terms of that instrument.
The parole evidence rule is subject to exceptions
1. It may be admissible to establish or prove the existence of a collateral contract

2. It may be admissible to establish the existence of a vitiating factor example mistake, duress, undue influence, fraud.
3. It may be admissible to establish the plea of non est factum ( this is not my deed)
4. It may be admissible to prove the existence of a custom or trade usage, which should apply to the contract
5. It may also be admissible to show that the operation of the entire contract had been suspended until the occurrence of some
event
6. Where's word or phrase in a written document is ambiguous parole evidence is admissible to explain such a word or phrase
7. It can be shown that a written document is incomplete in that it was not intend to contain all the terms of the contract, then
extrinsic evidence may be admitted to fill the gaps
8. Where it is shown that a written document which was intended to record a previous oral agreement does not accurately
reflect the contents of the oral agreement, extrinsic evidence will be admissible to rectify or correct the written document
prior to its enforcement,
Signed contracts
Where a document contractual terms is signed, in the absence of fraud or misrepresentation, the party signing it is bound by its terms
and it is wholly immaterial whether he read the document or not. L’ESTRANGE V F. GRAUCOB, INUSAH V DHL WORLDWIDE . Where
a party who is seeking to rely on a contractual clause in a written contract is guilty of misrepresenting its effect to the other party, he
may be precluded from relying on such clause, even if the other party has signed the contractual document.
CURTIS V CHEMICAL CLEANING AND DYEING CO.
The claimant took her wedding dress to the cleaners. She was asked to sign a form. She asked the assistant what she was signing and
the assistant told her that it excluded liability for any damage to the beads. The form in fact contained a clause excluding all liability
for any damage howsoever caused. The dress was returned badly stained. Held- The assistant had misrepresented the effect of the
clause and therefore could not rely on the clause in the form even though the claimant had signed it.
Doctrine of non est factum
The general rule is that a party of full age and understanding is normally bound by his signature to a document, whether he read the
document or not. In certain circumstances, however, a party who has been misled into executing a deed, or signing a document of a
class and character different from that which he intended to execute or sign can escape liability on the signed document by pleading
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the defence of non est factum in action brought against him for the enforcement of the document. The mistaken party will escape
liability if he is able to satisfy the court that he signed instrument is radically different from what he intended to sign and that his
mistake was not due to his carelessness. Where the plea is upheld, it makes the document entirely void such that even the innocent
party cannot acquire any rights under it. The plea of non est factum applies where
• A party’s signature has been procured by the fraud of another party

• The other party’s fraud was such as to lead the party to believe that the nature and contents of the document were
fundamentally different from what they actually were and
• The party who has signed is not guilty of negligence is so signing
The signed document is not valid merely on grounds of fraud but also on the grounds that the mind of the signer did not accompany
the signature. LEWIS V CLAY
Scope of the doctrine of non est factum
A mere negligence in not reading the document before signing it will cause an attempt to rely on the plea to fail.
SAUNDERS V ANGLIA BUILDING SOCIETY (GALLIE V LEE)
Mrs Gallie, a woman of 78 years, signed a document which stated it was the sale of her interest in her home to Mr Lee. Mr Lee then
used that document to obtain a mortgage on the property for £2,000. He failed to keep up repayments on the mortgage and the
building society sought possession of the property mortgaged. Mr Lee was a friend of Mr Parkin who was Mrs Gallie's nephew. Mrs
Gallie knew that they wished to raise some money and she had agreed to help them. She had told them she would assign her house
to the nephew as a gift on condition that he allowed her to remain there rent free for life. She had been told by the two men that
the document she signed gave effect to that agreement. She signed the document in both their presence but could not find her
glasses so had not been able to read it. The agreement between Mr Lee and Mrs Gallie had been held to be voidable for
misrepresentation. However, in the action against the building society Mrs Gallie raised the plea of non est factum (it’s not my
deed). Held- The House of Lords found against Mrs Gallie. The document was not radically different to that which she believed it to
be in that she believed that she was relinquishing her rights to the property in any event. Furthermore the House of Lords stated that
the plea of non est factum should not be too widely applied and reserved for those who through no fault of their own are unable to
read the document eg blind, illiterate or incapacitated through age.
The injured party is not without remedy if he cannot rely on the plea of non est factum. He can sue the person who defrauded him
for the fraud or misrepresentation. However the effect of the fraud is to make the contract voidable ensuring that an innocent third
party who acquires an interest in the in the subject matter of the contract before it is avoided acquires a good title.
NKRUMAH V SERWAH
The plf, an educated man, brought, an action for, inter alia, a declaration of title and or order of possession of a house against the
first def and the second def respectively. The trial judge found on the evidence that the plf sold the house to the second def who in
turn sold it to the co-def. the o-def eventually sold it to the first def. the plf appealed against this decision and contended, inter alia,
that the transaction between the co-def and the second def and first def could be rebutted by the plea of non est factum. Held- apart
from the fact that the plea of non est factum was not open to the co-def because she had not pleaded it, there was nothing from the
evidence to support the plea it was clearly borne out that in her dealing with the second def, she had full knowledge of legal advice
and there was not the slightest indication that she was coerced or pressurized into executing the deeds of the assignment. Besides,
as her lawyer verified on her behalf, the relevant documents there could not have been the result of any mistake as to the essential
nature or character of the document she executed to support the plea
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The onus of proof rested on the one who pleaded non est factum to establish it.
Illiterate persons and written contracts
It is immaterial that the party receiving the document is under a personal, but non-legal, disability, such as blindness, illiteracy or
inability to read the language provided that the notice is reasonably sufficient for the class of persons which the party belongs, he
will bound by the conditions. THOMPSON V LONDON, MIDLAND AND SCOTTISH RAILWAY.
Based on the decision in this case, chitty on contracts states that the general rule on the binding nature of exemption clauses, so far
as illiterate parties are concerned is as follows: it is immaterial that the party receiving the document is under some personal, but
non legal disability such as blindness, illiteracy, or inability to read our language. Provided the notice is reasonably sufficient for the
class of persons to which the party belongs (example passengers on a ship or railways), he will be bound by the conditions.
In Ghanaian law, there is no presumption that an illiterate person appreciates or understands the meaning and effect of a legal
instrument, or any instrument, simply because he signed it or put his mark on it-KWAMIN V KUFFOUR. In the interest of fair dealing
between a literate and illiterate party, the law imposes a quasi-fiduciary relationship. Ghanaian law places an obligation on the literate
party to the contract to explain the contents of the contract to the illiterate party such that if the literate party does not discharge
his good faith duty, by explaining the contents of the contract to the illiterate party, the contract is void. This is given legislative
backing in section 4 of the illiterate protection ordinance (cap 262)
Section 4—Conditions to be Fulfilled by Persons Writing Letters for Illiterates.
Every person writing a letter or other document for or at the request of an illiterate person, whether gratuitously or for a reward,
shall —
Reading and explanation.
(1) Clearly and correctly read over and explain such letter or document or cause the same to be read over and explained to the
illiterate person;
Illiterate's mark.
(2) Cause the illiterate person to write his signature or make his mark at the foot of the letter or other document or to touch the pen
with which the mark is made at the foot of the letter or other document;
Writer's name and address.
(3) Clearly write his full name and address on the letter or other document as writer thereof
Also the case of WAYA V BYROUTHY. The plf must also prove that the defendant fully appreciated the meaning of the effect of the
said document before he signed it.
BOAKYEM V ANSAH
The Odikro of Kotropei, by a deed of conveyance, granted a piece of land situate on the Kpong-Senchi road in Akwamu to the plf. The
execution of the deed of conveyance was attested to by the def., the Mankrado of Senchi and the head of his family; both attesting
witnesses were illiterate. In 1960, the def granted permission to two others to build on the said land. The plf sued the Mankrado and
the other two. In the High Court, Accra, for: (a) a declaration of title of ownership to the said land, (b) £G200 damages for trespass
and (c) perpetual injunction. The main point for the consideration of the trial court was who was the owner of the land of which the
land in dispute formed part, the plf’s grantor, i.e., the Kotropei stool or the def’s stool, i.e., the Senchi Mankrado stool? Held- where
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an illiterate attests to the execution of a document as a witness by making his mark on it, there is no presumption that he has any
knowledge of the contents of the documents; the presumption is, rather, the other way round, and a heavier onus rests upon any
person claiming that an illiterate who has attested to a document is aware of the contents of such document to prove it. The def
was therefore not estopped from denying the title of ownership of the Odikro of Kotropei to the disputed land by the mere fact that
he had attested to the document conveying the land to the plf as the evidence did not conclusively prove that the def., an illiterate,
understood the contents of the document.
Classification of the terms of the contract
Not all promises or terms in a contract are of the same importance even though they all have to be performs. Non-performance of
any term of a contract entitles the injured party to the award of damages by the defaulting party. Certain terms of a contract are
considered to be so essential that a breach of them is said to the root of the contract and therefore entitles the injured party to also
put an end to the contract. Such terms are known as conditions. A breach of warranty only entitles the injured party to damages.
Whether a term is a condition or a warranty is often determined or settled by the consideration of the terms of the contract at the
time the contract was made. Some terms fit into neither category and are classified as intermediate or innominate terms. For this
class the consequences of their breach can only be determined or evaluated in light of the consequences of their breach. Depending
on the gravity of the breach, the injured party may or may not be able to terminate the contract.
Conditions
A condition is a term of a contract which is so essential to the very nature of the contract that its breach entitled the injured party to
rescind the contract and sue for damages. SOCIAL SECURITY BANK LTD V CBAM SERVICES INC
A waiver or a right to terminate a contract or forbearance may be either oral or written and may either be inferred from the conduct
of the party affected by the breach complained of. The question a particular conduct would amount to a waiver that is intended to
be acted upon is, of course, determinable on case by case basis.
Warranties
A breach of warranty does not entitle the innocent party to repudiate the contract or treat himself as discharged from the obligation
to perform the contract. In NEOPLAN (GHANA) LTD V HARMONY CONSTRUCTION CO LTD, the court accepted the definition of a
warranty as a term of a contract which was collateral to the main purpose of the contract, that is, which is not so vital as to effect a
discharge of the contract, if the circumstances are, or become inconsistent with it.
BETTINI V GYE
The def entered into a contract with the plf for the exclusive of the use of his services as a singer in operas and concerts, both public
and undertaking that he would be in London at least six days before the commencement of the engagement, for rehearsals. He
arrived only two days before the engagement commenced and the plf thereupon refused to go with the contract, he sued the def for
breach. The issue was whether the stipulation or terms of the contract ‘to arrive in London 6 days before’ was a condition of the
contract or warranty. Held- with regard to the length of the contract and the nature of the performances to be given, the rehearsal
clause was not vital to the agreement. Thus it was not a condition but merely a warranty and accordingly its breach did not entitle
the pf to treat the contract as terminated.
POSSARD V SPIERS
Innominate or intermediate terms
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To ensure flexibility and justice on a case by case basis, the nineteenth century distinction, which pre-classified all terms of a contract
as condition or warranties has now given way to a more flexible test based on the gravity or seriousness of the breach and its
consequence. The new category of terms know as innominate or intermediate terms which lie in between conditions and warranties
in that the consequences of such terms does not depend on its prior classification as a warranty or condition but rather on the
seriousness of the breach which has occurred and its impact on the contract.
HONG KONG FIR SHIPPING CO LTD V KAWASAKI KISEN KAISHA
Hong Kong Fir Shipping hired out their elderly ship, the "Hong Hong Fir", under a two-year time charter-party to Kawasaki Kisen
Kaisha. It was to sail in ballast from Liverpool to collect a cargo at Newport News, Virginia, and then to proceed via Panama to Osaka.
A term in the charterparty agreement required the ship to be seaworthy and to be "in every way fitted for ordinary cargo service."
However the crew were both insufficient in number and incompetent to maintain her old-fashioned machinery; and the chief
engineer was a drunkard. On the voyage from Liverpool to Osaka, the engines suffered several breakdowns, and was off-hire for a
total of five weeks, undergoing repairs. On arrival at Osaka, a further fifteen weeks of repairs were needed before the ship was
seaworthy again. By this time, barely seventeen months of the two-year time-charter remained. Once in Osaka, market freight rates
fell, and Kawasaki terminated the contract citing Hong Kong's breach. Hong Kong responded that Kawasaki were now the party in
breach for wrongfully repudiating the contract. Held- the clause was innominate term in the sense that it could be broken by the
presence of trivial defects and rapidly remediable defects such as missing a nail from one of the timbers as well as defects which
must inevitably result in the total loss of the vessel. The unseaworthiness of the ship could be depending on the nature of the defect
entitle the charterer to rescind the contract or claim damages if it was trivial. The breach did not substantially deprive the charterer
of the whole benefit on the contract and so they were therefore not entitled to terminate the contract altogether.
CEHAVE N.V. V BREME HANDELSGESELLSCHAFT MBH (THE HANSA NORD)
This case involved contracts to sell citrus pulp pellets on GAFTA terms. Cl 7 of the contract said that the shipment was to be "in good
condition". The buyers were to use the product in animal feedstuffs. On arrival in Rotterdam, there was major damage to 1260 metric
tons and minor damage to a further 2053 tons. The buyers rejected the shipment and claimed the return of the price which had
already been paid. The sellers refused to repay the money, and the goods were sold to X for £33,000. The goods were then resold to
the original buyers for the same reduced price. The goods were then used for cattle food. The contract price was for £100,000 and
the market price at the time was about £86,000. Held- the term was an innominate term and as the goods were still of merchantable
quality the buyers were not entitled to reject the whole cargo. They were entitled to damages.
If there is well established custom, usage or authority to the effect that a particular clause constitutes a condition, the courts will give
effect to is as such.
Implied terms
The court in certain limited cases may imply terms into a contract in addition to the terms the parties have themselves included in
the contract. Generally terms may be implied into a contract by the court itself, by custom, by statute or by course of dealing.
Terms implied by the court
The court would imply terms into a contract if it is necessary to give the contract business efficacy. THE MOORCOCK,
REIGATE V UNION MANUFACTURING LTD,
EYRE V MEASDAY
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The plf had undergone a sterilization procedure. The gynecologist had emphasized that the procedure was irreversible and the plf
and her husband believed that she was sterile after the operation. The fact is that there is a slight risk of pregnancy even after such
an operation. Plf subsequently became pregnant. She sued for damages. Held- no such term could be implied because no such terms
arose by necessary implication
ATTUWO V AGRIP GHANA LTD
Terms implied by custom
Often, the contract is set against the background of customary practice that is familiar to those who engage in the particular trade or
business. Thus in addition to the express terms stated by the parties, the courts may imply certain terms based on customs and
usages that normally govern contracts of that nature. The assumption is that since the parties contracts with the reference to the,
known usages and customs of the trade, business or profession, they must have intended that those terms would apply to their
contracts. For the terms to be implied by custom or usage, the court must be satisfied that the custom of usage is notorious or well
known, certain and reasonable and must not contradict the intention of the parties. QUARTEY V NORGUAH
HUTTON V WARREN
A custom or usage which would otherwise be implied in a contract may be excluded by the partied, either expressly or impliedly,
where it is inconsistent with one of the express terms of the contract.
AFFRETEURS REUNIS SOCIETE ANONYME V LEOPOLD WALFORD LTD
Walford, as a broker, had negotiated a charter party between the owners of the SS Flore and the lubricating and Fuel Oils Co. Ltd.
There was clause in the charter party that the owners promised the charterers that they would pay Walford, on signing the charter,
a commission of 3 per cent on the estimated gross amount of hire. The owners, defending an action brought by Walford for his
commission, pleaded that there was as a custom of trade which stipulated that commission was payable only when hire had actually
been earned. The Flore had be requisitioned by the French government before the charter party could be operated and no hire had
in fact in fact been earned. Held- the custom that the commission on brokers was payable in respect of hire earned under the charter
party had been excluded or negative by the express term in this contract, that the commission was ‘payable on signing the charter,
ship lost or not. An alleged custom can be incorporated into a contract only if there is nothing in the express or necessarily implied
terms of the contract to prevent such inclusion, and further that a custom will only be imported into a contract where it is consistent
with the tenor of the document as a whole.
Terms implied by statute
In Ghana, legislation governing the sale of goods, tenancy agreements and hire purchase agreements, to name a few imply certain
standard terms into every contract for the sale of goods, tenancy agreement and hire purchase respectively. Such terms, which are
implied by statute, are equally applicable to the parties; contract as the terms they have expressly included in their contract.
FARAH V ROBIN HOOD FLOUR MILLS
Standard form contracts and exemption clauses
A standard form contract is a contract, the terms of which are often set put in a printed form in a written document and used as a
standard contractual document with little or no variation in all contracts of a particular kind. They are sometimes referred to as
adhesion contracts, because they are prepared by one party to the contract, usually the supplier of the goods or services, who
includes his/her own terms and conditions an offers them to the customers on a take it or leave it basis.
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Exclusion clauses
Exclusion or limitation clauses, a familiar feature in standard form contracts are contractual terms which purport to limit or exclude
the liabilities of one party which may arise under the contract. For such a clause to be effective, it must be shown that it was properly
incorporated into the contract as a term of it the person seeking to rely on the clause must show that he took reasonable steps to
draw the other party’s attention to the printed conditions.
Enforcement of exclusion clauses in contracts
Especially when the contract is made between parties of unequal bargaining power, the general principles of offer and acceptance
have proved to be inadequate in dealing with the special problems presented by the use of standard form contracts. In seeking to
exempt himself from liability for breach of contract, the party relying on the exclusion clause hereby deprives the other party of all
remedies he is expected to have under the contract.
Incorporation of exclusion clauses in the contract
As a starting point, the court must satisfy itself that the excluding or limiting clause is in fact an integral part of the contract. It must
be shown that both parties were aware of its existence and consented to its inclusion in the contract. Generally, when the exclusion
clause is contained in a written contract and signed by the consumer, the person who has signed the document is normally bound by
the clause, even if he did not read the contents of the document or did not understand it, unless there was a misrepresentation of
the effect of the clause or unless the person who signed can rely on non est factum. When the document containing the contractual
terms is not signed by the person receiving it but is merely delivered to him, it must be shown that the terms of the contract were
adequately brought to his notice. The party relying on the clause must show that he did was reasonably sufficient in the circumstances
to give the other party notice if the clause before or at the time the contract was made. PARKER V SOUTH EASTERN RAILWAY. Whether
or not sufficient notice has been given of the exclusion clause us a question of fact based on evidentiary circumstances.
The court deals with a number of broad guidelines.
1. Where the conditions or exclusion clause was printed on the back of a ticket or document, without any reference to it on
the face of the document, such as ‘see back for conditions’, the courts are likely to hold that reasonable notice was not given.
Also where the conditions printed on the ticket is obliterated by a stamp; faded or otherwise illegible, the courts are likely
to hold hat reasonable notice was not given.
RICHARDSON, SPENCE & CO V ROWNTREE
The plaintiff was a passenger on a steamer travelling from Liverpool to Philadelphia. The plaintiff was given a folded ticket,
no writing being visible in this form. The ticket, when opened had a great many conditions, one of which limited liability for
personal injury or loss of baggage to $100. The plaintiff never read the ticket. The plaintiff was injured whilst on the vessel.
1. Did the plaintiff know that there was writing on the ticket? This question was answered in the affirmative.
2. Did the plaintiff know the writing contained conditions relative to the contract of carriage? This was answered in the
negative.
3. Did the defendants do what was reasonably sufficient to give the plaintiff notice of these conditions? This question was
answered the negative.
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The High Court, Court of Appeal and House of Lords held that in the light of these findings the limitation clause was not
available to the defendant.
2. The courts have held that if the particular clause relied on by the party seeking exemption is exceptionally far reaching or
unusual in that class of contract, he must show that he took special measures to bring it to the notice of the other party. In
other words, the more far-reaching the clause, the greater must be the clarity of the notice given to satisfy the requirement
of reasonableness. THORNTON V SHOE LANE PARKING LTD,
INTERFOTO PICTURE LIBRARY LTD V STILETTO VISUAL PROGRAM

The claimants ran a photo library the defendant was in advertising. The claimants advanced some transparencies to
the defendant for his perusal and he was to get back to them as to which photos he would like to use. The package of
the photos contained a document stating that if any transparencies were kept longer than 14 days a £5 +VAT holding
fee would be charged per photo per day. The defendant had not read this document and then forgot about the
transparencies and failed to return them for 6 weeks. The claimants brought an action claiming a holding fee of £23,783
as specified in the contract. Held- The term was not incorporated into the contract. Where a term is particularly
onerous the person seeking to rely on the term must take greater measures to bring it to the attention of the other
party.
3. For the exclusion clause to be effective, the party relying on it must show not only that he gave the other party reasonable
notice of it, but also that notice of the clause was given before or at the time the contract was entered into not after. OLLEY
V MARLBOROUGH LTD
4. For the exclusion clause to be enforceable, the document containing the clause must be one, which can properly be described
as a contractual document, that is, it must be one, which a reasonable person would expect to contain the conditions or
terms of a contract.
CHAPLETON V BARRY UDC

The claimant booked into a hotel. The contract was made at the reception desk where there was no mention of an exclusion
clause. In the hotel room on the back of the door a notice sought to exclude liability of the hotel proprietors for any lost,
stolen or damaged property. The claimant had her fur coat stolen. Held- The notice was ineffective. The contract had already
been made by the time the claimant had seen the notice. It did not therefore form part of the contract.
5. Where there has been a consistent course of dealing between the parties of such a nature that any reasonable person would
know that the party invariably intends to contract only on certain specific terms if in the particular transaction, he was not
specifically notified of those terms.
MCCUTCHEON V DAVID MACBRAYNE LTD, ANDREWS BROS LTD V SINER & CO LTD
By contract the claimants agreed to buy some 'new Singer cars' from the defendant. The contract contained a term which
excluded 'all conditions, warranties and liabilities implied by statute, common law or otherwise'. One of the cars delivered
was not new but had been used on the road. The claimant sought to reject the car but the defendant argued that the clause
was effective to prevent him being able to do so. Since the term implied by s.13 Sale of Goods Act requiring goods to be as
described was excluded. Held- The clause was not effective since it did not cover the loss in question. The requirement of
the cars being new was an express term not an implied term. Whilst the Sale of Goods Act implies a term that goods must
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be as described any ambiguity in the effect of the clause would be interpreted against the party seeking to rely upon it under
the contra preferentum rule.
Exclusion of liability for negligence
Where a contracting party seeks to exclude liability for his negligence, the courts apply a very strict approach in the interpretation of
the clause. This is because the courts consider it mod unlikely that one party would agree to allow the other contracting party to
exclude liability for his own negligence. An exclusion clause will not be construed as excluding the party’s liability for his negligence
unless the clause expressly, or by necessary implication, covers such liability. This applicable rules were stated in Lord Morton’s
judgement in CANADA STEAMSHIP LINES V THE KING as follow:
1. If the clause contains language which expressly exempts the party relying on the clause from the consequences of negligence,
then effect would to be given to it. Example, if the word negligence or its synonym is used in the clause.
2. If not, then the courts ought to consider whether the words were wide enough in their ordinary meaning, to cover negligence
on the part of the party seeking to rely on it. In this regard, clause excluding liability for ‘any act or omission’, or, ‘,any damage
whatsoever or however arising’, would be sufficient
3. The court, assuming the second test is satisfied, must consider whether or not the clause may cover some kind of liability
other than negligence, such as strict liability. This is a matter of construction of the contract.
Sometimes a party is potentially liable both on the basis of negligence in torts and on the basis of strict liability in contract. Here, the
courts have adopted the restrictive approach pf interpreting the exclusion clause to exclude liability for breached in contract and not
liability for negligence, unless the clause expressly specifies negligence. WHITE V JOHN WARWICK. If however, there is no ground of
liability other than negligence to which the clause could reasonably refer, then the courts may be willing to give effect to the clause
excluding the party’s liability for negligence. ALDERSLADE V HENDON LAUNDRY
Exclusion of the liability of third parties
The position is quite ambivalent at common law.
ADLER V DICKSON
The plf was a passenger on a vessel, travelling on a first class ticket. The ticket was a lengthy printed document, containing some
excluding clauses. The ticket contained a general clause that ‘passengers carried at passenger’ entire risk and particular clause that
the company will not be responsible for any injury whatsoever to the person of any passenger arising from or occasioned by the
negligence of the company’s servants. While the plf was mounting a gangway, it moved and fell and she was thrown onto the wharf
from a height of 16ft and sustained serious injuries. She brought an action for negligence, not against the company, but against the
master and boatswain of the ship. Held- while the clauses protected the company from liability they could not avail to anyone else.
SCRUTTONS LTV V MIDLAND SILICONES LTD
In Ghana, the general rule on privity of contract has, subject to certain exceptions, been abolished by section 5 of the contracts act.
A provision in a contract made after the commencement of this Act which purports to confer a benefit on a person who is not a party
to the contract, whether as a designated person or as a member of a class of persons, may, subject to this section and sections 6 as
though that person were a party to the contract.
(Subsection (1) does not apply to --
b) a provision in a contract purporting to exclude or restrict a liability of a person who is not a party to the contract.
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The effect is that servants or agents of a party to a contract derive no benefit from an exclusion clause in a contract made between
their principals and their third parties.
Doctrine of fundamental breach of contract
The doctrine is based on the concept that a party to a contract is only entitled to rely on an exclusion clause when he is carrying out
his contract, not when he is deviating from it or when he is guilty of a fundamental breach of the contract. On this basis a substantive
rule emerged which stipulated that certain kinds of breaches and types of contractual terms were so fundamental that no exemption
clause, however widely drawn, could exclude liability for such breach. A fundamental term of contract is one which underlies the
whole contract such that where it not complied with the performance become totally different from that which the contract
contemplated. NICHOL V GODTS
KARSALES (HARROW) LTD V WALLIS
Mr. Wallis viewed a used Buick car that was being sold by Stinton for ₤600. Wallis found the car to be in excellent condition, and
agreed that he would buy the car if Stinton would arrange financing through a hire-purchase company. Karsales (Harrow) Ltd. bought
the car and sold it to Mutual Finance Ltd., which then finally lent the car to Wallis on hire-purchase terms. Wallis had not seen the
vehicle since his first viewing.
About a week later, the car was left outside, late at night. The following morning, Wallis inspected the car and found it to be in a
substantially different state than it was when he first saw the vehicle: the bumper was being held on by a rope, the new tires were
taken off and old ones put on, the radio had been removed, the chrome strips around the body were removed, and the car would
not run. Wallis refused to pay for the car since it was not in the same condition as when he agreed to make the purchase. Held- the
defendant did not have to accept the wrecked vehicle which plaintiff tendered, notwithstanding that warranty of roadworthiness of
the vehicle specifically disclaimed. This was because a car that is an undrivable wreck is so fundamentally different from a sound
vehicle that its delivery does not satisfy the terms of the contract any more than delivery of 100 lbs. of oranges would have sufficed.
Thus it was in breach.
SZE HAI TONG LTD V RAMBLER CYCLE LTD
The respondent dispatched goods by sea from England to Singapore. The bill of lading required that the goods must be delivered
‘unto order or assigns’, that is, goods were to be delivered upon the production of bill of lading. The carrier in breach of this
requirement, released the goods to a consignee who did not produce any bill of lading. Under the contract, the carrier’s liability was
to cease absolutely after the goods had been discharged from the ship. The carriers sought to rely on this clause to avoid liability for
the breach. The Privy Council held that the carrier was liable. Even though the clause, on the face of it was comprehensive. It must at
least be modified so as to permit the shipping company from deliberately disregarding their obligations as to delivery. The carrier
could not contract to deliver to the holder of the bill of lading and also contract that he was at liberty to deliver to someone who did
not hold the bill of lading. Lord Denning pointed out that no court would allow a fundamental breach to pass unnoticed under the
cloak of a general exemption clause
ALEXANDER V RAILWAY EXECUTIVE
Modifications in doctrine of fundamental breach
A number of problems were encountered in the implementation of the doctrine of fundamental breach. First of all the concept of
‘fundamental’ breach was not altogether easy to define. It also in its absolute form did not differentiate between cases where the
excluding or limiting clause was contained in a contract between parties of equal bargaining power and cases where intervention
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was necessary for the protection of the party with a weaker bargaining power. When applied to commercial transactions negotiated
and concluded between parties of equal bargaining power, the doctrine was likely to upset fair bargains entered into for the
reasonable allocation of contractual risks.
The courts adopted the position that the question as to whether an exemption clause is applicable where there was a fundamental
breach of contract was simply a question of the true construction of the contract. On this view, the question in each case is simply
whether or not the particular clause can be construed so as to cover the breach. As a rule of construction, the issue whether or not
an exclusion clause is effective would depend on the interpretation of the particular contract before the courts and the intentions of
the parties.
PHOTO PRODUCTION V SECURICOR TRANSPORT
Generally, the court will not allow a party to rely on an exemption or limitation clause in circumstances in which it would be unfair
and unreasonable to allow such reliance; and in considering whether it is fair and reasonable, the court will consider whether the
clause was in standard form, whether there was equality in the bargaining power, the nature of the breach and so on. All in all, the
court considers all the circumstances of the case, including the nature of the breach to determine whether the clause should operate
to exclude the liability of the party.
Thus the application of the doctrine of fundamental breach as a substantive rule of law has now given way to a test of reasonableness.
In applying the test of reasonableness the courts consider a number of relevant factors including
1. Whether the contract is commercial one entered into between parties of equal bargaining power or a consumer contract
entered into between an individual and a company, where there is a wide disparity in the bargaining power of individuals,
2. Whether there was an opportunity for the other party to insure,
3. The level of remuneration received for the service
4. Any attempt at allocation of risk between the parties and
5. The efficiency of the arrangements
GEROGE MITCHELL (CHESTERHALL) LTD V FINNEY LOCK SEEDS LTD
1. The clause was not negotiated between persons of equal bargaining power. It was inserted by the seed merchants in their
invoices without any negotiation with farmers.
2. The buyers/farmers, had no opportunity at all of knowing or discovering that the seed was cabbage seed, whereas the sellers
could and should have known that it was the wrong seed altogether. They should have tested it before putting it on the
market.
3. The buyer/farmers were not covered by insurance against this risk, nor could they insure. But, as to the seed merchants, it
was possible for them to insure against this risk.
4. Also, such a mistake as this could not have happened without sections negligence on the part of the seed merchants
themselves or their suppliers so serious that it would not before to allow them to escape responsibility for it.
5. In all the circumstances, it was held that it would not be fair or reasonable to allow the seed merchants to rely on the clause
to limit their liability.
Privity of contract
The common law position on privity of contract is that a person cannot be entitled to enforce or be bound by the terms of a contract
to which he is not a party. The rule on privity is based not only on the fact that there is no contractual relationship or privity between
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the third party plaintiff and the defendant, but also on the fact that third party plaintiff has not provided any consideration for the
promise which he seeks to enforce.
Rule of privity of contracts
TWEEDLE V ATKINSON
DUNLOP PNEUMATIC TYRE CO LTD V SELFRIDGE & CO LTD
TADDY & CO V STERIOUS & CO
The plfs, who were manufacturers of tobacco, sold their products subject to printed terms and conditions, fixing a minimum price
below which the products are not to be sold, and containing the following proviso ‘acceptance of the goods would be deemed a
contract between the purchaser and Taddy & Co. that he will observe these stipulations. In the case of a purchaser by a retail dealer
through a wholesaler dealer, the latter shall be deemed to be the agent of Taddy & Co. the plf sold to one Netten, who then resold
for his own profit to the defs. The defs had notice of the conditions, but sold to the public at a price below the stipulated minimum.
The action brought by Taddy & Co was dismissed for want of contractual relationship.
Even at common law the doctrine of privity of contract has not been applied without criticism and reluctance. DARLINGTON
BOROUGH COUNCIL V WILTSHIER NORTHERN LTD, Steyn J stated: ‘….there is no doctrinal, logical or policy reason why the law should
deny the effectiveness of contract for the benefit of a third party where that is the expressed intention of the parties’.
The doctrine of privity of contract had been criticized as being out of touch with modern trends in contract law. It had been pointed
out that the doctrine does not accord with the reality of many commercial contract. It has been pointed out that the doctrine does
not accord with the reality of many commercial contracts: in particular, the doctrine of privity has been said to be inappropriate and
unhelpful in multiple linked contracts which involve multiple parties such as construction contracts and contracts for the carriage of
goods.
Legislative changes to the doctrine of privity of contracts
Sections 5, 6 and 10 of Contracts Act
5. Provision in contract for benefit of third party (means the time when the parties were 1) A provision in a contract made after
the commencement of this Act which purports to confer a benefit on a person who is not a party to the contract, whether as a
designated person or as a member of a class of persons, may, subject to this section and sections 6. 2) as though that person were a
party to the contract.
A person who seeks to enforce some rights under a contract of which he is not a party can only do so if the contract purports to
confer some benefit on him, either as a designated person or as a member or as a class of persons.
The benefit of the party must be within the contemplation of the parties to the contract.
EJURA FARMS (GHANA) V HARLLEY
E.F.G. Ltd., the first defendants, entered into a contract with A.F.S. Ltd. The plaintiff, a stranger to the contract, guaranteed ¢30,000
to E.F.G. Ltd. in respect of the contract, and requested his bank, the second defendants, to act as his agent in respect of the guarantee
offering the bank government stock as security. Later without the plaintiff's knowledge, the terms of the contract between the two
firms were varied. E.F.G. Ltd. subsequently called for the payment of the guarantee, which the bank paid, reimbursing itself from the
plaintiff's stock. The plaintiff alleged that since he was not aware of the variation of the contract, E.F.G. Ltd. had wrongfully called for
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the payment of the guarantee, and he wrote demanding a refund from E.F.G. Ltd. E.F.G. Ltd. refused to pay on the ground that the
plaintiff was a total stranger to them in respect of the agreements between themselves, A.F.S. Ltd. and the bank. The plaintiff
therefore sued E.F.G. Ltd. and the bank basing his action on conversion, or alternatively on the ground of money had and
received. E.F.G. Ltd. sought to have the action against them struck out on the ground that it was frivolous and vexatious and disclosed
no cause of action against them. The High Court dismissed the motion [p.159] and E.F.G. Ltd. appealed. During the hearing counsel
for the plaintiff conceded that it was impossible to identify any specific sum of money or chattel of the plaintiff which could form the
subject-matter of conversion. He therefore rested his argument on the alternative ground of money had and received. Held- there
was no privity of contract between the plf and the first defs. Moreover, the plf could not on the facts disclosed in the pleadings and
in the said contracts seek third party benefits from the contract under the statutory exceptions contained in Part II of the Contracts
AC since the plf was clearly not within the contemplation of the parties to the said contracts and no provision thereof conferred or
purported to confer any benefits on him as a non-party whether as a designate person or a member of a class of person stated in
section 5(1) of Act 25
Incidental beneficiaries
Section 5(1) of the contracts act does not allow incidental beneficiaries of the contracts to sue on them. It should be expressly or by
necessary implication evident in the contract that the parties. To the contract in fact contemplated benefits to the third party.
YEBOAH V KRAH . According to Date-Bah , the learned judge does not probably mean to say that an injured third party would not in
fact be benefited by the insurers’ due performance of their obligation of indemnifying their assures. But such benefit in fact makes
the third party a mere incidental beneficiary who cannot sue because there is no intent to confer a benefit to him.
BAIDOO V SAM,
The plf, a front man prayed the court to set aside a transfer of salt whining business by the principal to the def. The appeal was
dismissed stating that ‘ a fortiori in this case where there is no provision whatsoever reserved in the contract for the benefit of the
plf, his action in suing to have the contract to which he is a perfect stranger set aside in quite wrong.
KOAH V ROYAL EXCHANGE ASSURANCE
The plaintiff brought the action herein against the defendants to satisfy a judgment awarded against the defendants' insured for
damages for personal injuries sustained by the plaintiff as a result of the negligent driving of the insured's driver. The defendants
denied liability on the ground that the third party insurance in force at the material time restricted driving to the insured, i.e. the
owner only. Held- The driver of the vehicle at the time of the accident could not take advantage of the provisions of the Contracts
Act, 1960 s. 5 because he was not a party to the policy and the terms did not confer a benefit upon him.
Section 10 of the contracts act
Under traditional English contract doctrine, a promisee cannot sue on a promisee for which he has supplied no consideration.
TWEEDLE V ATKINSON
Section 10 of the contracts act- Consideration need not move from promisee. A promise is not invalid as a contract by reason only
that the consideration for the promisee is supplied by a person other than the promisee. Promisee here refers to the person for
whose benefit a promise is made and not the person to whom the promise is made.
Exceptions to the rule on third party rights
Section 5(2) lays down two important exceptions to the rule on third party rights. It has to be noted that the exceptions outlined in
the act were acknowledged by Lord Denning in BESWICK V BESWICK
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(Subsection (1)
( a ) does not apply to and 7 , be enforced or relied on by that person a provision in a contract designed for the purpose of resale
price maintenance, that is to say, a provision whereby a party agrees to pay money or otherwise render some valuable
consideration to a person who is not a party to the contract in the event of the first-mentioned party selling or otherwise disposing
of the goods, the subject matter of the contract, at prices lower than those determined by or under the contract; or
(6 b) a provision in a contract purporting to exclude or restrict a liability of a person who is not a party to the contract.
Enforcement of resale price maintenance agreements
The contracts act for policy reasons, disallows the application of the rule in section 5(1) to resale price maintenance clauses in sale
contracts. Thus according to section 5(2), where a contract of sale, often entered into between a manufacturer and wholesaler,
contains a provision which binds the wholesaler as well as retailers who buy from the wholesaler not to sell the product below a
certain fixed price, the manufacturer will not be entitled to sue any third party retailer who sells the goods in breach of that resale
price maintenance clause in the contract of which he is not a party. This exception is based on economic policy which frowns on price
fixing and other activities which tend to be restrictive of competition. DUNLOP PNEUMATIC TYRE CO V SELFRIDGE & CO
Third party rights and e emption clauses- section 5(2) (b)
A person who is not a party to a contract cannot invoke section 5(1) to rely on an exemption clause in that contract to escape liability
Related provisions- section 6
6 b) a provision in a contract purporting to exclude or restrict a liability of a person who is not a party to the contract.
Rights of third party
Where under section 5 provision in the contract,
( a ) a person who is not a party to a contract is entitled to enforce or rely on a variation or rescission of the contract shall not
prejudice that person’s right to enforce or rely on the provision if that party has acted to the prejudice of that party in reliance
on the variation or rescission, unless that party consents to the variation or rescission; and
( 7 b ) subject to paragraph ( a ) , a party against whom the provision is sought to be enforced or relied on is entitled to rely on or
to plead by way of defence, set-off, counterclaim or otherwise a matter relating to the contract which that party could have so
relied on or pleaded if the provision were sought to be enforced or relied on by the other party to the contract.
The import of section 6 is that where a third party has an enforceable right under a contract by virtue of section 5(1), such right
cannot be taken away by the two parties to the contract agreeing to vary or rescind the contract, once the third party has acted to
his detriment in reliance of the contract, unless the third party consents to such variation or rescission.
In section 6(b), the rights of the third party beneficiaries cannot be better that that of the promisee under the contract since the third
party derives his legal rights from the promise made to the promisee. Consequently, all defenses, set-offs and counterclaims that are
available against the promisee may be set up by the promisor in a suit against him by the third party beneficiary of his promise.
Mistake
Vitiating factors are simply legally recognized factors, which make an apparent contract lose its validity when it comes to its
enforcement. In contract law, a contract is deemed to be vitiated or invalidated if it is found that there are factors, which negate or
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nullify the apparent consent of one or both of the parties. The vitiating factors recognized by the law are mistake, misrepresentation,
duress, undue influence and unconscionability.
Mistake
In contract law, to be mistaken is to be wrong as to a matter of fact that influences the formation or the making of a contract. Mistake
as used in contract law has a more restricted meaning than as in ordinary parlance or common speech in that the courts will not
declare a contract void simply because one or both partied claim to be mistaken about some fact or simply because one party claims
he would not have entered the contract if he had known the true facts.
When does mistake on part of one or both parties have any legal effect on a concluded contract?
Legal effect of mistake
For mistake to have any effect at all on a contract the mistake must be one which existed at the time the contract was concluded.
This means that the assumption made by the parties must have been factually wrong at the time the contract was concluded.
AMALGAMATED & PROPERTY LTD V JOHN WALKER
Effect of mistake at common law
At common law mistake operates in some cases to nullify consent. The legal effect of mistake at common law is therefore to render
the contract void ab initio. A void contract is a complete legal nullity. That is it confers no rights and imposes no duties on the parties.
A third party cannot acquire any valid interest under such contract even if he acquired the interest for value, in good faith and without
notice of the fact that the contract under which he derived his title was void.
Effect of mistake in equity
In equity, mistake has a wider scope but its effect is less drastic. It operates in the following ways:
1. Mistake may be a defence in an action for specific performance

2. Mistake may also entitle the parties to have a written contract rectified
3. Mistake may also be a ground for the rescission of a contract
Different kinds of mistake
There are three main kinds of mistake which are recognized at common law: mutual mistake, unilateral mistake and common mistake.
In mutual mistake the two parties make different mistakes. In unilateral one party makes a mistake, while in common mistake both
parties make the same mistake.
Mutual mistake
Mutual mistake is said to exist, although to all outward appearances the parties have agreed, there is in fact no genuine consensus
between them because one party makes an offer to the other, which the other accepts in a different sense from that intended by
the offeror. The two parties, unknown to each other, are at cross purposes. In deciding whether or not a contract should be deemed
to exist, the courts apply the objective test to determine whether an agreement can be inferred from the facts.
Unilateral mistake
A unilateral mistake exists where only one party to the contract is mistaken. The other party is usually aware of the first party’s
mistake and makes no mistake himself. The most common example is mistake as to the identity of the person one is contracting with.
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Common mistake
This exist where even though there is a genuine agreement between the parties, the parties have both contracted in the mistaken
belief that some fact which is the basis of the contract is true when in fact it is not. In common mistake, there is no question of lack
of agreement between the parties. The exact offer made by A is accepted by B. The contention however is that since both parties are
mistaken about some fact which is the basis of their contract such that the mistake robs the contract of its efficacy and the contract
must therefore be declared void by reason of mistake. The court applies the objective test to determine whether the mistake is
sufficiently fundamental as to make the contract void on grounds of mistake.
Mutual mistake or mistake as to the terms of the contract
It follows that if there is no genuine agreement between the parties, of if the offer does not correspond to the acceptance, no contract
should ensue. However, the intention of the parties to the contract are objectively determined so that the intention of the parties by
considering their words and conduct as they would have been understood by a reasonable man is used. The contract may be enforced
in the reasonable sense even if the actual intentions of the parties are different. TAMPLIN V JAMES
There are however situations where, even though the parties appear to have agreed, mutual mistake or mistake as to the terms of
the contract may operate to negate consent and render the contract void.
Where words used are patently ambiguous or rendered ambiguous by surrounding circumstances
Where the terms of the contract suffer from such latent ambiguity that it is impossible to determine objectively what the contract
relates to, and the offer is innocently accepted in a sense different from that which was intended by the offeror, the court may be
compelled to declare the contract void on the ground that there is no correspondence between the offer and the acceptance. Refer
to page 192 for illustration- ambiguity as to the name of the subject matter. SCRIVEN BROS V HINDLEY & CO
Where the offeree knowns that the offeror’s offer does not represent his real intentions
Where due to a mistake in the expression of the offer, the offer does not contain the real intention of the party making it and the
other party knows of this mistake and seeks to take advantage of it, the law will not recognize that a contract has come into existence.
HARTOG V COLIN & SHIELDS
It must be emphasized that where the parties agreed from all outward appearance on the same terms and on the same subject
matter, even if both parties are mistaken in their innermost minds about the quality of the subject matter, the contract remain valid.
Unilateral mistake- mistake as to the identity of a contracting party
Where a person makes an offer to a particular person, it can only be accepted by the person to whom it is addresses. Another person
cannot accept the offer and constitute himself a contracting party with the offeror who never intended to contract with him.
BOULTON V JONES
Mistake as to identity induced by the fraud of one party
This usually happen when a person contracts with another (rogue who impersonates someone) who later parts with the goods and
refuses to pay for them. The goods may then be sold to an innocent party for value in good faith. The central question for the courts
is whether the contract between the owner and the rogue is void on grounds of mistake or voidable by reason of fraudulent
misrepresentation of the rogue.
Where mistake as to identity is established
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If it is established that there was mistake as to the identity of the contracting party the resulting contract is deemed to be void. The
rogue does not acquire any rights. In accordance with the nemo dat quod non habet rule the third party acquires no rights either.
The third party’s only remedy would be to find the rogue if he can and sue him to recover his money.
Where mistake as to identity of contracting party is not established
If mistake as to identity cannot be established, the resulting contract will not be deemed to be void, but merely voidable on the
ground of the rogue’s fraudulent misrepresentation. A voidable contract is one which is valid unless and until it is disaffirmed or
avoided. If the rogue sells the goods to the third party before the rogue’s title is avoided, a valid title is passed and the owner cannot
recover the goods from the third party.
Establishing mistake as to the identity of the contracting party
In all cases of alleged mistake as to the identity of the contracting party, the courts have to determine whether the contract is void
for mistake or voidable for fraudulent misrepresentation. This depends on whether mistake as to the identity of the contracting party
can be established. To prove mistake as to the identity of the contracting party, the party pleading the mistake must generally prove
the following:
1. That he intended to deal with some person other than the person whom he had apparently made a contract and the latter
was aware of this intention. The pleading party must show that not only did he not intend to deal with the person with whom
he contracted, but that he actually had an identifiable person, other than the person with whom he contracted, with whom
he intended to deal. Mistake must relate to the identity of the party not his attributes such as whether he is solvent. CUNDY
V LINDSAY, KING’S NORTON METAL CO LTD V EDRIDGE, MERRIT & CO
2. That at the time of entering into the contract, he regarded the identity of the other party as a matter of crucial importance
3. That he took reasonable steps to verify the identity of that party
Contracts inter praesentes- where the parties contract in each other’s’ presence
Where the parties deal with each other face to face, with one party fraudulently misrepresenting himself to another existing person.
There is a strong presumption that the offeror intended to contract with the person who was physically present and no one else.
PHILLIPS V BROOK,
A rogue, North entered the plaintiff’s jewellery shop and selected for some jewellery and wrote out a cheque for 3oo pounds. He
stated that he was Sir George Bullough and gave an address in St. James Square. Plaintiff referred to a directory and found that Sir
Bullough indeed lived at the address. He allowed and North pledged the ring to the defendant for 350 pounds. The check was
dishonored. Per Horridge J.”Although he believed the person to whom he was handing the ring was Sir George Bullough, he in fact
contracted and deliver it to the persons who came into his shop.” . The contract thus made was not void but simply voidable on
grounds of the fraudulent misrepresentation. Since the plaintiff had not avoided the rogue’s title by the time he sold the goods to
the third party, the latter obtained a valid title to them, and the owners could not recover the goods.
INGRAM V LITTLE.
A rogue, Hutchinson, negotiated with the plaintiff for the purchase of their car which had been advertised. 717 pounds was agreed.
Rogue wanted to pay cheque. Plaintiff refused. Rogue said he was P.G.M Hutchinson, gave his name and address. On hearing one of
the plaintiffs went to find out from the telephone directory. Assured, car was sold to rogue. Rogue sold to defendant and disappeared.
Held- The plaintiff intended to deal with PGM Hutchinson and no one else therefore the rogue could not intend to accept the offer.
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The contract was void on the grounds of mistake as to identity and the rogue acquired no title to the car and transferred no title to
the third party , who was required to return the car to the owner.
In LEWIS V AVERY, the court declined to follow the decision in INGRAM V LITTLE.
Rebuttal of presumption in contract inter praesentes
Where the rogue dishonestly claims that he is acting as an agent for another person the presumption which applies in contract inter
praesentes will be deemed to be rebutted. HARDMAN V BOOTH. This is because the contract is not purported to be made with the
rogue himself but with the supposed principal.
LAKE V SIMMONS,
Appellant was a jeweler insured with company against loss by theft except “jewellery entrusted to customer’’. Fraudulent woman
posed as wife of wealthy customer. Few purchases were made to inspire confidence. She was allowed to take two pearl necklaces of
considerable value. Whether loss was covered by insurance policy or within the exception clause. Held- Even though, parties
transacted inter praesentes, no contract ensued between them because plaintiff was made to know he was dealing with different
person and was on this footing that he parted with goods. Loss did not fall within exception clause as there was no contract between
appellant and impersonated woman. Case was distinguished from Philips v. Brooks.
SHOGUN FINANCE LTD V HUDSON
The rogue applied to buy Mitsubishi Shogun on hire purchase. Rogue gave name as Mr. Patel, produced Mr. Patel’s driving license.
Although negotiations were held with car dealer, written contract under false name was signed with Finance Company. Finance
Company did credit check on Mr. Patel. Satisfied, rogue from was allowed to drive car away. Rogue sold car to Hudson. Under Hirer
Purchase Act 1964, a non-trade buyer of a car who buys in good faith a hirer under the hire purchase agreement becomes the owner.
Therefore if contract between shogun finance and rogue was valid, Hudson would be owner. Shogun Finance claimed against Hudson
for conversion. Held- This was not contract inter praesentes, since the apparent contract was formed with the finance company and
not the car dealer with whom the negotiations were made. The third party was therefore deprived of the protection under section
27 of the Hire Purchase Act, 1964.
Common mistake
This arises where the two parties have in fact reached agreement, but that agreement is based upon a fundamental mistaken
assumption which is shared by both parties. There is a correspondence between the offer and acceptance. The courts are only
prepared to declare a contract void on account of common mistake if the mistake is such that it empties the contract of all its content
or if the mistake radically affects the substance of the contract.
Common mistake may arise in different forms: mistake as to the existence of the subject matter of the contract, mistake as to title
and mistake as to the quality of the subject matter of the contract
Mistake as to the existence of the subject matter
Where unknown to both parties the subject matter, at the time of the contract was made does not exist (res extincta), the contract
may be void on grounds of common mistake. COUTURIER V HASTIE. The decision involved the interpretation or construction of the
contract only. If, on the true construction of the contract, it is found that one party guaranteed or impliedly promised that the subject
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matter was in existence, and it turns out to be false, the contract is not void and the party who made the promise can be sued for
damages for breach of contract.
MCRAE V COMONWEALTH DISPOSALS COMMISSION
The defendants invented tenders for the purchase of an oil tanker which they described as lying on Jourmand Reef, with its content
oil. Plaintiff submitted tender of 285 pounds which was accepted. No such tanker was there or a place known as Jourmand Reef.
Plaintiff sued for damages for breach of contract. Defendants argued that contract was void because subject matter of contract did
not exist. Held- Defendants were held liable for damages. They had promised that the tanker existed and were therefore in breach
of contract. Here there were no assumption that tanker existed. Defendants stated that the tanker existed and the plaintiffs merely
relied on the assertion made by the defendants.
Section 9 of the sale of goods act imposes an obligation on the seller of goods to ensure that the goods are in fact in existence at the
time property is to pass.
Mistake as to title
Where a person agrees to purchase property which, unknown to himself and the seller, is already owned by the buyer, such contract
may be void by reason of the common mistake as to title. Here the contract is treated as a nullity because the transferor had nothing
to sell or convey. COOPER V PHIBS. Section 10 of the sale of goods act states that there is an implied warranty on the part of the
seller that he will have right to sell the goods at the time when the property is to pass.
Mistake as to the quality of subject matter
Generally, if the parties are clearly agreed on the same terms with respect to the same subject matter, the courts are most reluctant
to declare a contract void simply because the parties were mistaken as to the quality of the subject matter.
BELL V LEVER BROS LTD.
Lever bros appointed Mr. Bell and Mr. Snelling (the two defendants) as Chairman and Vice Chairman to run a subsidiary company
called Niger. Under the contract of employment the appointments were to run 5 years. However, due to poor performance of the
Niger Company, Lever bros decided to merge Niger with another subsidiary and make the defendants redundant. Lever bros drew
up a contract providing for substantial payments to each if they agreed to terminate their employment. The defendants accepted the
offer and received the payments. However, it later transpired that the two defendants had committed serious breaches of duty which
would have entitled Lever bros to end their employment without notice and without compensation. Lever bros brought an action
based on mistake in that they entered the agreement thinking they were under a legal obligation to pay compensation. The House
of Lords held that this was only a mistake as to quality and did not render the contract essentially different from that which it was
believed to be. The action therefore failed.
For a mistake as to quality to operate to render a contract void it must be a mistake as to a certain quality without which the identity
of the subject matter would be radically different from what it was believed to be. LEAF V INTERNATIONAL GALLERIES LTD,
HARRISON & JONES V BUNTEN & LANCASTER,
FREDRICK E ROSE LTD V WILLIAM PIM,
Plaintiffs ordered for “Moroccan horse beans” described here as “feveroles”.plaintiff did not know what feveroles were. Defendant
said they were the same as horse beans and could supply. Oral contract was made for the purchase of horse beans which was later
put into writing. Defendant delivered horse beans to plaintiff. Plaintiff delivered to Egyptian firm. Egyptian buyers found that horse
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beans were not same as feveroles and claimed damages for breach of warranty. Plaintiff sought to have contract rectified and claimed
contract was void for mistake. Held- Even though it was clear that the parties contracted under a common mistake (they supposed
that feveroles was just another name for horse beans which was not), the mistake was not one which rendered the contract void
from the beginning.
NICHOLSON & VENN V SMITH-MARRIOT
Defendant put up for auction table napkins described as bearing crest of Charles I and the authentic property of the monarch. In
reliance plaintiff bought for 787 pounds. Napkins was discovered to be Georgian which cost 105 pounds. Held- The plaintiff had
acquired an article “essentially different from the thing as it was believed to be” within the test laid down by Bell v. Lever Bros.
Whenever it can be inferred from the terms of the contract or its surrounding circumstances that an agreement has been reached
based on a particular contractual assumption which is fundamental to the continued validity of the contract and that assumption is
not true, the contract may be declared void on that ground. SHEIK BROS LTD V OCHSNER,
ASSOCIATED JAPANESE BANK (INT’L) V CREDIT DU NORD
Fraudster, Jack Bennet, approached plaintiff bank with scheme to raise money by the sale and lease back of a number of engineering
machines. Bank agreed to buy machines for a little over a million pounds and lease back to him. Plaintiff bank wanted transaction to
be guaranteed. Defendant became guarantor. The machines however did not exist. Bennet disappeared after obtaining a million
pounds. Plaintiff sought to enforce guarantee against the defendant bank, neither bank having bothered to verify the existence of
machines. Held- Steyn J. the action must fail on the ground that as a matter of construction of the contract of guarantee, it was either
an express or implied condition that the machines existed. Secondly, Steyn j sated that he would be prepared to hold that the contract
of guarantee was void on grounds of common mistake.
Mistake in equity
Equity seeks to mitigate the harsh effects of the restrictive approach adopted by the common law to cases involving mistake. Equity
follows the law. Thus if a contract is void at common law equity will also treat it as a nullity. Beyond this, equity is certain cases will
intervene to relieve one of the parties from the effects of the mistake even where the contract is deemed to be valid at common law
in spite of the mistake. Thus in some cases a contract, which is deemed to be valid at common law in spite of a mistake, may be held
to in some manner to be unenforceable in equity, particularly when an equitable remedy is what s sought as the instrument of the
enforcement of the contract. The remedies provided by equity ay take three forms: rescission, the refusal of specific performance
and rectification.
Rescission
This is an equitable remedy the essence of which is setting aside of a transaction. In some cases even where a mistake is deemed at
common law not to be sufficiently fundamental as to render a contract void, the court, in the exercise of equitable jurisdiction may
grant the remedy of rescission and set the contract aside so as to relieve the party the party prejudiced by it from hardship. However,
the court generally will only do so if it can do justice to the other party to the contract.
In equity a contract is liable to be set aside or rescinded if the parties were under a common misapprehension either as to facts or as
to their relative and respective rights, provided that the misapprehension was fundamental and the party seeking to set it aside was
not himself at fault. COOPER V PHIBBS, SOLLE V BUTCHER, GRIST V BAILEY,
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MAGEE V PENINE INSURANCE CO, LTD,
Agreement between defendant and plaintiff to pay a certain sum to the assured (plaintiff) on the occurrence of certain risk. Plaintiff
signed insurance form stating he held provisional license which was false. Plaintiff had not been honest but had in fact misread form.
Was the basis of contract of insurance that plaintiff answers were true? Plaintiff car had accident and claimed 600. Insurance company
found plaintiff had no license and refused to pay. Held- That this common mistake did not make contract void under common law
but it made the contract liable to be set aside in equity.
LAURENCE V LEXCOURT HOLDING LTD
Case involve lease of office premises. Parties at time of letting assumed there was planning permission for whole of premises to be
used as offices. Permission related only to part of premises. Tenant asked lease agreement to be set aside on ground of common
mistake. Held- Lease agreement was rescinded on this ground of common mistake.
Refusal of specific performance
This is a discretionary remedy. The court would grant this remedy only if, having regard to all the circumstances it would be fair and
just to do so. In exercise of its discretion the court may refuse an application for an order of specific performance on the ground that
the party against whom the contract is to be enforced made a mistake. This would be done if the defendant made an honest mistake
and if the enforcement of the contract would impose a heavy burden on the party who has contracted under an accidental mistake.
WEBSTER V CECIL,
MALINS V FREEMAN.
The def went to an auction intending to bid on property A. he arrived late but in time to hear the auctioneer describe Lot 3 in terms
which were wholly applicable to property to A. he began to bid for Lot 3, supposing it to be property A, and in due course Lot 3 was
knocked down to him for an extravagant price. Lot 3 was quite a different property. The def’s mistake could not be ascribed in any
way to the conduct of the plf or his agents. Held- specific performance should not be issued to compel the def to perform the contract.
The court was of the view that the def never meant to enter into the contract and therefore it would not be equitable to compel him
to perform it.
This case is distinguished from TAMPLIN V JAMES because in that case, there was little excuse for the defendant’s misapprehension
since the plans of the property to be sold was clearly exhibited at the auction.
Rectification
This remedy is available where the terms of the contract have been reduced into writing and the parties made a mistake in recording
an oral agreement previously made. Where an agreement has been reduced into writing, and owing to a mistake shared by both
parties, the written document does not reflect the intentions of the parties as revealed in their previous oral understanding or
agreement, the court in exercise of it equitable jurisdiction may rectify the contractual document so as to make it conform to the real
intentions of the parties and enforce the contract as rectified.
Rectification is based on one of the exceptions to parole evidence rue, under which parole evidence is admissible to establish that
the intention of the parties expressed in the written agreement does not represent their true intention as expressed in their previous
oral agreement.
Before this remedy can be granted a number of conditions must be satisfied.
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1. Legal issue- there must be a legal issue between the parties as to their rights under the contract. It would not be granted in
a vacuum. It is only available within the context of a dispute between the parties as to their rights arising from the contract
as documented
2. Prior common intention- there must be some outward expression of accord or agreement on the terms up to the moment
of the execution of the written contract. There is no need for a prior binding contract. JOSCELYN V NISSEN
3. Literal disparity between the previous agreement and written document- clearly, a document which accurately records the
oral agreement of the parties cannot be rectified. This is so even if the parties entered into the contract with an inner
misapprehension as to the meaning of the terms they agreed on. FREDERICK E ROSE LTD V WILLIAM PIM
4. Rectification generally available only where the mistake is shared by both parties- this remedy is granted in respect of
common mistake. RIVERLATE PROPERTIES V PAUL
Summary of law on mistake
Steyn J in ASSOCIATED JAPANESE BANK LTD V CREDIT DU NORD outlines the following as steps that the courts are likely to follow in
order to determine whether an operate mistake exists for which some remedy must be given.
1. Before one can turn to the rule of mistake whether at common law or equity, one must first determine whether the contract
itself by express or implied condition precedent or otherwise, provides for who bears the risk of the relevant mistake. There
is scope for invoking the law on mistake only if the contract is silent on this point
2. Whether the case will be treated under the rule of common law or equity will depend on the remedy demanded.
3. If common law is pleaded, the court must first consider this plea and determine in accordance with the principles of common
law whether the contract is void at common law on grounds of mistake, if the contract is void at common law, no question
of mistake in equity arises.
4. However, if it is determined that no operative mistake at common law, the court will then have to go on to consider whether
the mistake in equity can be established, that is, the courts then consider whether any of the equitable remedies discussed
is available to the parties.
GRIST V BAILEY
House was sold at very low price because parties believed it was still occupied by statutory tenant. Unknown to parties at
the time of contract tenant died. Value was higher than agreed price. Plaintiff sued for specific performance. Defendant
counterclaimed for rescission on ground that contract was void for mistake. Held- there was no mistake sufficient to avoid
the contract at common law. However, the court upheld the def’s counterclaim for rescission of the contract.
Misrepresentation
Statements which are intended to influence the other party into entering the contract, but which do not become part of the contract
as terms of it are referred to as representations. A misrepresentation is basically a representation which is untrue or false. The general
effect of a misrepresentation which induces a party to enter into a contract is that it renders the contract voidable at the option of
the party misled.
What constitutes an operative misrepresentation?
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An operative misrepresentation consists of a false statement of fact, made by one party to another, before or at the time of the
making of the contract’ which is intended to and does in fact induce the other party to enter into the contract.
There must be a false representation. There must be a statement made or conduct from which a statement can be implied.
The statement must be one of existing fact that is, relating to a past or present state of affairs. This is distinguished from a statement
of intention or of opinion. A statement of intention or of opinion is generally not considered ad a representation because it is not a
positive assertion of fact. A statement of opinion is later turns out to be unfounded would not constitute and operative
misrepresentation. BISSET V WILKINSON. A statement of opinion may, however, amount to a misrepresentation of fact if it is proved
in the circumstances that the person who expressed the opinion did not in fact hold that opinion or could not, as a reasonable man
with his knowledge of the facts, honestly hold such an opinion. On these circumstances the statement so made would constitute a
misrepresentation of fact. SMITH V LAND & PROPERTY CORP
A representation of fact is distinguished from a statement of intention or a promise to do something in the future. The distinction is
based on the fact that an assertion of truth of a fact relates to an existing fact or past state of affairs and does not contain any element
of futurity. However a statement of intention can be a misrepresentation if it is found that at the time the statement was made, the
maker had no will or intention to put that stated intention into effect. EDGINGTON V FITZMAURICE
Generally, commendatory statements or mere sales talk usually expressed in vague terms, and used in advertisements and
promotional sales are considered ad mere puffs and have no effect at law or in equity. Statements like ‘this soap powder washes
whiter than snow’ of ‘this product gives lasting satisfaction’ are not considered representations of fact. DIMMOCK V HALLET. A
distinction is made between indiscriminate praise and specific promises or assertions of fact which can be verified. The more specific
or verifiable the statement, the more likely it is that it would be considered a representation of fact.
Silence as misrepresentation
Generally at common law, mere silence is not regarded as misrepresentation even if disclosure of facts known to the silent party
would have influenced the decision of the other party. SMITH V HUGHES. However, this is so only if the silent party is not guilty of
misleading conduct. Thus it has been held that a person who sits down in a restaurant and orders a meal, represents by his conduct
that he can pay for it. WALTERS V MORGAN
Contracts uberrimae fidei
Some kinds of contract have the peculiar feature of one party alone being in possession of the material facts affecting the rights of
the parties under the contract. In such special contracts, the law imposes a burden on particular party to the contract to disclose
material facts known to him. Such special contracts are referred to as contracts uberrimae fidei (contracts involving the utmost good
faith). Examples include insurance contracts, contracts to take shares in a company and family arrangements.
Where silence distorts a positive representation previously made
In some cases a representor may make a statement which is true at the time, but because of a change in circumstances, the
statements may become untrue to the knowledge of the representor before the contract is concluded. In such a case, the representor
come under a duty to disclose the change in circumstances to the representee before the conclusion of the contract.
WITH V O’FLANAGAN
The defendant, doctor represented to plaintiff, a potential purchaser of his practice, that the practice was worth 2000 pounds a year.
This was true but by time contract of sale was concluded, practice had dwindled which brought 5 pounds a week. Defendant failed
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to inform plaintiff of change in value before contract was signed. Held- The representation should be treated as continuing until the
contract was signed. Since the statement became false to the knowledge of the representor, he should have communicated the
changed facts to the purchaser before the contract was signed.
Partial disclosure
Even though a party to a contact may be legally justified in remaining silent about some material fact that affects he is entering into,
where he ventures to make a representation on the matter, It must be a full and frank statement, it must not be such a partial account
that what is withheld makes that which is said absolutely false. In other words, a half-truth may amount to a misrepresentation
because of what is left unsaid.
CURTIS V CHEMICAL CLEANING CO
Assistant informed customer that exclusion on receipt excluded liability to any damage howsoever arising. Held- The statement made
was a partial disclosure of the meaning of the clause which conveyed a false impression and therefore it amounted to a
misrepresentation.
The representation must be addressed to the party misled
The next requirement is that misrepresentation must have been addressed to the party misled. In other words, the party who has
relied on the misrepresentation must be one to whom, or whom it was intended to be passed on or a member of a class of persons
at which the representation was directed.
PEEK V GURNEY
Appellants sued promoters of company claiming he had purchased shares of the company on reliance of certain false statement as
stated in the company’s prospectus. Appellant was not a person to whom shares had been allotted on the formation of company. He
merely purchase shares from allottees. Held- The prospectus was addressed only to the first applicants for shares and that the
intention to deceive could not be supposed to extend to people other than the first allottees.
Inducement
The representee must show that the misrepresentation operated on his mind to induce him to enter the contract, that is to say, that
he relied on the misrepresentation in deciding to enter into the contract. It follows that there can be no remedy for a
misrepresentation if the plaintiff never became aware that the misrepresentation had been made before he entered the contract,
the plaintiff was not influenced by the misrepresentation or did not allow it to affect his judgement or if the plaintiff knew that the
statement was false.
The following principles are relevant:
1. Where the other party did not become aware of the misrepresentation before the conclusion of the contract, it cannot be
alleged that he was induced by it to enter the contract. HORSEFALL V THOMAS
2. Once it is established that the misrepresentation did in fact materially affect the representee’s decision to enter the contract,
he/she can rescind the contract on that ground even if there were other factors which also induced him to enter the contract.
EDGINGTON V FITZMAURICE
3. If it is shown that the representee did not allow the representation to affect his judgment or decision to enter the contract,
even though it was designed to do so, he cannot make it a ground for rescission. SMITH V CHADWICK
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4. Where it clear that the representee did not rely on the misrepresentation but relied on the accuracy of his own investigation
or independent judgement, the representee cannot be said to have induced to enter the contract by the misrepresentation
of the other party. ATWOOD V SMALL
5. Where, however, the representee has entered the contract in reliance on the misrepresentation, it is no defense for the
representor to assert that if the representee had taken reasonable care, he would have discovered the falsity of the
representation made.
REDGRAVE V HURD
Defendant proposed to by plaintiff’s house and join plaintiff’s practice as solicitor. Plaintiff represented that practice was
bringing 300-400pounds yearly. Plaintiff produced papers to defendant to support his claim. Defendant did not read the
papers and weren’t ahead to contract to buy the house and join the practice in reliance on plaintiff’s statements as to the
value of practice. Defendant later discovered that plaintiff’s statements were untrue and sought to rescind contract. Plaintiff
sued for specific performance claiming that if defendant had read the papers he would have discovered the fraud. Held- The
defendant had in fact relied on the representations mad e by the plaintiff by the plaintiff and it was immaterial that a prudent
buyer would have discovered the truth. The defendant was therefore entitled to rescind the contract on grounds of
misrepresentation.
6. If the representor can prove that the representee had actual and complete knowledge of the true facts, then even though
the representation made is false, it would not be a misrepresentation since the representee cannot claim that he has been
misled by it.
Finally, it must be established that representee must have been induced by the representation, it must be established that the
misrepresentation was material. Whether a representation is material or not depends in general on the significance that a
reasonable person would have attached to it.
Kinds of misrepresentation
Fraudulent misrepresentation
To establish fraudulent misrepresentation, it is essential to prove the element of fraud, that is, the absence of any honest belief in
the truth of the statement. Simply showing that the statement was made without the exercise of care is not sufficient to establish
fraudulent misrepresentation.
DERRY V PEEK
Company obtained permission to run trams by animal power. They applied for permission to run trams by steam or mechanical power
if Board of Trade gave consent. Directors of company believed Board would give consent since submitted plan to Board raised no
objection yet. Directors issued prospectus that company had the right to run trams by steam or mechanical power. Respondents
purchased shares in the company relying on this representation. Board of Trade refused to give consent and company wound up.
Respondent sued for fraudulent misrepresentation or deceit. Held- To succeed, plaintiff had to prove fraud and, the element of fraud
had not been established since plaintiff had not shown the absence of an honest belief on the part of Directors in the truth of the
statement they made. Facts show that Directors honestly believed that the statement they made was true, since they had sufficient
ground to believe that the permission would be granted.
Where fraud is proved the maker of the statement is guilty of fraudulent misrepresentation, which generally entitles the party misled
to rescind the contract. It also gives rise to action for damages for deceit. Remedies available to the party misled:
1. He may set it aside and recover damages in respect of any loss which he may have suffered by reason of the fraud.
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2. The contract can be repudiated if it has not yet been performed
3. Fraud may be set up as a defense against any action brought against the party misled for breach of contract or specific
performance and also counterclaim for damages for deceit
The court would normally award the plaintiff such damages as would put him in the position he would have been in if the
tort of deceit had not been committed. DOYLE V OLBY (IRONMONGERS) LTD
Negligent misrepresentation
A representation is negligent if it is made carelessly and in breach of a duty owed by the representor to the representee to take
reasonable care that that the representation is accurate.
Generally, a misrepresentation cannot be regarded as negligent unless the representor owed a duty of care to the representee. At
first at common law, there was no liability at all for negligent words or misstatements, especially where the only damage resulting
was financial damages. With time the courts recognized that an action for negligent misrepresentation could rise in certain
circumstances where the representor owed a duty of care to the representee to ensure the statement was accurate. Initially, such a
duty of care was only deemed to exist where there was an existing contract between the representor and the representee or where
there was fiduciary relationship between them. NOCTON V ASHBURN, CANDLER V CRANE, CHRISTMAS & CO,
HEDLEY BYRNE V HELLER & PARTNERS
Plaintiffs, advertising agents had Easipower Ltd as their clients. They placed substantial advertisement orders for Easipower Ltd at
their request. Plaintiff inquired financial standing from the bank of Easipower a reference or statement on the financial standing of
Easipower Ltd. plaintiff’s bank, not having relevant information, requested same from Easipower’s bankers who gave a favorable
response. Relying on this plaintiff placed large orders on behalf of Easipower who defaulted causing plaintiffs huge loss. Plaintiff
brought action against Easipower’s bankers, alleging that they were negligent in giving the reference on Easipower’s financial
standing and therefore should be liable in damages for negligent misrepresentation. Held- Even though there was no contractual or
fiduciary relationship between plaintiffs and Easipower’s bankers, there existed a duty of care owed by defendants to plaintiffs by
reason of the special relationship that existed between them and defendants would have been liable for the negligent
misrepresentation if they had not attached a disclaimer to the reference they gave. Plaintiffs attached a disclaimer stating that the
reference was being given “without responsibility”.
It has been noted that such a special relationship does not necessarily require a direct contract between parties, but exists where the
statement was made in connection with a business or professional transaction whose nature makes clear the gravity of the inquiry
and the importance attached to the answer. The elements of this special relationship are therefore: voluntary assumption of
responsibility by the representor and foreseeable detrimental reliance.
It has been recognized however that no liability arises in purely social relationship, even if the advice is given by a professional person.
However, even where the parties are friends, the duty of care may be deemed to exist if the representor voluntarily assumes
responsibility in a business connection and the advice is not given on a purely social occasion.
CHAUDRY V PRABHAKAR
The plaintiff, an accountant had recently passed her driving test and knew nothing about cars. She asked the first defendant, a friend,
to find a suitable second hand car for her to buy, although he was not a mechanic. She stipulated to the defendant that the car
shouldn’t have been involved in an accident and he was doing this for free. The first defendant found a one year old car which was
being offered for sale by the second defendant. The car had been engaged in an accident before but had been fixed and repaired,
although it was not road worthy. The first defendant recommended the car to the plaintiff buy for which she did. She found out later
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that the car had serious problems and she sued the defendants for the price of the car and damages. Held- the court held that a
gratuitous agent owes a duty of care to the principal to exercise the degree of care and skill which could be reasonably be expected
of him in all the circumstances, that degree of care and skill being measured objectively and not subjectively. The first defendant
knew that the plaintiff was relying on him and as such, he was in breach of his duty.
It has also been held that a duty of care may arise between the parties to a contract during pre-contractual negotiation if one party
rely on the superior skill and knowledge of that representor. ESSO PETROLEUM V MARDON
Innocent misrepresentation
An innocent misrepresentation is an untrue statement made in good faith, with honest belief in its truth, intended to induce a party
to enter into a contract. It is neither fraudulent nor negligent. It generally gives the party misled to rescind the contract but not to
claim damages. It can be set up as a defense to an action brought against the party misled for breach of contract or specific
performance on the contract. Instead of waiting to be sued, the party misled by an innocent misrepresentation may bring an action
for rescission of the contract and in some cases claim in indemnity against all losses or liabilities imposed on him by the contract
himself but he will not be awarded damages. NEWBIGGING V ADAM
Damages are all those losses which naturally and reasonably flow from the breach of the contract. In the cases of indemnity, the
plaintiff is not compensated for all losses flowing from the breach, but is compensated only for those losses incurred by him in the
discharge of the obligation created or imposed by the contract he has made. WHITTINGTON V SEALE-HAYNE
Rescission
Rescission consists in the setting aside of the contract. The aim of the court in granting the remedy of rescission is to cancel the
contract and restore the parties as far as possible. The court upon rescission attempt to achieve ‘restitutio in integrum’.
If a party misled elects to rescind the contract he must bring his decision to the notice of the representor. This can be done in a
number of way. In theory, rescission can be effect informally- by the representee giving notice to the giving notice to the representor
of his intention to rescind the contract. This may be done by the representor recovering the property delivered to the representor
under the contract; or by the representee returning what he has obtained under the contract. More importantly, rescission is
achieved by legal proceedings in which the plaintiff seeks a declaration in court that the contract is invalid.
However, when the representor absconds or makes it impossible for the representee to give him notice of his decision to rescind the
contract, t is sufficient if the party misled shows his intention to rescind the contract by some overt or outward means which is
reasonable in the circumstances.
CAR & UNIVERSAL FINANCE CO V CALDWELL
Rogue induced owner of car to sell to him by some fraudulent misrepresentation. Rogue paid cheque which was dishonored next
day. Rogue could not be traced. Owner promptly notified Automobile Association and Police to help find car. Rogue sold car to third
party after plaintiff had given notification. Issue was whether owner’s act of notifying policy and the Automobile Association
amounted to a rescission of the contract between him and the rogue. Held- The act of notifying the Automobile Association was
sufficient notice of the owner’s intention to rescind the contract, since the rogue had deliberately absconded, and thus made it
impossible for the owner to notify him personally of his intention to rescind the contract.
Discretion of the court
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Rescission is an equitable remedy and therefore is a discretionary one. This means the courts would only do so if it is satisfied that
having regard to the circumstance it would be equitable to do so.
Restitution
An essential condition for rescission if contract is the possibility of restitution. Normally, a party who wishes to rescind the contract
for misrepresentation must be in a position to restore to the other party any benefits he may have obtained under the contract. The
principle ground on which the right of rescission may be lost is where it is impossible to restore the parties to their original positions.
Therefore if restitution is impossible, there can be no rescission of the contract. The equitable principle is that restitution need not
be exact or precise but it must be substantial. It means the subject matter can be returned even in the altered state. In such a case,
the plaintiff must account for any profits derived from its use and also make allowance for deterioration caused by his dealing with
the subject matter. ERLANGER V NEW SOMBERO PHOSPHATE CO. Rescission is, however, impossible where the subject matter has
been so altered as to change the character of it. For example, an animal purchased under a contract slaughtered cannot be returned
as a corpse. CLARKE V DICKSON
Affirmation of contract
if the representee, after having disclosing the misrepresentation, expressly declares his intention to proceed with the contract, or
doe an act from which such an intention can be implied, he will be deemed to have affirmed the contract and he cannot thereafter
rescind the contract.
LONG V LLOYD
Plaintiff purchased lorry from defendant. Lorry advertised in newspaper was described as being in exceptional condition. Plaintiff
after phoning defendant to arrange was told that it was first class condition. Plaintiff went to view following day and was told was
capable of doing 40 miles per hour and 11 miles to the gallon. On test drive plaintiff found that speedometer was not working and
had to put a wire before accelerator would work. He still decided to purchase lorry. On first journey, plaintiff noticed certain faults
with lorry and contacted defendant, who offered to pay half of costs of repairs. On further journey, lorry broke down completely and
plaintiff sought to rescind contract and brought an action against defendant for innocent misrepresentation. Held- By accepting the
offer of payment of half of the cost of repairs when he had knowledge for the defects in the lorry, the plaintiff had lost his right to
rescind since he had by his actions affirmed the contract
Lapse of time
Lapse of time may act as a bar to the right to rescission. In the case of fraudulent misrepresentation, lapse of time does not act as a
bar to the rescission but may be evidence of affirmation. This is because the courts take the view that time only begins to run from
the discovery of the truth. In the case of innocent misrepresentation, however, the right to rescind may be barred by the lapse of
time even without any evidence of affirmation. LEAF V INTERNATIONAL GALLERIES
Third party rights
The right to rescind may be barred by the intervention of third party rights. If the contract is voidable, then once a third party acquires
an interest in the subject matter for value, in good faith and without notice, the party with the right of rescission losses his right to
rescind. PHILLIPS V BROOK, LEWIS V AVERY
Duress and undue influence

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Since a contract is based essentially on consent of the parties, agreements obtained by coercion or undue exertion of pressure are
generally not enforceable. Thus a party who has entered into a contract as a result of pressure may be entitled to relief under the
common law doctrine of duress or the equitable principles of undue influence.
Duress
Generally, at common law a contract which is obtained by illegitimate forms of pressure or intimidation is voidable on the ground
duress. At common law the definition of duress was a narrow one consisting only the more extreme forms of coercion. It consists of
actual or threatened violence to the person, threats of imprisonment or prosecution or threats of violence or dishonor to a person’s
wife, husband or children. KAUFMAN V GERSON
However, it is not required that it to be shown that the threat was the only for entering the agreement.
BARTON V ARMSTRONG
Armstrong was the chairman and held the largest sharing holding in Landmark Corporation Ltd a public company. Barton was the
managing director and also had a substantial shareholding in. There were two other directors Bovil and Cottrel. There had been a
long history of ill will between the parties and a struggle over who should have controlling power with Armstrong being the most
aggressive. The other directors in the company were also unhappy with Armstrong and wanted him to be removed for abusing certain
privileges and they disagreed with the way he ran the company believing him to be putting the company at risk of insolvency.
However, Armstrong refused to resign. The three managed to take control of subsidiary companies and removed all credit facilities
from Landmark Corp. When Armstrong discovered the credit had been removed he made a number of death threats to Barton to
pressure him into signing an agreement which contained various elements including the purchase by Barton of Armstrong's shares
in the company at a substantial over value. Barton agreed to this partly due to the threats but also due to the fact that it would mean
that Armstrong would no longer have controlling interest and he believed he would be able to turn the company around without
Armstrong's dealings. However, the company became insolvent shortly after and Barton sought to have the contract set aside. Held-
The contract could be set aside. Where there is duress to the person there was no obligation to show that he would not have entered
the agreement but for the threat, it simply being sufficient that the death threats were a cause.
Economic duress-duress by threatened breach of contract
In recent time, the courts have recognized economic duress as a factor which may render a contract voidable, provided the conduct
which constitutes such duress must always amount to a coercion of a will which vitiates consent. In cases where a party is induced
to enter a contract as a result of a threat by the other party to break an earlier contract, this may constitute economic duress and
entitle the party threatened to avoid the contract made. D & C BUILDERS LTD V REES, NORTH OCEAN SHIPPING CO V HYUNDAI CO
LTD.
It is not any threat to break a contract that will amount to duress, all circumstances must be considered, in particular the nature of
the pressure applied and the nature of the demand made in order to determine whether there was a coercion of will which vitiates
consent. In all cases, it must be shown that the pressure was such that the victim’s consent to the contract was not a voluntary act
on his part.
PAO ON V LAU YIU LONG
The claimant had threatened not to complete the main contract for the purchase of shares unless subsidiary agreements were met
including a guarantee and an indemnity. The defendant was anxious to complete the main contract as there had been a public
announcement of the acquisition of shares and did not want to undermine public confidence in the company and the consequent
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effect on share prices. The defendant could have sued for specific performance of the agreement but this would have delayed matters
and damaged the company's reputation. The defendant had taken legal advice on all these matters before agreeing to the guarantee
and indemnity. The claimant then sought to enforce the guarantee and the defendant sought to have the agreement set aside for
economic duress.
Held- There was no economic duress. The Privy Council identified 4 factors to consider in assessing whether economic duress was
present:
Did the person claiming to be coerced protest?

Did that person have any other available course of action?
Were they independently advised?
After entering into the contract, did they take steps to avoid it?
In the present case the defendant did not protest at the time. He also could have enforced the contract of sale through specific
performance and thus had another avenue of redress available to him. He had taken legal advice and took no steps to avoid the
agreement prior to the claimant seeking to enforce the guarantee. Therefore no economic duress could be established. It was simply
commercial pressure far short of duress.
Undue influence
This term is used to describe the equitable doctrine of coercion which deals with form of pressure which are usually less direct than
those discussed under the doctrine of duress. The doctrine applies in cases of express use of influence such as where the party
charged has actually exercised undue influence in the sense of dominating the will of the other party and presumption of undue
influence such as where there is a special relationship between the parties which raises the presumption of undue influence. Undue
influence render the contract voidable.
Express use of influence of domination of other party
Where it can be shown that one party exercised such domination over the mind and the will of the other party that his consent to a
contract cannot be said to have been independently given, the party who was so dominated can rescind the contract on grounds of
undue influence. Here, the onus is on the party seeking to rescind the contract to prove actual coercion or a high degree of domination
or control leading to the loss of independence of will or consent. ALLCARD V SKINNER. Once undue influence is proved, the contract
can be avoided.
MORLEY V LOUGHMAN
Loughman, a man of no means, and a member of a religious sect known as exclusive brethren, was employed as a travelling
companion to Morley, an epileptic of large fortune. While so employed, he converted Morley to his own religious views, and as a
result Morley his home and took up residence with Loughman, with whom he lived for the last seven years of his life. During this
period, Morley consulted with Loughman on spiritual matters, allowed him to regulate his diet and his medicine, and placed nearly
the whole of his fortune at Loughman’s disposal. Upon Morley’s death, the executors brought an action to recover £140,000 given
by Morley to Loughman as a gift. Held- the recipient of the gift had obtained the money by actual exercise of undue influence. Here
it was not necessary to decide whether or not any special relationship existed between the parties, because Loughman took
possession so to speak, of the whole life of the deceased and the gifts were not the result of the deceased’s free will, but the effect
of that influence and domination.
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Presumption of undue influence where there is a fiduciary relationship between the parties.
There is a presumption of undue influence where the parties stand in a relationship of confidence to one another, which puts one
party in a position to exercise over the other influence which is capable of being abused. A fiduciary relationship is one which one
party reposes confidence and trust in the other, and the other, by reason of his position in relation to the confiding party has some
influence over him which is capable of being abused.
Where parties are in such a fiduciary relationship, the law on grounds of public policy presumes that a transaction made between
them for the benefit of the party in whom the confidence is reposed, was the result of undue influence unless the benefiting party
can prove the contrary. All the circumstances of the case must be considered to determine whether the relationship exists.
The fiduciary relationship which are recognized by the law as raising the presumption of undue influence include the following:
• Parent and child- LANCASHIRE LOANS LTD V BLACK

• Guardian and ward-HYLTON V HYLTON
• Solicitor and client-WRIGHT V CARTER
• Physician and patient-RADCLIFFE V PRICE
• Trustee and beneficiary-ELLIS V BARKER
• Religious/spiritual advisor and follower-ALLCARD V SKINNER
It has been judicially established, however, that the husband/wife relationship is not considered as one raising the presumption of
undue influence-NATIONAL WESTMINSTER BANK PLC V MORGAN
The family home was subject to a mortgage for the purchase price (with Abbey National) and a second charge securing a loan of the
husband's business. The couple were unable to meet the payments and got into arrears. Abbey obtained a possession order. NatWest
offered a rescue package to help the couple save the home whereby they would pay off the existing mortgages and give a bridging
loan which was to last 5 weeks for the purposes of aiding the husbands business.
The manager called at the couples' home in order to explain the effect of the charge and to obtain the signatures of both parties. He
was at the house for 20 minutes and spent 5 minutes alone with the wife. The husband was reluctant to leave them alone and was
said to be hanging around close by at all times. The manager told the wife the charge was to pay off the existing debt and to provide
a bridging loan for a period of 5 weeks which was what the bank had intended to provide, however, the actual document did not
limited the amount or time. Mrs. Morgan had told the manager that she did not want to be exposed to any extra risks of her husband’s
business as she had no faith in his ability as a business man. The manager assured her that the risks were limited in the way he had
described. At no time did the manager advise her to get independent legal advice. She signed the charge. The bank later called in the
charge. In her defence the wife stated that the bank manager had exercised undue influence over her in procuring her signature.
Held-The normal relationship between a customer and banker was not one so as to give rise to a relationship of trust and confidence.
Lloyds Bank v Bundy was confined to its facts but not expressly overruled. The wife had not established a relationship of trust and
confidence and therefore no presumption of undue influence could arise.
The presumption of undue influence can be rebutted if the party who benefited from the transaction can show that the other party
acted independently of any influence from him. The most usual way of doing this is nu showing that the other party obtained and
followed independent advice before entering into the transaction. This requires that the party who benefited from the transaction
prove that the nature and effect of the transaction was fully explained to the other party by some independent and competent
advisor with knowledge of all the relevant facts.
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MERCER V BREMPONG II
The plaintiff, a legal practitioner, was retained by the defendant stool to negotiate with the Government of Ghana for the payment
of adequate compensation to the stool of Nsuaem in respect of its lands which had been acquired for a rubber plantation and also
to undertake legal services in litigation connected with the Nsuaem stool lands. The government on behalf of the defendant stool
paid an amount of ¢3,440 to the plaintiff as solicitor's fees, but this was not disclosed to the defendant stool. An oral agreement to
pay ten per cent of the compensation money to be obtained as the professional fees of the plaintiff was entered into in late 1971 or
early 1972, and this was later reduced into writing in October 1972. The agreement was prepared by the stool clerk of the Nsuaem
stool and executed by the defendant's predecessor and other sub-chiefs of the area. A copy of the agreement was sent to the Chief
Lands Officer in Accra authorizing him to pay the said ten per cent to the plaintiff as his professional fees. In August 1973, the
defendant stool became aware of the initial payment to the plaintiff and protested to the Chief Lands Officer in Accra, without taking
steps to repudiate or rescind the contract between the stool and the plaintiff. Subsequent correspondence between the parties
however indicated that the defendant stool was affirming the contract. The plf sued to enforce the contract. Held- undue influence
meant any influence by which the exercise of free and deliberate judgement was excluded at a time when the interest or benefit in
question was given to another by someone over whom such influence was exercised. In so far as the agreement was concerned, it
was prepared in the Nsuem language. The ohene of Nsuem and the three of his sub chiefs signed the agreement whilst the other sub
chiefs who are illiterate made their marks after the contents had been read and interpreted them in the Twi language by the stool
clerk. It could not therefore be said that the agreement ex facie was executed as a result of pressure by the plf on those who signed
it.
Unconscionable contracts
The courts of equity have recognized the need to intervene in cases where the contract is excessively harsh, especially where one of
the parties was poor, relatively ignorant, elderly or disadvantaged. The Ghanaian courts have established the principle ‘whether by
contract or by gift’ is unconscionable where on account of the special disability of one of the parties, he or she is placed at a serious
disadvantage in relation to the other. CFC CONSTRUCTION CO (WA) LTD, RITA READ V ATTITSOGBE,
KWAMIN V KUFUOR,
A lease was signed between the gold coast chief and an English gold prospector. Subsequently to the signing of the lease, an
agreement was entered into which contained a clause whereby the plf’s predecessor in office, another chief was alleged to have
agreed to give up all his rights and interest in the land, the subject matter of the lease, in consideration of payment of him of £300.
It was an agent of this predecessor chief who had signed this agreement, which had been drawn up on their behalf by the English
prospector. All the Africans involved in the transaction were illiterate. The plf alleged that the clause was understood only to be
intended to confirm and recognize the lease granted by the other chief and that in so far as it purported to surrender the rights of
the Enkawie stool, which he represented, it was invalid and ineffectual. His grounds his chief’s rights and, secondly, that the agent
did not understand the memorandum of the agreement. Held- though the agreement had been read over to the parties this was not
enough. It had to be further proved that the plf’s agent had assented to the legal document with an intelligent appreciation of its
content. Speaking of the agent, they insisted that, ‘the possibilities of misunderstanding are so obvious as to render it imperative on
the appellant, who alleges his intelligent consent to a contract expressed in a language which he did not understand to prove that it
was clearly explained to him
ACQUAYE V HALM
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The case involved a loan transaction. The plaintiffs claimed it was a mortgage transaction while the defendant alleged that it was a
contract of sale with an option to re-purchase. All the parties were natives of the gold coast and according to the plaintiffs they had
borrowed £200 from the defendant, a well-known moneylender. The plfs were illiterate and therefore it was the def who explained
the meaning of the English documents in the vernacular to the plfs. The documents were in fact a deed of absolute conveyance, and
an agreement for the re-purchase of land conveyed, but the plfs were made to believe that the documents embodied a mortgage
agreement. They did not appreciate that the def considered the transaction as one of sale until the def put in a claim to the
government as owner of the land, when the government sought to acquire the land. King-Farlow J held that the illiterate borrower
were not to be bound by the deeds in question. In equity, as is well known, an agreement not proved to be actually fraudulent may
be presumed to be so unconscionable that it is tainted with fraud and therefore voidable. This presumption will be made for the
benefit of the weaker party where the parties to the agreement deal with each other on very equal terms.
DIKYI AMEEN SANGARI INDUSTRIES LTD
Illegality and the enforcement of contractual obligations

Although a contract may be complete in all respects, it may be held to be unenforceable if its purpose or objects is illegal or contrary
to the policy of the law. The concept of illegality seems to be derived from two sources. First of all, a contract may be illegal because
it involves the doing of something which is unlawful because it is prohibited by statute. Secondly, a contract may be unenforceable,
not because it is prohibited by statute, but because it involves the doing of something which is considered to be against the public
good or public interest. Such contracts are said to be contrary to public policy.
Contracts which are illegal on grounds of public policy
The concept of public policy is applied by the courts to emphasize he fact that no court would assist a plaintiff to enforce a contract,
which in its view, is injurious to society. Injury to society is not easy to define. It is clear, however that the courts in applying the
concept of public policy have been of the view that any contract which tends to prejudice the social and economic interest of the
community must be forbidden.
Public policy is a variable or changing notion depending on changing matters, morals and social and economic conditions of a
particular society. It changes with time and place since social and economic conditions are invariable reflected in the ideas of public
policy.
The following are the categories of cases which are deemed at common law to be illegal and unenforceable on grounds of public
policy
Contracts to commit a crime, tort or fraud on another party
It is clear that a contract which has as its objects the deliberate commission of a criminal offence or a tort is illegal and unenforceable
as being contrary to public policy. This rule has been applied to contracts designed to obtain goods by false pretences contracts to
defraud shareholders, contracts to assault a third party, contracts to publish libel…BERG & SADLER V MOORE
On the bass of this principle an agreement to deceive even it is shown to be a common practice in a particular trade will still be illegal
and unenforceable as being contrary to public policy.
BROWN JENKINS & CO V PERCY DALTON
Contract for shipment of orange juice contained in barrels. Barrels was leaking. Plaintiff (ship owners) advice defendant (shippers)
that clause bill of lading be issued. Defendant wanted clean bill of laden and promised that is if ship owners signs bill of laden stating
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that goods were shipped in “good” condition” they would give an indemnity against all losses ship owners might incur. Ship owner
gave clean bill of laden. Compensated owners of bill because barrels were leaking when they arrived. Ship owners sought to recover
under indemnity. Held- Agreement was to deceive third party when it stated that barrels were shipped in god condition when in fact
they were not ….even though it was shown that this was a common practice and quite harmless , such an agreement was not
enforceable.
Contracts which promote sexual immorality
Generally, any contract which directly or indirectly promotes sexual immorality or which is contra bonos mores is treated by the law
as illegal on grounds of public policy. Such contracts are contrary to good morals. PEARCE V BROOKS
Contracts which interfere with the regulations of foreign countries
Contracts which contemplate the performance of acts in a foreign and friendly country which are illegal in or inimical to that country
are unenforceable as being contrary to public policy. For example, an agreement to raise money for subversion in another country
would be unenforceable in Ghana. FOSTER V DRISCOLL, REGAZZONIA V SETHIA
Contracts prejudicial to the administration of justice
Contracts which tend to stifle or compromise a public prosecution or which interfere with or pervert the course of justice are
unenforceable as being contrary to public policy. A good example or agreement to stifle as criminal prosecution by paying a bribe to
a policeman to drop charges against a person. KEIR V LEEMAN
Contracts leading to inefficiency and corruption in public life
The common law takes the view that the public has an interest in the proper performance of the duties of public servants, and is
entitled to be served by the fittest persons available. Thus contracts which have as their object, the sale of a public officer or honor
are unenforceable as being contrary to public policy. So is the procuration of a public officer for another for monetary consideration.
PARKINSON V COLLEGE OF AMBULANCE,
OKANTEY V KWADDEY
The Shippi of Anahor conveyed to Alfred Okantey a piece of land of Anahor quarter land. The Osu Mantse approved the conveyance
to Okantey who erected boundary pillars. Subsequently, the Shippi granted the dame land to Obodai Annan conveyed it to one Torto,
and he in turn conveyed it in 1954 to Kwaddey. She commenced to build on it. Okantey commenced an action against her. In 1966
O. applied for a writ of possession to execute his judgment. Execution was stayed at the instance of K. who promptly issued a writ of
summons against 0. to restrain O. from interfering with her possession of the land. In her statement of claim K. averred that in
furtherance of his wish to be appointed a lay magistrate O. had made certain promises, in a letter addressed to the then Minister of
Justice and copied to K., to the effect that in consideration of such appointment O. would not pursue his rights under the judgment.
O. admitted writing the letter. K. further averred that even though O. failed to procure the appointment, he had, however, by a
separate and subsequent agreement accepted monetary consideration from K. in order not to execute the judgment. The learned
High Court judge Coussey J. found as a fact that O. had waived his rights under the judgment by accepting monetary consideration
and gave judgment for K. On appeal to the Court of Appeal, counsel for O. contended that the only agreement between the parties
was that by which O. agreed not to execute the judgment in consideration for appointment as a magistrate and submitted that such
an agreement was unenforceable being contrary to public policy. Held- even if the contract was not void by statute, it would be void
at common law as contrary to public policy. The agreement was therefore illegal and unenforceable.
Contract to deceive public authorities

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An agreement on terms which are directly or indirectly intended to deceive the authorities is against public policy and therefore
unenforceable.
ALEXANDER V RAYSON
Contracts to oust the jurisdiction of the courts
It is a long established principle that any contract which seeks to destroy the right of one or both parties to submit questions of law
to the courts is contrary to public policy and therefore unenforceable.
LEE V THE SHOWMEN’S GUILD OF GREAT BRITAIN
A trade union committee sat on dispute between two members. After imposing penalty on one and dismissing him from the union,
rules of union provided that such disputes could not be submitted to a court of law. Held- Plaintiff conduct did not amount to unfair
competition as alleged, hence fine and expulsion were ultra vires. Lord Denning: parties by contract cannot oust the ordinary courts
their jurisdiction…they can, indeed make the tribunal the final arbiter on questions of fact, but they cannot make it the final arbiter
on questions of law.
Arbitration clauses which simply provide that the parties must resort to arbitration before submitting any disputes to court have
always been recognized as valid. IN RE GHANA PRIVATE ROAD TRANSPORT UNION (GPRTU); TETTEH V ESSILFIE
Contracts to use official positions or public office to secure private reward
Contracts involving the use of one’s position or public office to secure a private reward are unenforceable on grounds of public policy.
AMPOFO V FIORINI
Plaintiff an employee of forestry department entered into agreement with defendant to form timber business with the help of
plaintiff. Defendant agreed to pay to plaintiff 35% net profit annually. Defendant refused to pay. Held- Action was dismissed because
the consideration for which defendant might have entered the agreement was in contravention of the Civil Service Act, 1960(C.A.5)
and illegal. It was a misconduct for civil servant to take improper advantage of the position in the civil service for private financial
gain.
Contracts in restraint of trade
A contract in restraint of trade is one which a party restricts his freedom to carry on his trade, business or profession in the future.
Agreements which have been generally held to raise the issue of restraint in trade can be divided into two main groups: agreements
between a vendor and purchaser of a business and agreements between an employer and an employee.
The issue rises in the case of the sale of business where a vendor of the goodwill in business agrees not to carry on a similar business
in competition with the purchaser. In the case of agreements between an employer and an employee, the issue arises where an
employer agrees, upon leaving an employment that he will not compete against his former employer by setting up a business on his
own or entering the service of a rival trade.
Since it in public interest that people should be free to practice their professions and pursue their trades, all such contracts are prima
facie contrary to public policy. However, such contracts will be upheld if it is shown to be reasonable as between the parties and it is
shown that it is not unreasonable in the public interest. The principles stated by Lord MacNaughten in the case of MAXIN
NORDENFELT GUNS & AMMUNITION COMPANY LIMITED are used to govern contracts in restraint of trade.
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Restraint clauses in contracts for the sale of a business
If the seller of a business he has just sold immediately sets up competition next door, the purchaser would not get the full value of
what he has paid for. This is because he purchased the proprietary interest as well as the goodwill in the business. Therefore an
agreement which stipulates that the vendor will not set up business in competition with the purchaser would not generally be
enforceable as long as it is reasonable in the circumstances. NORDENFELT V MAXIM GUNS AND AMMUNITION COMPANY LTD.
It has to be reasonable in terms of the area covered, the duration of the restraint and the activities covered. The terms should not be
wider or longer in duration than what is reasonably needed to protect the proprietary interest of the seller. The restraint must also
generally limited to the business activity in respect of which the goodwill has been built. VANCOUVER MALT CO V SAXELBY
Restraint clauses in employment contracts
Such a contract would be enforceable only if it is reasonably necessary to protect a proprietary right of the employer in the nature of
trade connections or trade secrets. The employer is not entitled to protect himself against mere competition. HERBERT MORRIS V
SAXELBY
The plf company was a manufacturer of hoisting machinery in the UK and the def had been in their employment as draughtsman
from the time he left school after several years’ service, the def was engaged by the company as engineer for two years and thereafter
left the company under the agreement which contained a covenant by the def that he would not, during a period of seven years from
his ceasing to be employed by the company, either in the UK or in Ireland, carry on business In the sale or manufacture of hoisting
machinery. Held- the covenant or restraint in this case was wider than was required for the protection of the proprietary interests of
the plf company and therefore unenforceable.
In has also been held that for the restraint to be reasonable, it must afford no more than adequate protection for the party in whose
favor it is imposed.
KORES MANUFACTURING LTD V KOLOK MANUFACTURING LTD
An agreement was made between two companies that neither would, without the consent of the other, employ any person who had
been employed by the other company within the past five years. The agreement was intended to protect trade secrets, since they
were both working on similar products involving chemical processes. In addition, at the time it was thought that their factories would
be adjacent, though this turned out not to be the case. One of the companies brought an action to restrain the other from employing
a particular former employee. It seems clear that there was in this case a legitimate interest to protect, but the Court of Appeal held
that the restraint was too wide. It had the potential to cover an unskilled labourer as much as the chief chemist. On that basis, it was
unreasonable.
The invalidity of a particular provision or the part of the contract does not nullify the whole contract. If the valid parts of the contract
or the valid terms are severable, the court will proceed to enforce the valid part of the contract.
GODSOLL V GOLDMAN
In the sale of a business specialising in the sale of imitation jewellery in the UK the buyer sought to include a clause restraining the
seller from engaging in real or imitation jewellery across the UK, EU, and the USA. Held the scope was to wide i.e. the business only
concerned imitation jewellery and was limited to the UK. The court decided to narrow the scope of the restriction by simply the
deleting the words 'real or' and the reference to Europe and the USA
Effects and consequences of illegality
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The consequences if illegality may vary depending on whether the contract is illegal at its inception or illegal in its performance. A
contract illegal at its inception is unenforceable of the courts. No person can claim any right or remedy whatsoever under an illegal
contract in which he has participated. The principle same whether the contract is prohibited at common law on grounds of public
policy or where its very formation is prohibited. IN RE MAHMOUD & ISAAHANI,
OLATIBOYE V CAPTAN
Illegality in performance
In some cases the contract itself may be lawful at its inception, but one of the parties, with or without the knowledge of the other
exploits it or performs it in an illegal manner. Example a contract for the carriage of goods being performed illegally because the
carrier’s driver in driving the vehicle exceeds the speed limit or does not have a valid license.
Where a perfectly legal and valid contract is performed in an illegal way, the party responsible for the illegal performance may not
be allowed to enforce the contract or rely on any contractual rights or remedies under the contract. This is generally so where the
illegal act is central to the performance of the contract and not merely incidental to it. ANDERSON V DANIEL
Where a legal contract is performed in an illegal manner, the innocent party will be entitled to enforce the contract and rely on the
available remedies if it is shown that he did not condone or participate in the illegal performance in any way. ARCHIBOLD V
SPANGLETT, SCHANDORF V ZEINI
The appellants held a lease of a plot of land which contained a covenant against underletting without the lessors’ consent. The
appellants constructed a house on the plot. In 1969 the appellants entered into an oral agreement to sell the unexpired term of the
leasehold property, furniture and a cooker to the respondent for ¢19,290.00. The respondent commenced payment by instalments
and by January 1970 he had paid ¢11,000.00 to the appellants. The second appellant left the country for good some time thereafter,
having given the keys to the house to the respondent and appointed the first appellant his agent to take all legal steps to assign the
house to the respondent. The respondent moved into the house on 11 February 1970 and continued with payment of the amount
outstanding on the house, furniture and cooker. By 7 March 1972 the respondent had overpaid the appellants by ¢661.00. The first
appellant however refused to convey the house to him. The respondent therefore brought an action for specific performance of the
oral agreement and for the recovery of the ¢661.00 overpayment. The appellants denied that there had been an agreement for the
purchase of the house. They contended, inter alia, that the agreement had been for a tenancy of the house completely furnished for
six years at an annual rental of ¢2,500.00. The appellants therefore counterclaimed for a declaration that the transaction entered
into with the respondent had been a tenancy for six years certain.
On appeal to the Court of Appeal the appellants contended that: (a) the trial judge misdirected himself in decreeing specific
performance because the appellants could not make title by reason of the absence of the prior consent of the lessors and (b) since
part of the payment was made in foreign exchange the transaction offended the Exchange Control Act, 1961 (Act 71), and the
regulations made thereunder and was otherwise contrary to public policy and therefore void and unenforceable.
Held- The respondent was not obliged to disclose that he had paid the whole purchase price of the alleged sale before he could
succeed on his claim. Consequently the respondent was not obliged to disclose or to rely upon the illegal payment in order to obtain
the relief he sought. The court should therefore not deny him assistance merely because some illegality in his performance of the
contract came to their notice. Since possession in the property had by agreement fallen to the respondent, who had discharged the
obligations of owner and made improvements, the court would let the property lie where it fell. The court noted that a sub-lease in
contravention of the covenant always gave the head-lessor a right to damages and he might determine the lease but the sublease
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was not void ab initio. Section 8(1) of act 123 did not require the concurrence of the minister to precede disposition. The minister’s
concurrence could be sought after all arrangement for the disposition.
If however, it is established that the other party was privy to or condoned he illegal performance, neither party will be allowed to
enforce any rights under the contract. Here the contract is treated as if it was illegal at its inception. ASHMORE V DAWSON
Recovery of money or property transferred under an illegal contract
One important consequence if illegality is that where a contract if found to be illegal, monies paid or property transferred under such
a contract is found to be illegal, monies paid or property transferred under such a contract are generally not recoverable, especially
if the plaintiff has to rely on or disclose the illegality in order to establish his claim. The court will not lend its aid to a party who has
paid money or transferred property under an illegal contract in his attempt to recover it. This is expressed in the maxim ‘in pari delicto
potior est condition defendentis’ (in equal fault, the stronger is the situation of the defendant) PARKINSON V COLLEGE OF
AMBULANCE LTD,
TAYLOR V CHESTER
The plaintiff sued for the return of half a £50 note which he had delivered to the def. the def pleaded that the half note had been
deposited with her by way of a pledge to secure a debt owed to her by the plf. The plf’s reply was that the debt owed to the def was
in respect of the provision of wine and suppers supplied by the def for the purpose of being consumes by the plf and several
prostitutes in a debauch that was meant to incite prostitutes to disorderly conduct. Held- the plf could not recover the half note
because in order to get rid of the def’s defence, the plf had to set up this immoral and illegal contract in which he had participated.
Exceptions to general rule that moneys paid and property transferred under an illegal contract are irrecoverable
Claim and founded on illegal act
A party can recover money or property transferred to the other party if he can establish his claim without reliance on the illegal
contract.
AMAR SINGH V KULUBYA
A statutory ordinance in Uganda prohibited the sale or lease of ‘maila’ land by a non-african except with the written consent of the
governor, without obtaining the consent, the plf agreed to lease ‘maila’ land of which he was the registered owner, to the def for
one year and thereafter on a yearly basis. The agreement itself was void and no legal interest was vested in the def. after the def had
been in possession for several years, the plf gave him seven weeks’ notice to quit and ultimately sued for recovery for the land. Held-
the plf could succeed since his claim was based not upon the agreement but was founded on the independent ground of his registered
ownership.
Where plaintiff is no in pari delicto with the defendant-where parties are not equally guilty
Where the parties are not in pari delicto (equally guilty) the court in certain circumstances will allow the innocent party to recover
any monies or property that he has transferred to the other party under the contract. This relief is usually granted to the plaintiff
upon proof that he has induced to enter into the contract by fraud or duress or oppression at the hands of the defendant. HUGHES
V LIVERPOOL VICTORIA FRIENDLY SOCIETY,
KWARTENG V DONKOR
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Agreement between parties to the effect that if certain chief was destooled and defendant sees to it that plaintiff’s nephew was
elected chief of town, plaintiff would not recover debt owed by defendant. Defendant framed destoolment charges against chief in
question and made plaintiff to be elected but plaintiff’s nephew was never installed chief. Plaintiff brought action to recover debt.
Class protecting statutes
In some cases the contract formed is illegal because it violates a statutory provision was enacted to protect a certain class of persons
from oppression or exploitation by another class of persons b virtue of the latter’s stronger bargaining position. Such statutes are
described as class protecting statutes. Examples include conveyancing decree, NRCD 175 and the hire purchase decree.
The law states that where a contract is made in violation of such a provision in a class protecting statute, the party who is a member
of the protected class is not considered to be in pari delicto with the other party. Such party can therefore recover monies and
property transferred under the contract. KIRIRI COTTON CO LTD V DEWANI,
CITY & COUNTRY WASTE LTD V ACCRA METROPOLITAN ASSEMBLY
The def engaged the plf company to render waste disposal services within the city of Accra in an a agreement with the option that
both parties can renew it for a further seven years. The def terminated the agreement. The plf company brought an action to recover
damages for breach of contract. He def challenged the enforceability of the contract and claimed that it was executed under duress
and in breach of the local government act as well as other regulations of the def. held- the plf was not in pari delicto in a broad sense
and so the lf must be paid reasonable compensation for the services rendered to the def.
Recovery of money or property transferred under a contract is allowed where the plaintiff can show that he was induced to enter
the contract b fraud, duress or oppression of the party; it was ignorant of the fact which made the contract illegal or where the
plaintiff belonged to a vulnerable class protected by statute. However a strict adherence is bound to unduly penalize the plaintiff as
the ban on recovery of property or money on an illegal contract does not take into consideration relevant factors such as where the
illegality involved is minor or insignificant, wholly r largely due to the fault of the defendant or merely incidental to the contract in
question.
Locus poenitentiae-where one party to an executory contract repents before performance
This exception applies where money has been paid or property transferred for an illegal purpose which has not yet been performed
and the plaintiff changes his mind and withdraws from the contract. A party to a contract despite its illegality is allowed an
opportunity to repent or change his mind and may be allowed to recover any money or property transferred under the contract,
provided he begins proceedings before the illegal purpose has been performed either in whole or in part. KEARLEY V THOMSON
It must be shown that the plaintiff repented and not merely that the defendant deliberately failed or was unable to perform his side
of the contract. Also, the mere frustration of an illegal contract owing to the circumstances beyond the plaintiff’s control does not
entitle the plaintiff to recover his property under this exception. BIGOS V BOUSTEAD
Discharge of contract
There are a number of ways by which one or both parties to a contract may be discharged from their obligations to perform the
contract. Contracts may be discharged from their obligations to perform the contract. Contracts may be discharged by: agreement,
performance, breach of contract or frustration.
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Discharge by agreement
The parties to an existing contract may enter into a subsequent agreement to extinguish the rights and obligations created by their
earlier contract. FISH & MEAT CO LTD V ICHNUSA LTD
By a written contract, dated the 4th December, 1961, the defendants who were the owners of a fishing vessel agreed to sell all their
fish catches exclusively to the plaintiffs. The defendants were however to maintain their own vessel and its crew. The same parties
entered into another contract, on the 29th December, 1961, whereby the plaintiffs were to purchase the defendant's fishing
vessel. At the trial evidence was led to show that in the plaintiffs' reply to a letter written by the defendants, the plaintiffs referred
to some of the terms of 4th December contract. On the 3rd May, 1962, the plaintiffs informed the defendants in a letter that they
were no longer going to purchase the vessel. On the 17th July, 1962, the vessel arrived in Ghana and the plaintiffs nevertheless
started business with it, paid for its maintenance and the salaries of its crew.
They alleged that the defendants later took possession of the vessel, sold all its fish catches and threatened to remove it from Ghana.
They therefore sued for accounts of all the fish sold, payment to them of all the proceeds from the sales and an injunction to restrain
the defendants from removing the vessel, from Ghana during the currency of exhibit A. On the evidence as a whole he held that the
operative agreement was exhibit B and further that it was the defendants who committed a breach of that exhibit B. On the issues
of law,
Held-
(1) An existing contract can be discharged by mutual agreement and expressly by another contract or agreement in which a clear
intention to discharge the previous contract is shown. In the instant case the first contract was extinguished by second contract since
the character and terms of second contract were different from and inconsistent with 4th December contract.
(2) Whether a letter referring to the terms of a discharged contract will operate to revive that contract and discharge a subsisting
contract made subsequent to the first contract depends on the construction of the letter and the second contract and also upon the
letter being written after the execution of the second contract. The first contract cannot be said to have been revived by second
contract to regulate the contractual relations of the parties.
The court further considered the issue whether a letter referring to the terms of a discharged contract will operate to revive that
contract and discharge a subsisting contract made subsequent to the first contract. It was found out that this depends on the
construction of the letter and the second contract and also upon the letter being written after the execution of the second contract.
It was held that the December 4 contract could not be said to have been revived by the plfs letter referring to terms of December 4
contracts after execution of the December 29 contract to regulate the contractual relations of the parties.
In some cases the parties may intend to extinguish the original contract in its totality and put an end to their contractual relations
altogether. In this case the original contract is deemed to have been rescinded. In other cases the parties’ intentions may be to
extinguish the former written contract and replace it with a new and self-contained agreement. JAPAN MOTORS TRADING CO LTD
V RANDOLPH MOTORS LTD
Discharge by performance
Requirement of exact and precise performance of entire contracts
Generally, a party must perform all his obligations under a contract completely and exactly in order to be discharged from further
performance or in order to be entitled to sue to enforce the other party’s performance. His own performance must be precise and
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exact, that is, the performance tendered must be strictly in accordance with the terms of the contract and must leave nothing else
to be done.
In earlier cases, the general principle applied by the courts was that where the contract was bilateral and required one entire piece
of work to be done by one party, the complete performance of work was a condition for the liability of the other party to perform,
unless the parties had stipulated otherwise. CUTTER V POWELL
SUMPTER V HEDGES
The claimant agreed to build two houses and stables for the defendant. It was agreed that £565 would be payable on completion.
The claimant commenced performance and then ran out of money and was unable to complete. He had performed just over half of
the contract. The defendant completed the work himself. The claimant sought to recover £333 representing the value of the work
he had completed. He argued that in completing the work himself, the defendant had thereby accepted partial performance and
prevented the claimant from completing the contract. Held- The claimant's action failed. The court held that the defendant had no
choice but to accept partial performance as he was left with a half completed house on his land.
RE MOORE V LANDAUER
BOLTON V MAHADEVA
A person who cannot perform perfectly would recover nothing, this in some cases would cause unjust enrichment of the other party
who takes the benefit of the partial performance without having to pay anything for it. For these reasons, the law developed certain
qualifications and exceptions to the rule in order to mitigate its effect and achieve justice between the parties.
Doctrine of substantial performance
The law developed the doctrine of substantial performance to mitigate the impact of the principle of exact and precise performance
of entire contracts. The doctrine if substantial performance is premised on the fact that there are degrees of defectiveness or
incompleteness in performance: the defect or shortfall in performance may be trivial, minor, substantial or total. The principal of
substantial performance states that if the performance tendered falls short of the required performance only in some relatively trivial
respect, the party not at fault is not completely discharged from performance. He must pay the price agreed upon for the work done
or the services rendered but he may counterclaim for the loss he had suffered by reason of the incomplete or defective performance.
In determining what amount to substantial performance, the courts look at the nature of the defects in performance and the
proportion between the cost of rectifying the defects and the total price. Generally, where the cost of rectifying the defects in
performance is a relatively small proportion of the total price, the courts are likely to consider the contract as substantially performed.
HOEING V ISAACS
Acceptance of partial performance
The second exception to the rule to exact and precise performance before recovery applies where the innocent party voluntarily
accepts the partial performance tendered by the other party. This is so when it can be inferred from the actions of the other party
that he had accepted the partial performance. This inference is made where the other party, having the option to either accept or
reject the partial performance, chooses to accept and keep the benefit of the partial performance. In this case the party who tendered
the partial can sue on quantum meruit (reasonable price for work done) or quantum valebat (reasonable sum for goods supplied) to
recover payment that is commensurate with the benefit bestowed on the other party. Section 14 of the sale of goods act. MABSOUT
V FARA BROS (GHANA) LTD
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An agreement to pay for partial performance can only be implied from the circumstances if it was open to the recipient either to
accept or reject the benefit of the work done, and he voluntarily decided to accept it.
The performing party will only be entitled to sue on quantum meruit if the party not in default had the option either to accept or
reject partial performance, not if it was forced against his will. SUMPTER V HEDGES
Prevention of performance by promisee
The third exceptional situation arises where a party who has only partially performed his obligations under an entire contract is
prevented through the fault of the other party from completing his obligations under the contract. The performing party can either
sue to recover damages for breach of contract or he may sue to recover reasonable remuneration on quantum meruit for the work
he has done. PLANCHE V COLBURN,
SKANSKA JENSEN INTERNATIONAL V KLIMATECHNIK ENGINEERING LTD
The defendants who carry on business in Ghana as civil engineers had secured a contract from Glahco Hotels & Tourism Development
Co. Ltd, owners of the Golden Tulip Hotel, to do civil engineering works in the new Executive Wing of the hotel. Their contract
permitted subcontracting and they invited the plfs to be Sub-Contractors, for the supply, engineering and installation of a Heating
Ventilation and Air-Conditioning System (HVAC) in the Executive Wing of the Hotel.
Between May and November 1996, discussions took place between the defs and the plfs about the subcontract, but nothing concrete
materialised from those discussions. The Appellants themselves signed their agreement with Glahco Hotels, etc, in September 1996.
According to the plfs, the defs warned them in November 1996 not to expect any sub-contract. However, on or about the 26th of
November 1996 the defs informed the plfs that the sub-contract was available and that if they were still interested they should come
down to start the job immediately. This urgency was probably due to the fact that according to the Appellants their own contract
with the owners required them to have an air-conditioning engineer on the site by October 1996.
The plfs replied, accepting the offer. The Respondents' Managing Director testified that he came to Ghana on 7th December 1996,
expecting to sign a sub-contract but this did not happen. Between 19th and 21st December 1996, the plfs held discussions with the
defs on the terms of the subcontract and on 23rd December 1996, minutes of their meeting were signed. The minutes were tendered
in evidence as Exhibit G. It contained the main terms of their contract. The parties further considered a draft sub-contract. It was a
standard form contract used in the building industry. They made several changes there-to, by way of additions, outright cancellations
or substitution.
The draft sub-contract was tendered in evidence as Exhibit H. In this case, the parties merely initialed each page and each addition,
cancellation or other amendment. In particular, even though page 25 was printed with the usual concluding words: "IN WITNESS
whereof the parties hereto etc.." and spaces were provided for their signatures, the parties did not sign it. Paragraph 9 of Exhibit G
explained that they agreed that "the subcontract will be prepared and signed as per attached draft". From the plf's evidence, they
expected that the sub-contract would be prepared and made ready for signature soon thereafter. But that did not happen. Later, he
informed the def’s that a director of the Appellants' was coming into the country and, he the director, would like to discuss the terms
of the sub-contract with the Respondents' representative. A meeting actually took place on 27th January 1997 between the
Appellants' said director and the Respondents' Managing Director. According to the plf’s, this meeting confirmed the main issues of
the contract. On 19th March 1997 three documents were submitted to the plf. These were tendered as Exhibits K, K1 and K2. Exhibit
K was a letter which explained what was involved in having the draft subcontract prepared. K1 was the new subcontract and K2 was
"Bill of Quantities." Meanwhile the plf were carrying out the HVAC works in the hotel.
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The plf were unhappy about a number of important matters which had been discussed and agreed upon but had been left out. They
did not take this new development lying down and wrote a letter dated 20th March 1997 to the defs objecting to the unauthorised
deletions from the subcontract and demanding that the terms as agreed between them be reinstated in it. A copy of this letter was
tendered as Exhibit "L". The record does not show that exhibit L evoked any response from the Appellants. On 3rd April 1997 the
Respondents wrote a further letter to the Appellants - Exhibit "M" in which they gave a summary of the HVAC works they had
executed on the West Wing between 3rd December 1996 and 25th March 1997. On the same 3rd April 1997 the Appellants sent a
letter to the Respondents terminating the Respondents' employment because according to them, the Respondents had failed to
provide the performance guarantee mentioned in Exhibit H. This letter was tendered as Exhibit S.
Held- the Supreme Court was of the opinion that there are two ground for the assessment of the value of quantum meruit for work
done: reasonable remuneration fixed by the court or quantum meruit assessed at the contract rate. Where one party starts to
perform the contract but is prevented from completing it by the other party’s breach, he can claim quantum meruit at the contract
rate. The amount is the ration which the work done bears to the total volume of wor required to be perform under the contract.
Where there is no concluded contract, then the court must assess reasonable remuneration having regard to all circumstances. In
this circumstance, the plf became entitled to reasonable remuneration for work done to be assessed by the court and not an
assessment based at the contract rate.
Where there is no concluded contract, then the court must assess reasonable remuneration having regard to all the circumstances.
In the circumstances, the plaintiff-respondent become entitled to reasonable remuneration for work done- to be assessed by the
court and not an assessment based at the contract rate.
Divisible contracts
Whether a contract is entire or divisible depends on construction of the contract. Generally, a contract is divisible where the
obligation to pay for one part of the contract is in independent of performance of the other parts. Generally, a contract is divisible
where the obligation to pay for one part of the contract is independent of performance of other parts. In a building contract it is
common for the parties to provide for the payment at intervals or at stages.
Discharge by breach
In certain cases, breach by one party releases or discharges the other party from his duty to perform his obligations under the
contract. A breach of contract no matter what forms it takes, always entitles the innocent party to maintain an action for damages.
However it is not every breach which discharged the innocent party from his liability or obligation to perform. The right arises in two
kinds of cases:
1. Firstly, where the party in default has repudiated the contract before performance is due or before the contract has been
fully performed. Where the partly in default repudiates the contract before performance is due, such repudiation amounts
to anticipatory breach. FROST V KNIGHT
2. Secondly, where the party in default has committed what is described as a fundamental breach of the contract. A breach is
said to be fundamental if having regard to the contract as a whole, the promise which has been violated is of relatively major
importance to the contract.
Anticipatory breach
Repudiation occurs when a party by his words or conduct demonstrates that he does not intend to perform his obligations under the
contract. Such repudiation amount to anticipatory breach where the party in default renounces his obligations under the contract
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even before the time fixed for performance. Repudiation is explicit where the defendant expressly declares that he will not perform
the contract when the time of performance arrives. Repudiation is implicit where the reasonable inference that can be made of the
defendant’s conduct is that he no longer intends to perform his side of the contract. FROST V KNIGHT
Before the other party can treat himself as discharged, it has been established that the defaulting party made his intention clear
beyond reasonable doubt that he did not intend to perform his side of the contract. FEDERAL COMMERCE NAVIGATION CO V
MOLENA ALPHA INC
It must also be noted than even if one party repudiates the contract or commits an anticipatory breach, the contract does not end
automatically. The party must both agree to its termination. The other party May treat the contract as at end and sue for damages
immediately or he may affirm the contract and treat it as still being in force in spite of the other party’s breach until the date fixed
for the performance arrives. MERSEY STEEL & IRON CO V NAYLOR BENZON
Where the innocent party accepts the repudiation and treats the contract as discharged
Where the innocent party choose this option, the contract is finally discharged and both parties are released from further
performance. The innocent party is not obliged to accept or pay for any further performance and may sue the defaulting party for
damages as soon as the repudiation occurs. HOCHESTER V DE LA TOUR,
IN RE TIMBER & TRANSPORT KUMASI-KRUSEVAC CO LTD; ZASTAVA V BONSU
By a written agreement entered into on 20 July 1971 between Timber and Transport Co., Ltd. (T. & T. Co., Ltd.) acting by its managing
director of the one part and a Yugoslav company of the other, the two companies were to be merged and a new company established
under the T. & T. Kumasi-Krusevac Co., Ltd. to engage in a common enterprise in the timber industry. The agreement also dealt with,
inter alia, matters concerning share transfers, investment and management. Clause 15 of the agreement provided that the
agreement was to remain irrevocable for ten years and no member or director of the company as renamed could present a petition
or make an application to the court seeking the winding-up or liquidation or in any way seek or attempt to bring the existence of the
company to an end. Notwithstanding clause 15, the petitioner, the Yugoslav company, petitioned for the official winding-up of the
company. Held- The crucial issue which was avoided by the trial judge was whether the agreement was still binding on the
parties. The well-established principle was that where one party has manifested a clear intention to be no longer bound by the terms
of his contract or where he has openly repudiated it, the innocent party might treat the contract as at an end and might seek such
remedies as were open to him. Where the breach was fundamental, the innocent party might accept the breach and treat it as
absolving him from his own obligations under the contract; the question whether a breach was fundamental was for the courts to
determine. In the circumstance of this case, if the averments contained in the petitioner's affidavit were established, they would
indicate that by 1978 the respondents had clearly shown by conduct that they did not regard the 1971 contract as binding and in that
case the petitioners would be justified in treating the agreement as at an end.
Affirmation of contract
The innocent party will be deemed to have affirmed the contract if after becoming aware of the other party’s repudiation, he makes
it clear by his words or conduct that he refuses to accept the breach as a discharge of the contract. The effect of affirmation is as
follows:
1. The contract remains in force for the benefit of both parties
2. If in the interim, the defaulting party changes his mind and decides to perform, the contract is thus fulfilled and the defaulting
party incurs no liability
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3. The defaulting party is entitled to take advantage of any frustrating event or supervening circumstances, which may occur in
the interim.
AVERY V BOWDEN, JOSEPH V BOAKYE
HASNEM ENTERPRISES LTD V IBM WORLD TRADE CORPORATION
The plfs bought a photocopier from the def and for a number of years the defs maintained and serviced the machine for a fee anytime
they were invited to do so. On one occasion, when the machine broke down, the defs refused to do so. The plfs sued and argues inter
alia that it was the policy of the defs to maintain and service their products exclusively. The defs denied and argued inter alia, that
the plfs had not fully settled an outstanding bill and were in breach of the alleged exclusive maintenance policy by allowing a third
party to service the machine previously. Held- Even if there was an exclusive maintenance contract between the parties, the plaintiffs
knew that their settlement of any outstanding bill before the defendants would be obliged to honour any further calls from them
was of the essence of the agreement. The plaintiffs’ default in paying their outstanding bill was therefore a clear breach of the after
call service agreement. Accordingly, the defendants’ refusal to service the plaintiffs’ machine thereafter constituted their election to
treat the breach as a repudiation of the contract, thereby discharging the contract. Furthermore, the plaintiffs’ acceptance of services
from CTS also constituted a breach of the agreement and since it went to the root of the contract, it did not only entitle the defendants
to repudiate the contract but it also signified the plaintiffs’ acceptance of the defendants’ repudiation of the contract. Accordingly,
the defendants were not liable to the plaintiffs for refusing to respond to their later calls.
Affirm the contract, perform one’s obligations under the contract and sue for payment?
An innocent party can perform his side of the contract if only if it is possible for him to do so without the assistance of the other
party.
WHITE & CARTER (COUNCILS) LTD V MCGREGOR.
The plfs were advertising contractors who supplied litter bins to local authorities. The bins were then placed on the streets. They
were allowed to attach to these bins, plates or stickers carrying advertisements and the plfs obtained profits for advertising in this
way for companies. The def owned a garage. The sales manager of the company entered into an agreement with the plfs under which
the plfs were to display certain advertisements for the defs for a certain period of time. The sales manager in fact had no authority
to make this contract with the plf- and so the owner of the company, when he heard of it wrote to the plfs the same day to cancel
the contract. The plfs refused to accept this repudiation. They ignored it and went ahead to prepare the necessary plates and stickers
and attached them to the bins and displayed them for the specified period of 3 years. The plfs then brought an action to recover the
amount agreed upon in the contract for their performance and the def refused to pay. Held- the plfs were entitled to go ahead and
perform as they did, since they could do so without the def’s co-operation and then sue for the price agreed upon in the contract.
According to the case this was subject to qualifications:
1. The innocent party could do so only if he could perform his obligations under the contract without any cooperation from the
repudiating party
2. Secondly, the innocent could only do so if he could show that he had legitimate interest- financial or otherwise, is performing
the contract, rather than claiming damages.
HOUNSLOW LONDON BOROUGH COUNCIL V TWICKENHAM GARDENS DEVELOPMENT LTD
Discharge by frustration
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After a contract has been made, unforeseen contingencies or events may occur through no fault of the parties which may make
performance of the contract physically impossible or which may radically change the nature of the obligations under the contract.
When such events occur the contract is said to be frustrated and the parties are discharged from the obligations they have undertaken
to perform under the contract. Thus a contract is said to be frustrated where an unforeseen or unexpected event occurs to make the
performance of the impossible, illegal or radically different from the performance that was contemplated. The doctrine of frustration
of contract allows the court to bring the court to an end and do justice between the parties. TAYLOR V CALDWELL
The implied condition theory was to the effect that even though there was no express contractual term to deal with the effect that
even though there was no express contractual term to deal with the event which had arisen, a term could be implied in the contract
that if the parties had anticipated and considered the possibility of that event occurring, they would have decided that the contract
would be discharged.
This theory has been replaced by a new principle where the court simply imposes on the parties the just and reasonable solution that
the new situation demands. Instead of implied term approach the courts now apply the doctrine of frustration only if they consider
that to hold the parties to further performance, would in the light of the changed circumstances, alter the fundamental nature or the
contract.
Lord Radcliffe in DAVIES CONTRACTORS V FAREHAM UDC stated the test for determining when a contract is deemed to be frustrated
as follows:
Applying the test for frustration
First of all, the contract itself must be construed in the light of nature or type of contract and the relevant surrounding circumstances
existing at the time the contract was made. Then the scope and nature of the original obligations undertaken by the parties must be
determined. The obligation referred to is the fundamental obligation created by the contract. Next the scope and nature of the
contractual obligations must be assessed after the event has occurred and the two must be compared to decide whether the new
obligation to be performed after the event has occurred, would be radically of fundamentally different from what was undertaken
under the contract originally.
Whether a contract is frustrated is a matter law for the court to consider, and in doing so the court applies the objective rule or
approach. BARCLAYS BANK V SAKARI
AFORDI V GHANA PUBLISHING CORPORATION
In 1968, the second defendant, Ghana Publishing Corporation (GPC), applied for 44 residential houses from a state sister corporation,
Tema Development Corporation (TDC), the first defendant, to be used as accommodation for its workers under a House ownership
(Hire-purchase scheme) of TDC. A deposit was paid under the scheme leaving a balance to be paid on each house which was to be
paid over a defined period of time. GPC started a system of deducting 20% of the salaries of accommodated workers under their
employment as housing allowances, presumably to use part or all of it in payment for the outstanding balances on the houses.
There had been complaints from workers that the monthly deductions were often higher than the monthly amounts due to TDC as
advances on the property balances. In 1979, under the AFRC a housing committee unit which was set up directed that the 20%
housing allowances which was deducted by the GPC and other establishments be stopped and the allowances paid out to the
employees so that the plaintiffs could pay directly to the TDC. Pursuant to this documents were issued to the plaintiffs known as rent
cards which were used for the recording of payments. Later TDC informed the plaintiffs individually by standard form letters that
they had finished paying off the balances on their occupied premises and went ahead to execute some form of leases between itself
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and the plaintiffs some of whom took the trouble to have the documents registered at the Lands registry, GPC attempted to atop
TDC from continuing to issuing leases to the plfs, whereupon the plfs instituted the proceedings to the High Court.
Held- from the facts there was a contractual relationship between the two institutions, TDC and GPC, since TDC acknowledged part
payment on the disputed properties under the hire purchase arrangement and there was no similar arrangement entered into by the
plfs or any similar employees. The salary advances were not meant to be advances pad on behalf of the plfs for their individual
accounts, so as to liquidate the balances on their houses and make them individual owners. GPC was thus systematically liquidating
its own balances with TDC by the monthly deductions and this did not in law disturb its ownership of the properties in question.
The action of the AFRC did not convert the plfs and other similarly situated employees into owners of the TDC properties occupied
by them. The committee only changed the mode of payment and directed that the plfs and other employees pay directly to the TDC
and further advised the Managing Director of TDC to issue rent cards directly to the employees concerned. Therefore the contention
for the plfs that the contract between GPC and TDC was automatically frustrated and abrogated by the AFRC directive is not
sustainable. This is because the directive of the AFRC did not in any way create an impossibility or impracticability by the issuance
of rent cards, nor did it make the hire purchase agreement between GPC and TDC illegal or in any way render the performance of
the executory portions of the agreement impossible or commercially impracticable.
Illustration of the doctrine of frustration
Destruction of a physical thing
Where it is clear from the nature of the contract that the continuing availability of a particular thing or given person is essential to
the fulfilment of the of the object the contract, the contract will be deemed to have been frustrated if by some extraneous
circumstances such person or thing is no longer available. TAYLOR CALDWELL. The same principle applies in the case of the
unavailability of a person, especially in cases involving contracts for the performance of personal services example an artist who
contracts to paint a picture or a person who contracts to serve as apprentice. MORGAN V MANSER
The defendant, a music hall artiste entered into an agreement with the plaintiff by which he appointed the plaintiff as his manager
for a term of 10 years. After two years, the plaintiff was called up for service in the army and was not demobilized until after 8 years.
The plaintiff sued the defendant for certain breaches of the agreement and the defendant alleged that by reason of his call up to the
army, the agreement had been frustrated. Held- there was such a change of circumstance and for such a duration that he original
contract, looked at as a whole, was frustrated by the call up of the def
A contract may similarly be deemed to be frustrated by reason of the nonoccurrence of an event, which must reasonably be regarded
as the basis of contract. This factor relates to special kinds of contracts into which the parties enter with mutual understanding that
a particular event will happen. KRELL V HENRY, HERNE BAY STEAMBOAT V HUTTON
Mere inconvenience, hardship or financial loss not sufficient
It is important to note that an even which causes serous inconvenience, hardship, financial loss or even delay in the performance of
the obligation under the contract is not of itself sufficient to constitute frustration of the contract. The event must be such that it
renders the contractual obligation radically different from what was originally undertaken under the contract. DAVIES CONTRACTORS
LTD V FAREHAM UDC,
BARCLAYS BANK V SAKARI
The plaintiff bank granted the defendant, its long standing customer, a loan of over two million cedis (repayable within twenty
months), for the purchase of two Mercedes Benz trucks required for the operation of the defendants business. On receiving the loan,
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the defendant, without consent of the bank, used the loan to purchase a Saurer tanker, instead of the Mercedes Benz trucks as
agreed with the bank. A week after the purchase of the tanker, the tanker was seized by the government on the grounds that Saurer
vehicles were to be operated exclusively by the state and not individuals. The loan remained unpaid. Some years later, the bank
brought the action against the defendant for the recovery of the loan and the accrued interest. The defendant pleaded the common
law defence of frustration of the loan agreement arising from the unexpected seizure of the Saurer tanker by the government. Held-
on the facts of the case, the obligation created under the loan contract was for the def to repay the loan with interest and not the
performance of the purpose for which the loan was sought. The def is therefore entitled to repay the loan
STAFFORDSHIRE AREA HEALTH AUTHORITY V SOUTH STAFFORDSHIRE
Changes in the law which render performance illegal
It generally accepted that governmental intervention by way of legislation or change in policy, which renders the performance of the
contract, impossible or illegal results in the frustration of the contract. DENNY, MOTT & MOTT DICKENSON V FRASER
R T BRISCOE V ESSIEN
The plfs claimed an amount as the value of equipment and balance of cash advances given to the def, a timber merchant, for the
supply of logs. The def pleaded that while he was performing the contract legislation came into force which declared the Ghana
Timber Marketing Board the sole buyer of Ghana Wawa and redwoods. The performance of the said contract was thus rendered
impossible and it was held that both the plfs and the def were discharged by frustration.
Application of doctrine of frustration to leases
The position used to be that the doctrine of frustration could not apply to leases because in a contract creating a lease the property
interest is also interest. So the contract continued regardless of any changed in the circumstances and therefore even if the property
was requisitioned by government, burnt down by fire or taken over by enemy action, the lease was thereby frustrated. Within time,
however, this position has been abandoned by the courts, and it now accepted hat the doctrine of frustration in appropriate
circumstances could apply to leases. CRICKLEWOOD PROPERTY & INVESTMENT TRUST LTD V LEIGHTONS INVESTMENT TRUST LTD,
NATIONAL CARRIERS V PANALPINA (NORTHERN) LTD
Self-induced frustration
One essential point about frustration is that the doctrine of frustration applies only where performance of the contract becomes
impossible without the fault of either party. The rule therefore, is that a party cannot rely on a self-induced frustration as discharging
him from performance. MARITIME NATIONAL FISH LTD V OCEAN TRAWLERS LTD
The appellants chartered the respondent’s trawler for use in the fishing industry for a period of 12 months. Both parties knew that
the vessel could only be used with an otter trawl and that it was an offence to use the vessel with the otter trawl without a licence
from the Minister. The appellants, who were operating 5 trawlers, applied for 5 licenses, but were granted only 3 and asked to name
the 3 trawlers. They named the three trawlers other than the one they had chartered from the respondents. They then sought to rely
on the failure to obtain a licence as a ground of frustration of the contract. Held- the appellant could not rely on the lack of license
as the cause of the frustration of the contract because it was elf- induced. If they had wanted to they could have named the vessel
they had chartered from the respondents. Here, the appellants had themselves chosen to defeat the common purpose of the
contract.
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Where it is not certain whether the frustrating event was caused by the fault of one party or not, it is for the party alleges that the
frustrating was self-induced to prove that the frustrating event was in fact caused by the other party. JOSEPH CONSTANTINE
STEAMSHIP V IMPERIAL SMELTING CORPORATION
Consequences of frustration
The rule at common law is that the occurrence of frustration event brings the contract to an end forthwith and it is automatic in its
effect. It does not render the contract ab initio. Thus the effect of frustration is that it discharges both parties from further
performance of the contract. CHANDLER V WEBSTER. The harshness of the effect of decision in CHANDLER V WEBSTER resulted in a
lot of criticism and in 1942, the decision was overruled by the House of Lords in the case of FIBROSA SPOLKA AKCYJNA V FAIRBAIRN
LAWSON COMBE BABRBOUR LTD (THE FIBROSA CASES)
In this case, an English company agreed to sell certain machinery to a polish company for the price of £4,800. Delivery was to be
made in 3 or 4 months. The Polish company had paid only £1,000 when the war broke out and the contract became frustrated. The
Polish company sued for the return of the £1,000 they had paid to the English company.
Even after the House of Lords decisions in the Fibrosa Case, the state of the common law on the effect of frustration was still
unsatisfactory for two reasons:
1. According to the principle established in the FIBROSA CASE, money which had been paid under a frustrated contract was
recoverable only if there had been a total failure of consideration. This means that if the consideration had been partly
performed, the principle would not apply and a party who had already paid could not recover any part of his money.
2. Secondly, the application of the principle in FIBROSA may be unfair to one party who had spent money in beginning to
perform the contact, if he is required to refund to the other party the whole of the amount paid to him in advance. For
example, if the English company in the FIBROSA CASE had expended money in building the machinery, they would have been
left with a lot of useless half-built machinery on their hands with no compensation for the money they had spent in beginning
to perform the contract.
In view of these loopholes in the state of the common law on the consequences of frustration, the legislature in Ghana has intervened
by enacting specific provisions in the contracts act to deal with the rights and obligations of the parties to a contract which has
become frustrated.
Section 1—Adjustment of Rights and Liabilities of Parties to Frustrated Contracts.
(1) Where a contract to which this Part applies has become impossible of performance or been otherwise frustrated and the parties
thereto have for that reason been discharged from the further performance of the contract the following provisions of this section
shall, subject to sections 2 and 3 of this Act, have effect in relation thereto.
(2) Subject to subsection (3), all sums paid or payable to any party in pursuance of the contract before the time when the parties
were so discharged (in this Part referred to as "the time of discharge") shall, in the case of sums so paid, be recoverable from him,
and in the case of sums so payable, cease to be so payable.
(3) Where a party has incurred expenses before the time of discharge in, or for the purpose of, the performance of the contract, the
Court may allow him to recover or to retain out of any sum received by him under the contract, such amount (if any), not exceeding
the expenses so incurred or the total sum payable to him under the contract, as the Court may consider just having regard to all the
circumstances of the case.
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(4) In estimating, for the purposes of the foregoing provisions of this section, the amount of any expenses incurred by any party to
the contract, the Court may, without prejudice to the generality of those provisions, include such sums as appear to be reasonable
in respect of overhead expenses and in respect of any work or services performed personally by that party.
(5) In considering whether any sum ought to be recovered or retained under the foregoing provisions of this section by any party to
the contract, the Court shall not take into account any sums which have, by reason of the contract, become payable to that party
under any contract of insurance unless there was an obligation to insure imposed by an express term of the frustrated contract or by
or under any enactment.
Section 2—Severance of Frustrated Contract.
Where it appears to the Court that a part of any contract to which this Part applies can properly be severed from the remainder of
the contract, being a part wholly performed before the time of discharge, or so performed except for the payment in respect of that
part of the contract of sums which are or can be ascertained under the contract, the Court shall treat that part of the contract as if it
were a separate contract and had not been frustrated and shall treat section 1 of this Act as only applicable to the remainder of that
contract.
Section 3—Parties may Contract Out of Part I.
Where any contract to which this Part applies contains any provision which, upon the true construction of the contract, is intended
to have effect in the event of circumstances arising which operate, or would but for that provision operate, to frustrate the contract,
or is intended to have effect whether such circumstances arise or not, the Court shall give effect to that provision and shall only give
effect to the provisions of this Part to such extent, if any, as appears to the Court to be consistent with that provision.
The import of sections 1-3 of the contracts act which deal with the consequences of frustration of contracts can be summed as
follows:
1. First of all, when a contract it deemed to have been frustrated, both parties are discharged from further performance of the
contract. (section 1(1))
2. Secondly, all sums paid to any party under the contract before the frustration of the contracts and the discharge of the
parties are recoverable by the party who paid them. (section 1(2))
3. All sums payable or due to be paid to any party under the contract before the time of discharge cease to be payable. (section
1(2))
4. However, a party who has spent money on the performance of the contract can recover from the party an amount which
should not exceed his expenses or the total sum payable under the contract. (section 1(3))
5. In computing the expenses incurred by the party, the court may include overhead expenses, cost of personal services
rendered etc. however, insurance receipts are to be ignored by the court except where there is an obligation to insure under
the contract. (section 1(3))
6. The provision in part one of the contracts act do not apply to any charterparty, or to any contract for the carriage of goods
by sea. Also, the provision of part one do not apply to contract of insurance. Section 4(1)
7. According to section 3, the parties can agree expressly as what should be the effect of frustration of the contract they have
made. If that is done, those provisions should be applied and not the provisions of the Act.
8. Where it appears to the court that a part of any contract which has been wholly performed before the time of discharge can
properly be severed from the remainder of the contract, the court shall treat that part of the contract as if it were a separate
contract and had not been frustrated, and shall treat section 1 as only applicable to the remainder of the contract. Section
2
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RT BRISCOE (GHANA) LTD V ESSIEN
Remedies for breach of contract

Every breach of contract entitles the injured party to recover damages for the loss he has suffered. Other remedies include specific
performance and injunction which are equitable remedies.
Generally, a plaintiff may suffer various kinds of losses consequent to a breach of contract by the other party:
1. The plaintiff may have lost the value of the benefit he has conferred on the defendant, for which he refuses to pay.
2. The plaintiff’s claim may be based on expenditure incurred in preparing for the defendant’s performance.
3. The plaintiff’s claim may be based on the potential benefit or net profit he would have made if the contract had been
performed.
4. The claim may be based on personal injury or damage to property occasioned by the breach, sometimes referred to as
consequential losses
5. The plaintiff’s claim may be based on compensation for expenses incurred after the breach in attempts to reduce the loss
Recovery of damages for breach of contract
The general objective of the courts in awarding damages is to place the injured party or the innocent party, as far as money can do
it, in the position he would have been in if the breach had not occurred, that is if the contract had been performed. ROYAL DUTCH
AIRLINES V FARMEX
Test of reasonable foreseeability- remoteness of damage
It is generally recognized that it would be impracticable to allow the plaintiff to recover all the losses that in fact result from the
breach, no matter how vast and unpredictable they may be. Two concepts applied by the courts to limit the quantum of damages
recoverable by the plaintiff are: remoteness of damages and mitigation of damages.
With regard to remoteness of damages, the general principle is that the plf is only entitled to recover damages or such losses as were
reasonably foreseeable as likely from the breach of contract. The test for recovery of damages is therefore, one of reasonable
foreseeability. HADLEY V BAXENDALE
VICTORIA LAUNDRY LTD V NEWMAN INDUSTRIES
The plfs, who were launderers, decided to expand their business. To do so, they required a larger boiler. The defs, an engineering
firm contracted to sell and deliver to the plfs, a certain boiler of the required capacity. The defs failed to deliver the boiler until 5
months later. The defs were aware of the nature of the plf’s business. In an action for the breach of contract, the plf’s claimed: (1)
damages for the loss of the profit they would have earned in that period but for the delay in delivery; and (2) damages for the loss of
exceptional profits they would have earned on certain lucrative dyeing contracts they had obtained. Held- the defs with their
engineering and with the knowledge of the facts possessed by them, could not reasonably contend that they did not contemplate
that some loss of profit would result from their delay in delivering the boiler. The defs were, therefore, liable for the loss of profits
caused by their delay in delivering the boiler.
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It must be noted that the def was an engineering firm or a seller rather than a mere carrier was relevant. A def in that position would
be expected to know more about the use to which the product is to be put than a mere carrier.
Lord Asquith reformulated the rule in HADLEY V BAXENDALE and stated the following propositions:
1. First of all, it was observed that there is actually one rule governing the award of damages which states the test as one of
reasonable foreseeability
2. Upon breach of contract, the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the
time of the contract reasonably foreseeable as likely to result from a breach of the contract.
3. What was at the reasonably foreseeable depends on the knowledge then possessed by the parties, or, at all events, by the
party who later commits the breach
4. For this purpose, knowledge possessed is of two kinds: imputed knowledge and actual knowledge
5. Everyone, as a reasonable person is taken to know the ‘ordinary course of things; and is therefore taken or presumed to
know what loss is liable to result from a breach of contract in the ordinary course. This knowledge is imputed to the def
6. Added to this imputed knowledge, in certain cases, in knowledge, which the def actually possesses, of special circumstances
outside the ordinary course of things, which are likely to cause additional or special losses.
FRAFRA V BOAKYE
The respondent who had a contract to supply timber logs to the Mim Timber Co. Hired a tractor from the appellant at a rate of 80
cedis a day to enable him haul timber logs from his timber concession in Mim. Under the agreement, the respondent paid a deposit
of 1,100 cedis. According to the respondent, the appellant logs a day. The respondent, however, found the tractor hauling a maximum
of seven logs a day and a total of 60 logs during a period of a little over a month. Consequently, the respondent brought an action for
damages for breach of contract. Held- in awarding damages for breach of contract, the test to be applied was whether on the
information available to the def when the contract was made, he should, or the reasonable man in his position would have realised
that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from
the breach or that the loss of that kind should have been within his contemplation. The appellant should have foreseen that the
respondent would suffer loss if his tractor proved defective.
JUXON-SMITH V KLM DUTCH AIRLINES
ASHUN V ACCRA BREWERY LTD
The plaintiff was employed by the defendant brewery. On 29th November, 1996, the Defendant’s managing-director invited the
plaintiff into his office and handed him, in the presence of two other members of the management, a letter informing him that his
post in the company had been declared redundant as a result of a manpower rationalization exercise by the company. The letter
stated that his services would no longer be required from 2nd December 1996, but that he would be paid up to that day and also be
paid three months’ salary in lieu of notice. The letter further informed him that he would receive a severance award of two and a
half months pay for each year of service, commencing from 1st January 1991. At the meeting with the managing-director, the plaintiff
was given his three months’ salary in lieu of notice and two days salary for December 1996. He was also paid monetary compensation
for his accrued leave days. On the 5th of December 1996, the Plaintiff collected from the Accounts Department of the Defendant the
severance award referred to above.
After thus collecting the compensation offered in the letter of 29th November, 1996, the Plaintiff caused his lawyer to write a letter
to the defendant dated 29th January 1997 which asserted that the Senior Staff Service Conditions of the defendant dated 1st April
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1995 contained no provision covering redundancy. It characterized the defendant’s action in terminating the plaintiff’s employment
as smacking of arbitrariness and injustice. It expressed the view that the defendant’s declaration of the plaintiff redundant was
unlawful at law and in breach of the Industrial Relations Act 1965, Act 299. It requested the holding of amicable bilateral discussions
to resolve the dispute. In a letter written in response, the solicitor to the defendant asserted that, in addition to the express conditions
of service for the Senior Staff, the defendant had implied contractual terms, including working rules, corporate practices and
conventions, built over the years, which together constituted the engagement terms of the work force, including the senior staff.
The solicitor contended, in effect, that the redundancy exercise was in accordance with these terms implied by practice and usage.
When the dispute between the parties was not resolved by the correspondence between their solicitors, the Plaintiff issued a writ of
summons against the defendant on 19th May, 1997. The Plaintiff’s claim was for: a declaration that his being declared redundant is
unlawful and so wrongful, general damages for wrongful termination of employment by defendant, Monetary compensation of eight
(8) months’ salary for every year of service with the defendant and an order for the payment to plaintiff of all salaries, increments
and all other benefits for the remaining six (6) years of service with defendant company.”
Held- a contract is not necessarily a contract till the retirement age and as such it is terminable. If it is terminated wrongfully, it does
not give the aggrieved party the right to be paid salary till his retirement age. However where an employer terminated an employee’s
appointment in breach of a contract of employment, the employer is liable to pay damages to the employee. The measure of damages
in the quantum of what the aggrieved party would have earned from his employment during a reasonable period, determined by the
court, after which e or she should have found alternative employment. This quantum is subject to the duty of mitigation of damages
Likelihood of loss
In VICTORIA LAUNDRY V NEWMAN INDUSTRIES, it was stated that in order to make a contract breaker liable, if suffices that if he
had considered the question, he would as a reasonable man have concluded that the loss in question was likely to result. It need to
be proved that the def could as a reasonable man for foresee that it was likely to result.
THE HERON II.
Generally, as long as the kind of damage or loss caused by breach of contract was within the reasonable contemplation of parties at
the time the contract was made, I is immaterial that the chain of events which resulted was unlikely or far more serious than what
was reasonably contemplated.
WROTH V TYLER
The def failed to complete his contract to sell a house for £11,500. It was held that the def was liable to pay £5,500 as damages. A
rise in the price of the house was in the contemplation of the parties when the contract was made, and it is irrelevant that they never
expected a rise which would nearly double the price.
PARSON LTD V UTTLEY INGHAM & CO
Assessment of damages for breach of contract for the Sale of Goods
Measure of damages for non-delivery-section 54
Damages for non-delivery are determined in the same way as damages for non-acceptance. The measure is the loss which could
reasonably have been foreseen by the seller at the time when the contract was made as likely to result from his breach of contract.
Formula for calculation of damages for non-delivery-section 54(2)
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Difference between the market price and the contract price where the market price is higher
Market price on which date
• where a times has been fixed in the contract for delivery, it is the market price of the goods on the date fixed ford delivery
that is used
• where no date has been fixed, it is the market price on the date the seller actually refused to deliver the goods
• where a date has been fixed for delivery and the seller repudiates the contract before the date but the buyer does not accept
the repudiation, it is the market price on the date fixed for delivery
• where the buyer accepts the repudiation it is the market price on the date on which the buyer repudiated the contract
• where the goods are to be delivered within a reasonable time, it is treated as though no date has been fixed for the delivery
of the goods and therefore it is the market price on the date the seller actually refused to deliver the goods
Compensation for wasted expenditure
The court would compensate the plaintiff for the expenditure, which has been wasted as a result of the defendant’s breach if he can
establish the expenses made in anticipation of the defendant’s performance of the contract and also show that the waste was a result
of the breach. ANGLIA TELEVISION LTD V REED
Mitigation of damages
Generally, a plaintiff is entitled only to such damage as would have been suffered by a person acting reasonably after the breach.
This means that where that where the party not in default, is in a position to take any action which would reduce or avoid the losses
resulting from the breach of the contract, he is required to do so. A party not in default is under duty to mitigate his losses consequent
upon the breach and thus can only recover damages for such losses occasioned by the breach as could not have been avoided by
mitigation. Whether or not the plaintiff has failed to take reasonable steps to mitigate the loss caused by the breach is a question of
fact depending on the particular circumstances of each case and the burden of proving such failure rests upon the defendant. PAYZU
V SAUNDERS,
NUTAKOR V ADZRAH
The defendants by an indenture of conveyance containing the usual covenant of title purported to convey a piece of land to the
plaintiff in consideration of £G45. In fact the land in question was family land and the defendants had no authority to make any grant
of it. When the plaintiff made preparations to commence building operations on the land, he was warned by the family to keep off.
Not heeding this warning, he proceeded to erect a building worth over £G4,000 on the land. The family successfully brought a suit
for a declaration of title to and recovery of possession of the land. The plaintiff then sued the defendants claiming the value of the
building he had put up on the disputed land and expenses incurred by the plaintiff in defending his title. The defendants did not
dispute liability for breach of their covenant of title, but contended that they were not liable to pay the plaintiff the cost of his
building. They however conceded that the plaintiff was entitled to a return of his purchase price and interest on it up to when the
plaintiff learnt of his lack of title. The trial judge rejected the defendants' submissions and awarded the plaintiff £G4,000 damages,
taking into account the building erected by the plaintiff. From this judgment, the defendants appealed to the Supreme Court. Held-
the proper measure of damages was the market value of the land at the date when the purchaser became seized of knowledge that
he had acquired no title to the land by reason of the incapacity of his vendors to give him title. Because of the duty to mitigate
damages, no improvement which a purchaser undertook after he had learnt of his want of title would be legally chargeable to the
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vendor in breach. On the facts, the plaintiff here had erected his building subsequent to his discovery of the defect in his vendors'
title. Consequently, the trial judge erred in taking the value of the building into account in assessing the plaintiff's damages
SOCIETE GENERALE DE COMPENSATION V MOSHIE ACKERMAN,
By a contract drawn in the French language but executed in Ghana, the plaintiff, an Israeli national, agreed to serve the defendants,
an external French company, as the defendants' works supervisor "under the control of the defendants' Tema [p.414] representative,
at their building site at Tema, Ghana" for a fixed period of three years inclusive of a four-month probation period. The plaintiff's salary
was made payable in French currency in France with the exception of his living expenses which were to be paid in Ghana currency.
Each party was entitled to terminate the contract during the probation period without either notice or compensation subject to the
express limited right of the defendants to terminate the contract for either "a professional or disciplinary reason." However, before
the expiration of the probation period, the defendants summarily terminated the plaintiff's contract on completely different grounds.
ATTITSOGBE V POST TELECOMMUNICATIONS CORPORATION,
The defendant locked a letter box it had rented out to the plaintiff, ostensibly for non-payment of rent. After it had come to his notice
that the letter box had been locked, the plaintiff who had already paid his rent for 1994 at the time of closure of the letter box, made
some inquiries and was informed by one of the defendant's officials that the box was locked up for non-payment of rent. The plaintiff
then went to see the defendant's post master and represented to him that he had not received his bill, whereupon he was given a
fresh bill. Thereafter, the plaintiff wrote to the defendant per the post master (exhibit C) for confirmation as to whether or not the
defendant had locked the plaintiff's letter box and how much was due to be paid in respect of the letter box. The plaintiff did not
however disclose that he had already paid in respect of the letter box. Subsequently, after his letter box had remained locked for
over a month, the plaintiff filed a suit against the defendant for a declaration that the closure of the letter box was wrongful and for
damages. In support of his action the plaintiff asserted, inter alia, that as a result of the closure of the letter box for over one month
he lost communication with the outside world, as well as business contacts and thereby suffered extensive damage. The plaintiff
however admitted under cross-examination at the trial that he did not disclose earlier to the defendant (per the post master) that
he had already settled his bill for 1994 because, as he put it, "he wanted to trap them and for them to commit themselves more."
After finding on the evidence that the plaintiff discovered the closure of his letter box on 11 February 1992 and that the defendant
did not open the box till sometime in April 1994. Held- The law imposed on a claimant a duty of taking all reasonable steps to mitigate
the loss consequent upon the breach of his contractual rights and barred him from claiming any part of the damage which is due to
his negligence to take such steps. However, it was the defendant who assumed the burden of producing evidence to establish that
as a reasonable man, the plaintiff should have taken steps to mitigate his loss. Thus any loss which was directly caused by the
claimant's failure to fulfil that duty was not recoverable from the defendant; yet, since the defendant was the wrong doer, the
standard imposed on the plaintiff in such circumstances was not a high one. In the instant case, the plaintiff knew he had paid his
rent but he failed to disclose it to the defendant but rather gave the defendant the impression that he had not paid the rent. By
deliberately trapping the defendant, the plaintiff effectively created an avenue whereby his loss would be increased and thus his
damage claim; and having done so to his detriment the plaintiff would not be entitled to recover damages for his misrepresentation
which was an act in bad faith. In any event, whatever loss was occasioned the plaintiff after the closure of the letter box would not
be recoverable because if the plaintiff had acted in good faith he would have had the box opened by 12 February 1994 by showing
evidence of payment.
DELMAS AGENCY GHANA LTD V FOOD DISTRIBUTORS INTERNATIONAL LTD
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The plf-resp (FDI) ordered and purchased some cartons of yam to be shipped to the US, alleged by the def-appellant. The plf claimed
that the yams were rendered fit for export, after a heavy rainfall, as a result of the defs inaction and sued for loss of profit and the
value of the yams claiming an amount $20,000 in the statement of claim as well as paying a nominal filing fee of ₵5,500. In the
meanwhile they did nothing to minimize their losses. Held- the law is that where the Plaintiff has failed to mitigate his loss where
there were reasonable opportunities for doing so he is only entitled to nominal damages.
Scope of duty
The scope of the obligation to mitigate one’s losses upon breach of contract can be summed up in the following three points:
1. First of all, it must be noted that the plaintiff is expected to do only what is in the normal course of business. He is not
required to take risks with his money, or to take steps which might damage his commercial reputation, or to take any
complicated legal action against a third party in order to mitigate his loss. PILKINGTON V WOOD
2. Secondly, if the plaintiff in fact avoids or mitigates the loss by taking certain steps after the breach , he cannot recover any
damages for such avoided loss
3. Thirdly, the plaintiff may recover damages for any loss or expenses incurred by him in reasonably attempting to mitigate his
loss following the defendant’s breach. BANCO DE PORTUGAL V WATERLOW
Mitigation and anticipatory breach
The application of the rules on mitigation is of great significance in the assessment of damages in cases of anticipatory breach. A
person who accepts the repudiation is under a duty to mitigate his losses and is only entitled to recover such damages as he would
have incurred if he had taken such reasonable steps in mitigation. Under the sale of goods act, where a buyer repudiates the contract
of sale before the date fixed for acceptance of the goods and the seller accepts the repudiation, damages in such a case are calculated
as the difference between the contract price and the market price on the date of repudiation.
Section 48—Assessment of Damages.

(1) The measure of damages in an action under section 47 of this Act is the loss which could reasonably have been foreseen by the
buyer at the time when the contract was made as likely to arise from his breach of contract.
(2) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the
difference between the contract price and the market or current price—
(a) if a time has been fixed for acceptance, or if the buyer repudiates the contract before the time of performance, and the
seller does not accept the repudiation, at the time or times when the goods ought to have been accepted;
(b) in any other case, at the time or times of the refusal to accept the goods.
(3) In this section a time is not deemed to have been fixed for acceptance by reason only that the goods are to be accepted within a
reasonable time.
The second option is to reject the repudiation and affirm the contract. Here, the plaintiff is not under a duty to mitigate until the date
fixed for performance arrives and the defendant refuses to perform. The measure of damages us the difference between the contract
price and he market price on the date fixed for acceptance.
Measure of damages for non-delivery- section 54 of the sale of goods act
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(1) The measure of damages in an action under section 53 of this Act is the loss which could reasonably have been foreseen by the
seller at the time when the contract was made as likely to result from his breach of contract.
(2) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the
difference between the market or current price and the contract price —
(a) If a time has been fixed for delivery, or if the seller repudiates the contract before the time of performance, and the buyer
does not accept the repudiation, at the time or times when the goods ought to have been delivered;
(b) in any other case, at the time or times of the refusal to deliver the goods.
(3) In this section a time is not deemed to have been fixed for delivery by reason only that the goods are to be delivered within a
reasonable time.
TREDEGAR IRON COAL CO. V HAWTHORN BROS. & CO
Damages fixed by the contract-liquidated damages and penalties
Sometimes a contract may contain a clause which stipulates or prescribes a fixed amount of money as being payable upon a breach
of contract by one party. Such fixed amounts, where they represent a genuine pre-estimate of the innocent party’s possible loss are
normally enforceable by the courts as liquidated damages. However, where the fixed sums are in the nature of penalties or punitive
in nature, stipulated as a threat to hold the other party to performance and obviously greater than any possible loss that might be
occasioned by the breach, the courts will not give effect to that provision.
Distinction between liquidated damages and penalties
A clause in a contract qualifies as a liquidated damages clause if it is a genuine pre-estimate of the loss of one party in the event of
breach by the other party. A clause is said to be a penalty, if it is obviously greater than any loss likely to be suffered by the innocent
party; and is stipulated in terrorem of the offending party or as a security to the promisee for the performance of the contract. LAW
V REDDITCH LOCAL BOARD
Whether a particular clause or stipulated sum is a liquidated damages clause or penalty is a question of construction determined by
the nature of the contract, the terms of the clause and the surrounding circumstances. This is judged at the time of the making of the
contract and not at the time of its breach. DUNLOP PNEUMATIC YRE CO LTD. V NEW GARAGE & MOTOR CO. Generally, the burden
of showing that the fixed amount in a contract is a penalty ad not liquidated damages lies on the party who is sued for damages.
ROBOPHONE FACILITIES V BLANK.
First of all it is established that the fact that the parties have used the terms penalty or liquidated damages in the contract is not of
itself decisive.
Certain rules have been laid down for the guidance of the courts in deciding whether a particular sum stipulated in a contract as
payable upon breach is in substances a penalty or liquidated damages clause. These rule or guideline are clearly summarized by Lord
Dunedin in the case of DUNLOP PNEUMATIC TYRE CO LTD V NEW GARAGE MOTOR CO
The following guidelines were given for the determination of whether a fixed sum is a penalty or liquidated damages
1. It will be held to a be a penalty if the sum stipulated is extravagant and unconscionable in amount in comparison with the
greatest loss which could conceivable be prove to have resulted from the breach
78 | P a g e
2. A fixed sum will be held to be a penalty if the breach consists only of the payment of sum of money, and the sum stipulated
as payable upon breach is a sum greater than the sum which ought to have paid
3. If a single is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which
may occasion serious damage, and other trivial damage, there is a presumption (but no more) that it is a penalty
4. A fixed sum payable upon breach may still qualify as liquidated damages even if the consequences of each particular breach
are incapable of precise calculation. This is so as long as the stipulated figure is justifiable as a genuine pre-estimate of
possible loss.
CAMPBELL DISCOUNT CO LTD V BRIDGE
Recovery of non-economic losses
Usually, a breach of contract leads to financial losses or at least losses which can easily be quantified in terms of money. The courts
are generally reluctant to compensate a plaintiff for purely subjective losses such as disappointment, injured feelings, etc in cases of
breach of contract. ADDIS V GRAMAPHONE CO LTD
There is no longer an absolute rule that damages cannot be recovered for mental distress in cases of breach of contract. In
appropriates circumstances, damages may be awarded to compensate the plaintiff for mental distress, disappointment etc. GODLEY
V PERRY-pain and suffering, H WEST & SONS LTD V SHEPHARD- injured feelings, CHELINI V NIERI- physical or mental illness resulting
from injured feelings, BAILEY V BULLOCK- physical inconvenience. JARVIS V SWAN’S TOURS
Equitable remedies
The equitable remedies for breach of contract include specific performance and injunction
Specific performance
An order for specific performance is a decree by the court which compels a contracting party to do that which he has undertaken to
do under the contract. This remedy is purely equitable in origin and it acts in personam. It is discretionary and not available to the
party seeking it as a matter of right. LAMARE V DIXON. It has been held that equity will only grant specific performance, if considering
all the circumstance, it is just and equitable to do so. STICKNEY V KEEBLE.
Conditions for granting specific performance
As a general rule, specific performance will be granted only where damages will not adequately compensate the plaintiff. For this
reason, specific performance is generally not ordered in cases of breach of contracts to sell commodities or share, which are readily
available in the market.
Damages will be deemed to be inadequate where the plaintiff cannot get a satisfactory substitute or where the seller refuses to
deliver specific or ascertained goods. Indeed, section 58 of the sale of goods act states: in an action for breach of contract to deliver
specific or ascertained goods the court may, if it thinks fit, by its judgment direct that the contract should be specifically performed
without giving the seller the option of retaining the goods n payment of damages.
In contracts involving the sale of land in particular, the courts have traditionally taken the view that damages are an inadequate
remedy and therefore the remedy of specific performance is normally available to either party in such contracts.
REDCO LTD V SARPONG
79 | P a g e
The respondent agreed to purchase a flat from the appellant-company at a cost of ¢72,000. In 1980 the respondent made a down
payment of ¢19,000, with the remainder to be paid upon completion. The appellant in 1981 informed the respondent that the flat
would be ready in December 1981 and was asked to pay a second instalment of ¢31,400. The respondent agreed and paid ¢32,000.
At the end of 1981 no flat was allocated to the respondent. Seven years later the appellant informed the respondent that the flat
now cost ¢3 million. The respondent immediately sued on his contract and claimed specific performance on the ground that although
¢21.000 was outstanding, what had been paid so far constituted sufficient part performance to warrant the grant of specific
performance. In his defence the appellant stated that extraneous circumstances militated against the completion of the flat by the
agreed date. The respondent then moved the court for judgment in that the defence disclosed no reasonable defence. Judgment
was then given for the respondent. Held- The basis upon which specific performance would be granted in equity was quite
settled. Certain contracts were of such a nature that time became of the essence, and a mere award of damages was not enough. For
example, in contracts of sale where a house was required for immediate residence, as in the instant case, a delay of six to seven years
without any explanation could not be compensated for by mere damages when it was clear that such damages could not supply the
flat for which the respondent had paid a substantial purchase price. There was ample evidence that the conditions set out in the
contract to be fulfilled by the respondent had all been, or a substantial part had been, fulfilled which in equity would entitle him to
his equitable right of specific performance.
AHUMAH V AKORLI (NO 2),
In 1961 the defendant negotiated with B.T.C. for the sale of a plot of land for £G1,200. A deposit of £G800 was paid to B.T.C of which
the plaintiff contributed half and the defendant half. The defendant then went into possession and managed the land, paying the
balance of the purchase price from the money thus obtained. In 1963 B.T.C. executed a formal conveyance to the defendant. The
plaintiff then asked the defendant to convey to him his portion of the land, and an area 300 ft. by 300 ft. was demarcated on which
stood an engine room for which the defendant demanded an extra £G200. The size of the plaintiff's portion was later reduced to
300 ft. by 100 ft. represented by a site plan, exhibit C, approximately one-third of the whole area and he accepted this but refused
to pay for the engine room. Relations between the parties deteriorated and the plaintiff sued for specific performance of an oral
contract by which he alleged the defendant was to share the land with him equally. He further asked for an account of the rents,
tolls and other moneys collected by the defendant from the land since 25 February 1963 and an order for the payment to him of a
one half share of the amount. Held- this was a case in which specific performance should be ordered because: the land was known,
the terms of the purchase were known and the price paid by the plaintiff was known. There was no doubt that there was to be some
form of sharing, which, in the absence of any fixed proportions to the contrary, the court should ensure was reasonable and
equitable. The matter was simplified by the plaintiff's acceptance of the one-third share and the one point of difference, which the
court could settle, was the extra payment for the engine room.
DJAN V OWOO,
PRAH V ANANE
By an agreement in writing dated 3rd June, 1958, between the appellants and the respondent, drawn up by the appellants, the
respondents allowed her seven –room house to be pulled down by the appellants for the purpose of building a market. By the same
agreement, the appellants promised to erect for the respondent, as a substitute, a new house containing seven rooms in small sizes
each and reserved to the respondent a right of action in the event of default on the part of the appellant. Shortly after the agreement,
the appellants stated building in the market which took them only three months to complete. They however failed to erect for the
respondent the house promised. After a period of over three years the respondent brought this action against the appellants claiming
damages for breach of contract. The appellants denied that they had committed a breach of the contract. The appellants denied that
80 | P a g e
they had committed a breach of the contract contained in the agreement and maintained that their failure to erect the house for the
respondent earlier was due to her inability to select a site for the building. Held- the learned trial judge rejected the appellants; case
and held inter alia that they had showed a total lack of consideration for the respondent’s interest. The appellants had committed a
breach of contract and therefor liable to the respondent in damages.
The court noted that the general rule in equity was that an agreement to erect buildings could not be specifically performed, but
there are certain exceptions to that general rule. The authorities show that, where there is a definite contract, by which a person,
who has acquired land in consideration thereof, has agreed to erect on the land so acquired a building, of which the particulars are
clearly specified, and the erection of which is of an importance to the other party which cannot adequately be measured by pecuniary
damages, that is a case in which specific performance ought to be ordered and also to be considered whether there is a building of
which the particulars are clearly specified.
The question in the instant case was whether from the evidence on record the case for the respondent could be brought with any of
the exceptions above stated. The first question is whether the work, as described in the contract, was sufficiently defined. It was held
that it was not. The other question was, whether the respondent’s building obtained possession of a piece or parcel of land on which
the respondent’s building was to be erected by means of the contract for its erection. Clearly they did not. It seemed therefore, that
this case could not be brought within the exception laid for an order for specific performance.
Specific performance will normally be granted where the quantum of damages is difficult to assess and would be unfair to the plaintiff.
DOMINS FISHERIES LTD V BREMEN-VEGESACKER FISCHEREI
The defendants, the owners of a foreign fishing vessel, The Paderborn, offered to sell the vessel to the plaintiffs, a fishing company,
for ¢30,000.00 after a lengthy discussion at a meeting held between the solicitors of both parties. The terms of the sale were verbally
agreed upon at the meeting where the plaintiffs, to whom the vessel was of special interest and value, accepted the offer through
M., their solicitor. Consequently, M. on behalf of the plaintiffs, paid to the defendants through Q. their solicitor, ¢2,000.00 as part
payment of the agreed deposit of ¢3,000.00. On the receipt of that amount, Q. embodied all the terms of the sale verbally agreed
upon in a letter in which M. was requested to confirm in writing the plaintiffs' acceptance of the terms of sale inclusive of payment
of the balance of the purchase price by twelve equal monthly instalments commencing from a specified period. On 23 November
1970, M. in his reply, enclosed a cheque for ¢1,000.00 as final payment of the deposit and confirmed the plaintiffs' [p.491] acceptance
of the offer but requested a "three-month moratorium before the commencement of the payment of the instalments." The plaintiffs'
request was however rejected on 28 December by the defendants through Q. their solicitor. M. therefore on behalf of the plaintiffs,
wrote to Q. on 5 January 1971 to the effect that the instalment proposals were acceptable to the plaintiffs. The letter was delivered
by hand on the same day. However, on 6 January, Q. verbally informed M. that the defendants were no longer prepared to sell the
vessel to the plaintiffs because the defendants had already concluded a contract on 30 December 1970 to sell the vessel to the Ghana
Government.
The plaintiffs sued claiming, inter alia, a declaration that the defendants had by a contract sold the vessel to them, an order for
specific performance of the contract and general damages for loss of use. The defendants, however, contended inter alia that (a) the
three-month moratorium requested by the plaintiffs had modified the instalment proposals and that that amounted to a rejection
and counter-offer which was subsequently rejected and therefore no contract was concluded on 23 November 1970, (b) in any case,
their offer was validly withdrawn on 6 January 1971, and (c) the remedy for specific performance was not in the circumstances
available to the plaintiffs.
Held- having regard to all the surrounding circumstances and particularly to the deposit payments by the plaintiffs as well as the
previous negotiations held between the parties, the plaintiffs' letter of 23 November amounted to acceptance of the defendants'
offer. The court noted that specific performance was supplementary to the common law remedy of damages and its grant was
discretionary to meet cases where, as in the instant action, remedy by an action for damages was not adequate compensation for
81 | P a g e
breach of contract. Since the vessel in the instant case was of special interest and value to the plaintiffs who might not easily get its
kind from another source, an order for specific performance would be granted, even though the vessel was a foreign vessel and it
had been transferred to a third party.
The court will not order a contract to be specifically performed if the contract is incomplete or if its terms are uncertain.
ASARE V ANTWI
The defendant owned several plots of land at Adabraka some of which he sold to interested parties. The plaintiff expressed interest
in buying one of these plots provided the price was right. The plot was never identified. Three years later the plaintiff sued the
defendant for "specific performance of a ‘partly performed' agreement for the sale by the defendant of his plot of land at Adabraka
measuring 120 feet by 60 feet, for the sum of ¢2,000." In support of his claim the plaintiff tendered exhibit A, a temporary receipt,
which read, "Receipt from Mr. S. K. Antwi the sum of fifty pounds (£G50) being part payment of the cost of plot 120 ft. x 60 ft. to be
sold to him. (Sgd.) J. G. Asare, 1 December 1964." Held- there was no effective contract between the parties which could be
specifically enforced since (a) there was no agreement as to the purchase price; (b) the parties were not ad idem about the subject-
matter of their inchoate agreement; (c) the payment of part of the purchase price per se was not sufficient evidence of part
performance of a contract of sale of land, and it could not be deduced from exhibit A that the payment of £G50 was made as part
performance of a concluded contract of sale
Specific performance will not be ordered if it would be impossible for the defendant to comply with the order. An example is contract
of sale of land not owned by the vendor (WATTS V SPENCE) or if the contract is oppressive (WALTERS V MORGAN).
Further, specific performance will generally be refused if the plaintiff had acted unfairly or dishonestly. Also, the courts have held
that equity cannot be invoked in aid of an illegal transaction.
ZAGLOUL REAL ESTATES CO LTD (NO 2) V BRITISH AIRWAYS LTD
In 18 June 1986 the plaintiff, a limited liability company incorporated under the laws of Ghana, agreed in writing to lease out part of
its premises to British Caledonian Airways Ltd (BCAL), an external company, for a period of 25 years commencing from 1 October
1986. In October 1986, the parties in pursuance of the agreement executed a formal lease and a total rent of 40 million cedis for 25
years was paid in advance by the defendants. Before the execution of the lease, both parties were aware of the External Companies
and Diplomatic Mission (Acquisitions or Rental of Immovable Property) Law, 1986 (PNDCL 150), which had come into force on 13 th
June 1986. The law provided that any or tenancy in respect of any immovable property to an external company should receive the
consent in writing of the committee and the payment of the said sum must be in convertible currency notwithstanding any agreement
to the contrary. To circumvent PNDCL 150, the solicitors of the BCA prepared a deed of indemnity which was subsequently signed by
the parties by which if BCAL, as an external company were obliged to pay rents to the plaintiffs in convertible currency, then, the
plaintiffs would give an indemnity to BCAL to the full extent of the sum of 40 million cedis paid by the lessee (BCAL) and will on
demand repay to the lessee the said sum.
Sometime later the operations of BCAL ceased in Ghana and they, with the consent of the plaintiff assigned the remainder of the 25-
year lease to British airways Ltd (BA Ltd), another external company. The ministry of foreign affairs later requested that BA Ltd pay
rent in respect of the leased property in convertible currency (US$ 1900) per mouth as assessed by the implementation committee
established under PNDCL 150. The plaintiffs therefore tendered back to BA Ltd the 40 million cedis under the original agreement. BA
Ltd refused to accept the payment contending that the advanced payment had discharged them from complying with the provisions
of PNDCL 150.
The Supreme Court held that the deed of indemnity was a dishonest device which sought to defeat the intentions of PDCL 150 and
at the same to enable the defendants to avoid any loss from such a violation. Such an agreement was the defendant to avoid any loss
from such a violation. Such an agreement was illegal and therefore void. Having any regard to the fact that deed was void, the issue
82 | P a g e
of the 40 million cedis was not an issue which had to be remitted to High Court for retrial since it was not legitimate because the
deed from which it arose was avoid and, therefore unenforceable.
The court will not order specific performance of contracts for personal services or contracts he performance of which requires the
constant supervision of the court. As a rule, the court will not order specific performance of contract involving the application of
personal skill (for example the court will not compel an employee to do any work by ordering specific performance). FRANCIS V
MUNICIPAL COUNCILLORS OF KUALA LUMPUR. This is because it is improper to compel one man to serve another. By the same
rule, an employer will not be compelled by equity to keep a servant. PAGE ONE RECORDS LTD V BRITTON.
Specific performance will not be ordered where there is lack of mutuality. That is the remedy is available to the plaintiff only if it can
be awarded against him. For this reason specific performance will generally not be granted to a minor since the remedy does not lie
against a minor.
It has been established, however that where the plaintiff has fully performed his obligations under the contract, such that there is
nothing that the other party could possibly ask a court to specifically decree. The remedy would be available to the plaintiff in spite
of the lack of mutuality.
LARTEY V BANNERMAN
The defendant, a lessee of the State Housing Corporation, contracted to sell his property to B.L. B.L. informed the defendant that he
was buying the property for his daughter - the infant plaintiff. After B.L. had, in pursuance to the contract, [p.462] paid part of the
purchase price and given the balance to his solicitor to be given to the defendant when he executed the deed of assignment, the
defendant refused to execute the deed of assignment. Consequently, B.L. brought an action in his own name for, inter alia, specific
performance against the defendant. Whilst giving evidence, however, B.L. testified that his daughter was a minor. He was therefore
cross-examined about his authority to commence and maintain the action. The writ was subsequently amended to indicate that the
plaintiff was suing by B.L. as her next friend. The defence in an amended plea thereupon claimed that the agreement could not be
specifically enforced as it purported to have been made with an infant. The trial judge refused to decree specific performance on the
ground of the absence of mutuality in contracts involving infants. Held- the sole justification for the rule that specific performance
might not be granted to an infant was that because of the privileged position of the infant the other party could not obtain the
remedy against him. The basis of the rule therefore disappeared where the infant came before the court with a request for the
decree after he had performed his side of the bargain because there was nothing that the other party might possibly ask a court to
specifically decree. The remedy of specific performance should therefore be available to the plaintiff to compel the defendant to
perform his part of the contract.
Injunction
An injunction is an order of the court to a party to a contract to do or refrain from doing a specified act. It is issued when the conduct
of a party is likely to cause injury to the applicant and that injury could not be adequately compensated in damages. An injunction
operate in personam. An injunction may be prohibitory or mandatory.
A prohibitory injunction orders a defendant not to do something in breach of a contract he has entered into and it enjoins the
defendant to refrain from a particular type of conduct. It is generally granted in the case of a negative promise that is a promise not
to do something or engage in a particular kind of conduct. It is also known as a restrictive injunction.
A mandatory injunction requires a defendant to reverse the effects of an existing breach. It requires the defendant to do a particular
act. With mandatory injunctions, a court will apply the balance of convenience test, refusing relief if the hardship caused to the
defendant by compliance with the order outweighs the consequential advantages to the plaintiff.
83 | P a g e
With regards to the period of operation, an injunction may be an interlocutory or interim injunction, which is designed to regulate
the position of the parties pending a hearing or final determination of the suit. An injunction may be perpetual which is given after
the plaintiff's right has been established. This is also called a permanent injunction
Prima facie, an injunction will not be granted to restrain actionable wrongs for which damages are the proper and adequate remedy.
In granting an injunction the courts will consider a number of factors to ensure that the order when granted will not unduly prejudice
the interests of the parties and will in fact achieve the purpose for which it is given.
First of all the court will generally not order the defendant to do the impossible; nor would it grant an order of injunction if it will
confer no appreciable benefit to the plaintiff and would be materially detrimental to the defendant. CHARRINGTON V SIMONS & CO
LTD
The general rule is that an injunction will not be granted if the effect is to do directly or indirectly compel the defendant to do acts,
the performance of which the court would not grant specific performance. On this basis, an injunction will generally not be granted
to require the performance of a contract for personal services.
However there are some important exception to this rule. A service contract may contain negative obligations which could be
enforced by injunction without compelling positive performance of the whole contract. LUMLEY V WAGNER
An important qualification has, however been introduced to the effect that an injunction will not be granted if its effect would be to
compel the defendant to work for a particular person or force the alternative starving. WHITWOOD CHEMICAL CO V HARDMAN. In
other words, an injunction may not be granted to prevent the defendant from breaching an undertaking because the inevitable result
would be to compel him to work for the plaintiff or otherwise starve.
84 | P a g e

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What are the essential elements of a valid contract?

What are the essential elements of a valid contract?

What remedies are available for breach of contract?

What remedies are available for breach of contract?

Sybil Danita Quaye Contract Dimidium Facti Qui Coepit Habet

The nature and essence of contract

Elements of a valid contract

Nature and test of agreement

SCRIVEN BROS V HINDLEY & CO

ADDISON V A/S NORWAY CEMENT EXPORT LTD

Offer and acceptance

Display of goods for sale

PHARMACEUTICAL SOCIETY OF GREAT BRITAIN V BOOTS CASH CHEMIST (SOUTHERN) LTD

Circulation of catalogues and price lists

Kinds of auction sales

Bilateral and unilateral contracts

Acceptance by conduct-BROGDEN METROPOLITAN RAILWAY CO

Acceptance and counter-offers

DEEGBE V NSIAH & ANTONNELI

Counter-offer and inquiry

Exception to the general rule on communication of acceptance

Acceptance by modern communication methods

Principles to govern the implementation of the postal rule

Acceptance by electronic mail

Prescribed method of acceptance

FINANCINGS LTD V STIMPSON.

Prescription of silence as a mode of acceptance

Revocation of general offers

BUTLER MACHINE TOOL CO. V EX-CELL O CORPORATION (ENGLAND) LTD.

Intention to create legal relations

Agreements made in the domestic or social setting

Agreements entered between husband and wife

Agreements entered into between a parent and a child

Other domestic arrangements

PARKER V CLARK, HAMER V SIDWAY

DOYLE V WHITE CITY STADIUM LTD

Minor’s liability in loan contracts

Minor’s liability in torts

Fraudulent misrepresentation of age by infant

Minor’s right to enforce contract against adult party

Exceptions to past consideration rule

Consideration need not be adequate.

Reform of specific rules on consideration by the Ghana contracts act, Act 25

Pre- existing legal obligations

A pre- existing legal obligation may arise in three different ways.

WILLIAMS V ROFFEY BROS & NICHOLLS CONTRACTORS LTD

• Pre- existing legal / public duty- KESSIE V CHARMANT

Consideration need not move from the promisee

The doctrine of promissory estoppel

CENTRAL LONDON PROPERTY TRUST V HIGH TREES HOUSE LTD

Scope of the doctrine

Effect of promise generally suspensory

Circumstances must be inequitable

D & C BUILDERS V REES

Ascertaining the terms of a contract

Test for ascertaining the terms of an oral contract

ESSO PETROLEUM V MARDON

CITY AND WESTMINSTER PROPERTIES LTD V MUDD.

SHANKLIN PIER LTD V DETEL PRODUCTS LTD