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. See also Aidoo and Others v AG and
Another. NTHC Ltd v Antwi.
 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 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

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.

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

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.

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.

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 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.

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.

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.

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

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

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 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 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 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 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 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 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.

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.
 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,

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 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

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 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

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

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.

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.

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 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.

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 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 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 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

(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 agunto 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 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.

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

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. 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 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 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,

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.

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?

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 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
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.
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 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

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

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 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.

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.

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

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 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

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.

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

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 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
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.

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 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

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.

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 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

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

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 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, 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.

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.

(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

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.

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 29 th 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 1 st 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 5 th 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 29 th November, 1996, the Plaintiff caused his
lawyer to write a letter to the defendant dated 29 th January 1997 which asserted that the Senior Staff Service
Conditions of the defendant dated 1st April 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 19 th 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)

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
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

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

(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
 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

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 3 rd 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 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 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 13th 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 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.

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.