When a Ghanaian Business Contract Needs Writing, Consideration or a Third-Party Right

A handshake can still make a contract in Ghana. It does not follow that every promise is enforceable, or that anyone who benefits from a deal can sue on it. The Contracts Act, 1960 (Act 25) speaks to three points businesses still get wrong: when writing is required, when absence of consideration matters, and when a person who did not sign may enforce a term. This note states what the Act says on those points. Offer, acceptance and illegality sit largely outside it.

Writing is not generally required

Section 11 provides that, subject to any other enactment and to the Act itself, no contract is void or unenforceable by reason only that it is not in writing, or that there is no written memorandum or note of it. The section applies whether the contract was made before or after the Act commenced.

Two limits sit in that sentence. "By reason only" means the lack of writing is not, by itself, a ground of invalidity. An oral agreement can still fail because its terms cannot be proved. The rule also yields to any other enactment, and to the rest of Act 25.

The Schedule records that parts of the English Statute of Frauds ceased to apply in Ghana, including section 4 except so far as it relates to any contract or sale of lands. That is not a licence to treat land contracts as informal. Section 11 leaves other enactments in place.

Guarantees are the clear exception in the Act

Section 14(1) is the formality businesses meet most often. An agreement by which a person guarantees the due payment of a debt, or the due performance of any other obligation by a third party, is void unless it is in writing and signed by the guarantor or the guarantor's agent, or is entered into in a form recognised by customary law.

A director's oral assurance that the company will be made to pay can fall inside that rule if it guarantees the company's obligation. The customary-law alternative is real and should not be dropped from the advice. It is not a reason to leave an ordinary commercial guarantee unwritten. Section 14(2) is separate. A promise or representation about the character or credit of a third person, made so that the third person may obtain credit, money or goods, is void unless it is in writing and signed by the party to be charged or that party's agent.

Consideration is modified, not abolished

Act 25 does not say that consideration is unnecessary. It validates two kinds of promise despite the absence of consideration, and it adjusts two familiar doubts.

Under section 8(1), a promise to keep an offer open for acceptance for a specified time is not invalid as a contract by reason only of the absence of consideration. A seller who promises to hold a price until a stated date should not assume the promise is worthless merely because the buyer paid nothing to keep it open. The section does not say the promise is enforceable whatever else is wrong with it.

Section 8(2) does the same for a promise to waive payment of a debt or part of a debt, or to waive performance of some other contractual or legal obligation. A creditor's promise to accept a lesser sum is not invalid merely because the debtor gave no fresh consideration. Again, the words are "by reason only".

Section 9 says that performing an act, or promising to perform an act, may be sufficient consideration for another promise even though a legal duty already requires that act, whether or not the other party could have enforced the duty. The word is "may". The section does not say that every performance of an existing duty is automatically enough.

Section 10 provides that no promise is invalid as a contract by reason only that someone other than the promisee supplied the consideration. A parent or a related company may supply the value. The section does not say consideration is irrelevant, and it does not give that other person a right to sue.

A third party can enforce only a conferred benefit

Section 5(1) is narrower than the slogan that Ghana has abolished privity. A provision in a contract made after the Act commenced, which purports to confer a benefit on a person who is not a party, may be enforced or relied on by that person as though they were a party. The person must be designated, or be a member of a class of persons. The right is subject to the rest of Part II.

Section 5(2) excludes two kinds of provision. One is a resale-price-maintenance term, under which a party agrees to pay a non-party if goods are sold below the contract price. The other purports to exclude or restrict a non-party's liability. An incidental advantage is not enough. If the contract does not purport to confer the benefit, section 5 does not apply.

Where section 5 applies, section 6(a) limits later changes. No variation or rescission may prejudice the third party's right if that person has acted to their prejudice in reliance on the provision, unless they consent. A named beneficiary who has done nothing in reliance on the term is not given a veto by this paragraph. Section 6(b) protects the party being sued. That party may raise any matter relating to the contract which they could have raised if the other contracting party had sued, including by defence, set-off or counterclaim.

Section 6A, inserted by the Volta River Project (Supplementary Provisions) Act, 1962 (Act 96), keeps sections 5 and 6 off agreements listed in the First Schedule to Act 96, unless a listed agreement says otherwise. Those are named project agreements, not an ordinary supply contract. Transfer of an existing debt is a different path, under section 7, and is not the third-party right in section 5.

What to check before relying on a promise

An agreement to hold an offer open, or to accept less than the debt, raises section 8, not a general abolition of consideration. A promise to answer for someone else's debt raises section 14, and should be written and signed unless a customary-law form is genuinely being used. A clause that names a person, or a class, and purports to confer a benefit raises section 5, with the reliance rule in section 6 and the exclusions in section 5(2).

Where the point is important, record the terms. Section 11 removes lack of writing as a ground of invalidity. It does not help a party who cannot prove what was agreed.

Parliament records the Contracts (Amendment) Act, 2023 (Act 1114) as amending section 17, on contracts for the Republic. That is not a change to sections 5 to 14. Amended section 17 wording is not set out here, because that text was not compared.

Questions about how a commercial term should be drafted, or about a dispute over an existing agreement, sit with the firm's corporate and commercial practice. To discuss a specific contract, contact the firm.

This article is general information about the Contracts Act, 1960 (Act 25), as amended by Act 96 in the copy relied on. It is not legal advice, and it does not create a solicitor-client relationship. The text used is the copy hosted by the Business Regulatory Reform programme, described there as Act 25 as amended by Act 96. It is not a Gazette-certified consolidation, and GhaLII was not available for a second comparison. Other enactments can impose formalities that section 11 expressly preserves. Outcomes depend on the documents and the facts. A lawyer should be consulted before anyone relies on a promise, a guarantee or a third-party clause.