UNIVERSITY OF CAPE COAST

COLLEGE OF HUMANITIES AND LEGAL STUDIES

FACULTY OF LAW

COURSE CODE: LAW 209

COURSE TITLE: LAW OF CONTRACT

LECTURER: MR. VANBOVEN SWANZY-ESSIEN, ESQ.

SEMESTER 1 - ASSESSMENT 1

INDEX NUMBERS:

BL/LAW/20/0001
BL/LAW/20/0017
BL/LAW/20/0029
BL/LAW/20/0094

QUESTION: With the aid of relevant authorities, assess critically the changes made by the
Contracts Act, 1960 (Act 25) to the doctrine of consideration.
INTRODUCTION

A contract may be defined as an agreement between parties who have capacity, for a price
measured in terms of money, effort, forbearance or exchange of promise, which agreement is
intended to bind the parties and is enforceable by a court of law. (Bondzie-Simpson, 2010). A
valid contract thus has to satisfy a number of conditions or elements to succeed as a contract
which include offer and acceptance, consideration, capacity, intention to create legal relations
and enforceability by courts.

In every legal system there exist rules which identify the types of agreement that are to be treated
as enforceable contracts. The doctrine of Consideration has since the 16th century developed
under the Common Law as a principal tool for distinguishing between gratuitous promises and
enforceable bargains. (McKendrick, 2017). This paper seeks to discuss some significant inroads
that Ghana’s Contracts Act, 1960 (Act 25) has made to the doctrine of Consideration.

MEANING OF CONSIDERATION

For a promise to sustain an action it must have been made in a deed or it must be backed by
consideration. A person who has not provided consideration is called a “volunteer”. The
Exchequer Chamber in the case of Curie V Misa1 provided the classical definition of
consideration as follows: “A valuable consideration, in the sense of the law, may consist either of
some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment,
loss or responsibility, given, suffered or undertaken by the other”. In the case of Thomas V
Thomas2, consideration was similarly explained as in Curie V Misa (Supra). Consideration was
defined to mean something which is of value in the eyes of the law moving from the plaintiff
which may be some detriment to the plaintiff or some kind of benefit to the defendant.

Consideration as defined in the above-named cases was found to be restricting and limiting
because the benefit-detriment concept was not applicable to all cases, especially in instances
where mutual promises were involved.

1
[1875] LR 10 EX 153
2
[1842] 2 Q.B. 851; 114 ER 330
It is against this backdrop that the law began to develop by seeing consideration not only in the
light of the benefit-detriment concept but by viewing it in the light of a price for a bargain
(something given in exchange for another's promise). This development later was adopted in the
case of Dunlop Pneumatic Tyre Co. Ltd v Selfridge 3 where it was established that an act or a
forbearance or promise of one party is the price for which the promise of the other party is
bought.
Consideration could be an act as in the case of Kessie V Charmant4, or an exchange of promises
as in the case of Afrifa V Class-Peter5 or a forbearance like in the case of Bank of West Africa V
Appenteng6.

ADVENT OF THE CONTRACTS ACT, 1960 (ACT 25)

The doctrine of consideration has inherent strict rules and compliances. However, with the
passage of time and under new and emerging circumstances, it seemed to be that these strict
rules were unable to meet the demands of the emerging and developing situations, and hence the
need for modification. It was in the light of this difficulty in Ghana that, the Contracts Act, 19607
was promulgated and aimed at making some necessary modifications to remedy these
constraints. This Act was enacted to among other things clarify the position of the Ghanaian law
with regard to the concept of consideration. The inroads made by the Contracts Act, 1960 8 on the
doctrine of consideration are discussed below:

i. The first modification made by the Contracts Act, 19609 is in Section 8(1). It provides
that a promisor who promised to keep an offer open for a specified period is not at
liberty to withdraw his offer before the expiration of that period on the basis that the
promisee has not provided any consideration for the offer.

3
[1915] A.C. 847
4
[1973] 2 GLR 194
5
[1975] GLR 359
6
[1971] JELR 69126 (CA)
 This contrasts sharply with the position under common law where the offer could be
withdrawn before the specified period would elapse once there is no consideration as
in the case of Dickinson V Dodds10.

The modification made by Act 25 in this regard is very critical because the promisee
may have relied on the promise to keep the offer open until the specified period and
might have contracted or engaged himself in other transactions all in preparation to
accept the offer before the due date. In the situation where the offer is withdrawn
before the due date, it is reasonable that the promisee gets entitled to appropriate
relief at law because the promisor has offended section 8(1) of the Act.

i. The second strict rule or modification made by the Contracts Act is the part payment
of debt. The Common Law position on the waiver of payment of a debt or part
payment of debt is that generally, a promise to forego a debt or part payment of a debt
is not binding on the promisor unless there is some fresh consideration following
from the promisee. Thus, in Pinnel’s case 11 the principle was that “payment of a lesser
sum in satisfaction of a greater cannot be any satisfaction for the whole”. Thus, the
part payment of a smaller sum of money does not excuse the debtor from paying the
full amount even though the creditor has agreed it to be full discharge. This principle
was reaffirmed in the case of Foakes v Beer12 where it communicated that in the
absence of fresh consideration, the part payment did not constitute a total discharge of
the whole debt.

This rule in the Pinnel’s case (supra) under which a waiver of a debt or other
obligations was only valid and binding if accompanied by other consideration is no
longer applicable in Ghana as it has been overruled by Section 8 (2) of the Contracts
Act, 1960, (Act 25). The Act states that, “A promise to waive the payment of a debt
or part of a debt or the performance of some other contractual or legal obligation shall
not be invalid as a contract by reason only of the absence of any consideration
therefor”. The rational for this is intended to preclude settlement of debts or
 obligations in a business-like manner where a creditor was content to receive less
money instead of the delay and risk it might take in pursuing the whole. It could also
encourage litigation. Thus, a party can offer to forgive a debt (in part or whole) or
waive an obligation and be held to his promise.

10[1875] 2 Ch D 463
11[1902] 5 Co. REP. 117A
12[1883] LR 9 App Cas 605

ii. Thirdly, another rule modified by the Contracts Act, 1960 is the one regarding pre-
existing legal duty. the Common law position for acts or forbearances in the
performance of an existing public duty is that the performance of or a promise to
perform a duty already imposed on a person by law does not constitute sufficient
consideration for a counter promise. The traditional position was that, if the promisee
is already under a legal duty to do or forbear to do the thing promised, he or she is not
conferring additional benefit or incurring additional detriment by merely providing
that act, promise or forbearance. This was the case in Collins V Godefrey13. Here the
plaintiff was subpoenaed to appear at a trial to testify on behalf of the defendant, who
promised him a sum of money but defaulted. In a subsequent action the plaintiff
failed to recover the money since he was already under duty to perform the said act
for which he was subsequently promised consideration. There is an exception to this
rule even under common and that is if the promisor promised or undertook to do more
than he was legally bound to do then such performance would constitute sufficient
consideration for another promise. This was the position in the case of Glasbrook
Bros V Glamorgan City Council 14.

However, this rule has been modified in Ghana by virtue of Section 9 of the Contracts
Act, 1960, (Act 25) which states that, “ The performance of an act or the promise to
perform an act may be a 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 or not”. Thus, in the case of Kessie V Charmant 15
 (Supra), the ambassador’s performance, although enjoined by law was held to be
sufficient consideration.

iii. Finally, under section 10 of Act 25, it is possible for consideration to be supplied by
someone other than the promisee. The beneficiary need not be the promisee. The Act
clearly provides that “No promise shall be invalid as a contract by reason only that
the consideration therefor is supplied by someone other than the promise”.

13[1831] 1 B & AD 950

14[1925] A.C 270
15[1973] 2 GLR 194

This constitutes a gross deviation from the position under common law which
required that consideration must by all means move from the promisee as established
in the case of Twedle v Atkinson16. To wit, consideration all the time needed to move
from the promisee. This means that the person in whose favour the promise is made
can only enforce such a promise if he provided consideration for it himself or herself.
It also followed that a promisee could not sue on a promise if the consideration was
provided for by a third party as has been established in the case of Twedle v
Atkinson (supra).

16[1861] 1 B&S 393

CONCLUSION

In conclusion, the modifications and affirmation of the common law principles in respect of the
rule on part payment, waiver of debts and pre-existing duties, have made significant inroads into
the common law position on sufficiency of consideration under pre-existing legal obligations. It
has allowed Ghanaian Courts inter alia to avoid tenuous processes of giving effect to such
contracts especially where they do not affect public policy. These modifications in the doctrine
of consideration as a principal prerequisite for ensuring enforceability of contracts is aimed at
protecting the interests of parties who rely on such promises, in so far as the enforceability of
such promises is not debarred by any vitiating factor.
REFERENCES

1. Bondzi-Simpson P. E. (2010): Law of Contract with special reference to the Law of

Ghana. 2nd Edition Avant Associates Ltd.

2. Mackenderick, E. (2017): Contract Law. 12th Edition. Palgrave Mcmillan Education.

3. Dowuona-Hammond, C. (2011): The Law of Contract in Ghana. Frontiers Printing and

Publishing Co. Ltd.

LIST OF CASES

1. Currie V Misa (1875) LR 10 EX 153.

2. Thomas V Thomas [1842] 2 Q.B. 851; 114 ER 330

3. Dunlop Pneumatic Tyre Co. Ltd v Selfridge [1915] A.C. 847

4. Kessie V Charmant [1973] 2 GLR 194

5. Afrifa V Class-Peter [1975] GLR 359

6. Bank of West Africa V Appenteng [1971] JELR 69126 (CA)

7. Dickinson V Dodds [1875] 2 Ch D 463

8. Pinnel’s case [Pinnel v. Coles (1902) 5 Co. Rep. 117a.]

9. Foakes v Beer [1883] LR 9 App Cas 605

10 Collins V Godefrey [1831] 1 B & AD 950

11. Glasbrook Bros V Glamorgan City Council [1925] A.C 270

12. Twedle v Atkinson [1861] 1 B&S 393