Breach of Contract and Remedies That Commercial
Lawyers Must Know in Ghana
A breach of
contract occurs when one party fails to fulfill their obligations under a
legally binding agreement. Understanding the types of breaches, their legal
implications, and available remedies is essential for commercial lawyers in
Ghana. This knowledge enables them to effectively advise clients, negotiate
settlements, and pursue or defend legal actions.
1. Breach of Contract: Definition and Types
A breach of
contract occurs when a
party to a contract fails to perform their obligations as agreed. The Contracts
Act, 1960 (Act 25) and common law principles guide the determination of breaches and
remedies in Ghana.
Types of
Breaches:
Actual
Breach:
Occurs when
a party fails to perform their obligations on the due date.
Example: A
supplier fails to deliver goods as agreed.
Anticipatory
Breach:
Occurs when
a party indicates, before the performance is due, that they will not
perform their obligations.
Example: A
contractor informs the client they cannot complete a project due to
financial difficulties.
Material
Breach:
A
significant failure that undermines the contract’s purpose, allowing the
other party to terminate the agreement.
Example:
Delivering entirely different goods than specified in the contract.
Minor
(Partial) Breach:
A failure
to perform a less critical obligation that does not entitle the other
party to terminate the contract but may warrant compensation.
Example: A
slight delay in performance without significant harm to the other party.
2. Legal Implications of Breach of Contract
When a breach
occurs, the non-breaching party may take legal action to seek remedies or
enforce performance. The following legal principles guide breach of contract
cases in Ghana:
Proof
of Breach:
The
claimant must establish the existence of a valid contract, the breach,
and resulting damages.
Defenses
to Breach:
A party
accused of breach may argue impossibility of performance, frustration, or
illegality.
Mitigation
of Loss:
The non-breaching
party is obligated to take reasonable steps to minimize the damages
resulting from the breach.
Commercial
Lawyer’s Role:
Assess
whether a breach has occurred and evaluate its materiality.
Advise
clients on the best course of action, including pursuing remedies or
negotiating settlements.
3. Remedies for Breach of Contract
Remedies aim to
compensate the injured party or enforce contractual obligations. In Ghana,
remedies for breach of contract are governed by common law principles and statutory provisions under the Contracts Act, 1960.
a. Damages
Damages are monetary compensation awarded to the injured party.
Compensatory
Damages:
Awarded to
restore the injured party to the position they would have been in if the
contract had been performed.
Example:
Loss of profits due to non-delivery of goods.
Nominal
Damages:
Awarded
when no substantial loss is suffered but a breach is proven.
Punitive
Damages:
Rarely
awarded in Ghana; intended to punish the breaching party for egregious
conduct.
Liquidated
Damages:
Pre-agreed
amounts specified in the contract as compensation for specific breaches.
Commercial
Lawyer’s Role:
Calculate
appropriate damages and ensure that clients document losses effectively.
Draft
contracts with clear liquidated damages clauses to protect clients’
interests.
b.
Specific Performance
A court order requiring the breaching party to fulfill their contractual
obligations.
Typically
granted when damages are inadequate to compensate for the breach, such as
in contracts for unique goods or real estate.
Courts in
Ghana exercise discretion in granting specific performance, considering
the feasibility of enforcement.
Commercial
Lawyer’s Role:
Advise
clients on the likelihood of obtaining specific performance.
Present
compelling evidence demonstrating why monetary compensation is
insufficient.
c.
Injunctions
Court orders preventing a party from doing something (prohibitory injunction)
or requiring them to perform an act (mandatory injunction).
Often used
in cases of anticipatory breach or ongoing harm caused by the breach.
Commercial
Lawyer’s Role:
File
applications for injunctions to protect clients’ interests pending
resolution of the dispute.
Argue for or
against injunctions in court based on their impact on business operations.
d.
Rescission
Rescission involves canceling the contract and restoring the parties to their
original positions.
Applicable
in cases of fraud, misrepresentation, or material breach.
The injured
party must not have affirmed the contract after becoming aware of the
breach.
Commercial
Lawyer’s Role:
Evaluate
whether rescission is the best remedy based on the client’s objectives.
Draft
notices of rescission and negotiate terms for unwinding contractual
arrangements.
e.
Restitution
Restitution aims to prevent unjust enrichment by requiring the breaching party
to return benefits obtained under the contract.
Common in
cases where the contract is declared void or rescinded.
Commercial
Lawyer’s Role:
Ensure
clients recover any benefits conferred under unenforceable or breached
agreements.
4. Factors Influencing Remedies in Ghana
Several factors
determine the type and extent of remedies granted in breach of contract cases:
Nature
of the Breach:
Material
breaches often lead to termination and significant damages, while minor
breaches result in limited remedies.
Mitigation
of Damages:
Courts
assess whether the injured party took reasonable steps to minimize
losses.
Contract
Terms:
Clauses
such as exclusion or limitation of liability affect the remedies
available.
Court
Discretion:
Ghanaian
courts have wide discretion in awarding damages, granting injunctions, or
ordering specific performance.
5. Alternative Dispute Resolution (ADR) for Breach
of Contract
Given the time
and cost associated with litigation, ADR methods such as arbitration and
mediation are increasingly popular in Ghana.
Benefits
of ADR:
Speedy
resolution of disputes.
Confidentiality
of proceedings.
Preservation
of business relationships.
Commercial
Lawyer’s Role:
Represent
clients in ADR proceedings and negotiate settlements.
Draft
arbitration or mediation clauses in contracts to provide for alternative
mechanisms in case of disputes.
6. Conclusion
Understanding the
legal framework for breach of contract and the available remedies is crucial
for commercial lawyers in Ghana. From advising clients on dispute resolution
strategies to pursuing damages or specific performance, lawyers play a pivotal
role in safeguarding their clients' rights. By mastering these aspects,
commercial lawyers can effectively navigate Ghana’s legal landscape and support
their clients’ business objectives.
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