Introduction of Contracts (Amendment ) Act, 2023 (Act 1114)

The law that has been regulating contractual arrangements in Ghana since 1960 has been the Contract Act,1960 (Act 25). Earlier this year on the 1st day of March 2024, the President of the Republic assented to the Contracts (Amendment) Act, 2023 (Act 1114) which by the assent, came into force.

 

The amendment was limited to only Section 17 of the Act which relates to Contracts of the Republic. The section originally only stated that the Act applies to contracts and transactions which are entered into on behalf of the Republic as it applies to other contracts and transactions[1].

 

The amendment has introduced two major additions to the existing provision.

 

The first is to clarify the persons that are authorized to enter into a contract or transaction on behalf of the Republic[2]. They are:

 

  • a Minister responsible for a subject or department on a matter falling within the portfolio of the Minister
  • a person authorized by the Minister; or
  • any other person authorized by law.

 

As such, for any contract where the Republic or any government agency is a party to, as from the 1st of March 2024, it is only the group of persons listed above that can sign on behalf of the Republic or government agency.

 

The second major addition is to regulate the calculation of interest on sums of money due a party under a contract or transaction involving the Republic. Such interests shall only be calculated by simple interest.[3] The Amendment Act has strictly outlawed the calculation of interest by compound interest where the Republic is a party to the contract and no authorized person shall enter into such a contract[4].

 

It further goes on to say that such a contract if entered into is null and void[5] hence unenforceable in any court.  Further, a person who knows about these provisions and willfully enters into such a contract commits an offence and could be made to pay between five thousand and ten thousand penalty units or imprisoned for a period between ten and fifteen years or both[6].

 

In conclusion, it must be clear that these provisions only apply to contracts entered into after the 1st of March 2024 and not before. In dealing with any government agency, we need to be sure it is the Minister responsible for that sector that signs or someone expressly authorized by the Minister and finally, only simple interest can be calculated on any interest payments with respect to government contracts.

 

Cephas Tettey Omenyo

Alexander & Partner Ghana PRUC

co(@)alexander-partner.com

+233 20 823 1346

 


[1] Section 17 Contracts Act, 1960 (Act 25)

[2] Section 17 (2) Contacts (Amendment) Act, 2023 Act 1114

[3] Section 17 (3) Contracts (Amendment) Act, 2023 Act 1114

[4] Section 17 (4) Contracts (Amendment) Act, 2023 Act 1114

[5] Section 17 (5) Contracts (Amendment) Act, 2023 Act 1114

[6] Section 17 (6) Contracts (Amendment) Act, 2023 Act 1114

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