PRIVITY

OF
CONTRAC
T
(LAW 152 - GROUP
1)
PART TIME
 GROUP 1 MEMBERS
1. APPIAH KUBI, FRANCISCA - 2381822
2. ASOMANING, ELIZABETH - 2382222
3. BAFFOE-BONNIE, BISMARK - 2382522
4. BANNOR, BARBARA ADWOAH A. - 2382622
5. DAPAAH, JAMES - 2383622
6. DANING, TONITA PETINGLE - 2383422
7. FYNN, JENNIFER - 2384122
8. KOMEY, AARON NII AYITEY - 2384822
9. ODURO, PAUL KWABENA - 2386622
10. WIAFE, DANIELLA ADUBEA - 2389322
OUTLINE
In this work, we will look at;
•Introduction to Privity of Contract
•Background/Concept
•Ghana Contracts Act, 1960 (Act 25)
a. Section 5
b. Section 6
c. Section 10
•Criticism
•Conclusion
INTRODUCTION
 The doctrine of privity of contract, per the common law
position, stipulates that only persons who are parties to a contract
are entitled to take action to enforce it (Price v. Easton; Tweddle v.
Atkinson).
 Thus, under the common law doctrine of privity of contract, a
contract cannot as a general rule confer rights or impose
obligations arising under it on any person except the parties to it.
 PRIVITY OF CONTRACT
(BACKGROUND)
 A key issue in contractual history has always been whether or not third parties could
actually enforce contracts under any circumstance.
 The common law position settles the claim, and holds that third parties could not
enforce contracts. (The landmark case of Tweddle vs. Atkinson)
 The reason given for the ruling is; Whether the third party had provided
consideration for the promise/benefit given. The case concluded that consideration
was vital, Wrightman J. puts it beautifully that a stranger to consideration could not
take advantages made for his benefit.
 This position influenced the decision of other cases including, Dunlop Pnuematic Co.
v. Selfridge.
THE GHANA CONTRACTS ACT,
1960 (ACT 25)
 The Ghana Contracts Act (Act 25) abolished the common law position
on the doctrine of privity of contracts and abolished the rule subject to
certain exceptions.
 The statutory provisions which changed the received law are contained
in Sections 5,6 and 10 of the Contracts Act, 1960.
Section 5(1) states: “Any 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 the provisions of this part, be enforced or relied upon by that person as
though that person were a party to the contract.”
THE GHANA CONTRACTS ACT,
1960 (ACT 25) - SEC. 5(1)
 This means that, the intention to confer some benefits on the third party, by
the parties to the contract is an important prerequisite for the enforcability of
third party rights. The parties must have had the third party within their
contemplation as someone or a member of a group on whom they intend to
confer some rights or benefit upon and such intention must be evident in the
contract.
 Date-Bah (JSC) submitted in his statement that an intent to confer a benefit on
a third party must mean either an intent to confer a gift on him or an intent to
discharge an obligation owed to him.
 This established position was reaffirmed in the decided case of Ejura Farms
(Ghana) Ltd and Anor. v Harlley.
 GHANA CONTRACTS ACT, 1960 (ACT 25)
- SEC. 5(1), INCIDENTAL BENEFICIARIES
 Incidental beneficiary refers to a third party who benefits from the performance of a contract,
but whose benefit was not the reason the contract was formed.
 Section 5(1) of the Contract Act does not allow incidental beneficiaries of contracts to sue on
them.
 This is borne out by the Memorandum to the Contracts bill 1960 which states that Section 5(1)
of the act “ does not apply merely because a contract in fact confers a benefit on a third person.”
Therefore it must be established that the parties contemplated benefitting the third parties and
such intention is evident in the contract either expressly or by implication as espoused in the case
of Yeboah and Anor v Krah.
 In Koah v Royal Exchange Assurance, Archer J (as he then was) stated inter alia that, “Here in
Ghana the Contracts act has changed the law with a fanfare of trumpets and has made it clear
that third parties not parties to a contract can sue but if and only if and when the contract
purports to confer a benefit on that third person.”
 EXCEPTIONS TO THE RULE ON
THIRD PARTY RIGHTS
Section 5(2) provides two major exceptions. They are;
a) Third-party right on resale price maintenance agreement
The Ghana statute on third party rights provides under section 5(2)(a) that, the provision under section
5(1) shall not apply to contracts purporting to maintain a resale price. This provision under section 5(2) is
an affirmation to the decision in the English case of Dunlope Pneumatic Tyre v. Selfridge. Thus, a promisor
cannot sue a third party for not abiding by a price maintenance clause contained in a contract existing
between the promisor and a promisee.
b) No conferment of immunity by a contract on a third party
Section 5(2)(b) provides a restriction to the application of section 5(1) by denying the promisor to sue a
third party who is affected by an exemption clause been stated in the terms of a contract. This exemption
clause indemnifies the third party’s liability to be sued. However, this does not allow the third party to take
advantage of the vicarious immunity. He/she may be liable if has acted out of negligence as was held in
Scruttons limited v. Minlands Silicons.
THE GHANA CONTRACTS ACT,
1960 (ACT 25) - SECTION 6
Section 6 states that where under the provision of section 5 of this Act a person
who is not a party to a contract is entitled to enforce or rely on a provision in the
contract -
 (a) no 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 his prejudice in
reliance thereon, unless that party consents to the variation or rescission; and
 (b) subject to paragraph (a), any party against whom the provision is sought to
be enforced or relied on shall be entitled to rely on or to plead by way of defence,
set-off, counterclaim or otherwise any matter relating to the contract which he
could have so relied on or pleaded if the provision were sought to be enforced or
relied upon by the other party to the contract.
Section 6 of Act 25 is a supporting section to the provision under
section 5(1) of the same Act. The two main support provided under
section 6 of the Act are;

a) The power to Amend or withdraw Third Party’s Right

The general Ghanaian rule is that, “where the beneficiary has acted in
reliance to the conferred benefit, the parties to the contract may not be
entitled to rescind or amend the contract without the beneficiary’s
consent.” This has been provided for under section 6(a) of Act 25.
b) The Derivative Nature Of Third-Party Rights.

Section 6(b) seeks to provide protection to the promisor against a suit by the third party in reliance
on section 6(a). This section provides that, the promisor is entitled to defend himself against the
claimant’s action by way of set-offs or counterclaims based on fraud, undue influence or
misrepresentation. The promisor may not be held liable to the third party’s claim if the other party to
the contract has not provided consideration to the promise in Question.

Section 6(b) stipulates that the legal position of third parties cannot be better than that of the
promisee under the contract since the third party derives his legal rights from the promise made to
the promisee. All defences, 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. In other
words, the promisor may set up defences, set-offs and counterclaims that are available against the
promisee against the third party too in a suit against him (the promisor).
(ACT 25) - SECTION 10
 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.
 Section 10 of the Contracts Act, 1960 (Act 25), basically cancels the
common law provision established in Tweddle v Atkinson that
consideration must move from the promisee. Hence, someone other
than the promisee can supply consideration.
 Section 10 allows a third party to enforce a contract to which he is a
stranger though he has provided no consideration for the promisor’s
promise.
 CRITICISM AGAINST PRIVITY
The doctrine of the privity of contracts though applied faced a lot of criticism.
Steyn J. in Darlington Borough Council v. Wiltshire Northern Ltd said that in,
“respecting the autonomy of the parties, the law of contract should of course give
effect to the reasonable expectations of the contracting parties.”
• He goes on further to add that, “there is no doctrinal, logical or policy reason why
the law should deny the effectiveness of a contract for the benefit of a third party
where that is the expressed intention of the parties”.
The doctrine of privity of contracts has also been criticized as being “out of touch
with modern trends” in Contract Law. Stone R. in his book Modern Law of Contract
points out that the doctrine does not accord with the reality of many commercial
contracts. In particular, the doctrine of privity was said to be inappropriate and
unhelpful in multiple linked contracts which involved multiple parties such as
 CRITICISM AGAINST PRIVITY -
CONT’D…
 Criticizing the received law on third party rights, Date Bah is of the view that, the reason
for the negation of third-party rights in the received law is based on dogma and on the
need to keep the doctrine of privity intact.
 However, according to him, there is no need to keep the concept of privity of contract
completely sacrosanct. He also mentioned that, legal doctrines should be used for
achieving socially or commercially desired results and that doctrines such as privity of
contract have to continually be evaluated so modifications can be adopted where
necessary.
 He also stated, “Indeed in the area of the assignment of contractual rights, English law
has already recognized the need for such modification of the doctrine of privity of
contract, in the interest of commercial convenience”.
 It is probably for reasons as such that the Contracts Act, 1960 (Act 25) sought to finally
allay the worries of persons on issues concerning third party contractual rights.
 CONCLUSION
 The coming into force of the Ghana Contract Act, 1960 (Act 25) has made a significant
amendment to the received rules governing the enforcement of third-party rights. These
amendments have created a conducive atmosphere in the making of contracts involving
third parties in the Ghanaian business settings.

 One thing we observed is that, many Ghanaian businessmen and women are not
exposed to the existence and relevance of this statues and its corresponding
amendments.

 We therefore suggest that, such important laws should be made more accessible to all
Thank you.
REFERENCES
 Christine Dowuona-Hammond, The Law of Contract in Ghana (Frontiers
Printing & Pub 2011)