In today’s Friday read we will be looking at the Frustration of contracts in Ghana.
After parties agree and enter into a contract, an unexpected event or situation may occur that completely changes the nature and terms of the contract.
This unexpected situation usually happens through no fault of either party. This can make the performance of a party’s obligation under the contract impossible to fulfill or change the terms of the contract.
A common example of such an unexpected event is the COVID- 19 pandemic which resulted in the lockdown order issued by the President of Ghana which ground several businesses to a halt.
The doctrine of frustration of contract allows the court to bring a reasonable solution to the new reality that the parties to the contract are facing.
It must be noted that not all unexpected situations result in the frustration of the contract. Some examples of instances that do not give rise to the frustration of a contract are the increase in the cost of expenses, financial loss, mere delay, and self-induced frustration.
Here are some guidelines used by the court to determine the doctrine of frustration:
⮚ At the time the contract was made, what were the surrounding circumstances; did the contract consider the risk of the unexpected situation occurring;
⮚ At the time the contract was made, what were the party’s contractual obligations; and
⮚ Was there a change in the contractual obligations of the parties after the unexpected situation and how can it be solved to benefit all parties.
Once the court is satisfied that all the guidelines have been met, the court will find that the contract has been frustrated and provide a reasonable solution for all the parties to the contract.
Share with your network and stay informed! #contractlaw #Ghana #legalawareness