Introduction
“…where, subsequent to the preparation of an unexecuted document – which the parties intend should constitute a contract between them – those parties act consistently with its provisions, it may be concluded that they have entered into an informal or implied contract in the terms of that document.”
There is no doubt that contracts constitute part of our everyday dealings and are the backbone of business agreements. They are the foundation upon which mutually agreed-upon terms and obligations are erected. A contract is a promise or set of promises, the performance of which the law would recognize a duty to be performed and the breach of which the law will provide a remedy. A basic binding agreement, whether written or oral, must comprise some key elements including an offer, acceptance, consideration and intention to create legal relations. Contracts, especially written ones, are legally binding agreements that require the parties involved to express their mutual consent by signing the document. Accordingly, a lack of signature would ordinarily suggest that a party did not wish to be bound and had not accepted the terms of the offer. There are situations, however, where the absence of a signature does not necessarily negate the enforceability of the contract. Whether a contract is signed is only one factor for the courts to consider when deciding whether or not the parties to a contract intended to be bound. This essay explores the legal test for determining under what circumstances an unsigned contract would be treated as binding and enforceable by the parties.
Forming legally binding contracts in Ghana
In order to form a legally binding contract in Ghana, it is imperative that an agreement exists between the parties supported by consideration from each of those parties with the intention to create legal relations. The basic framework of offer and acceptance is used as a means of determining whether or not the parties to a contract have reached an agreement. In cases where the terms of the contract have been reduced into writing, a signature is often relied upon as an indication of acceptance. Admittedly, signature is not the only way in which the acceptance of an offer may be communicated. In some instances, conduct will amount to acceptance of an offer if it is clear that the parties acted with the intention of accepting an offer. Their conduct thus serves as evidence of the party’s implicit acceptance of the terms.
Furthermore, in business relationships, parties often engage in a consistent course of dealing over time. Where there is a well-established history of transactions and conduct that implies an agreement, such may be enforced as a binding contract concluded by consistent course of dealing. The courts usually consider the parties’ actions and history as evidence of an implied agreement. More so, where one party has partially or substantially performed its obligations under a contract, it can be an indicator of the parties’ intent to be bound by the agreement. Courts would thus enforce the terms of the contract based on the performance that has already taken place. Overall, the ultimate legal test for determining the formation of a legally binding contract in Ghana is whether, based on an objective assessment, the parties should be considered to have reached an agreement. If so, then whether or not a contract is in writing would not be a barrier to a legally binding contract coming into effect. It should be noted, however, that there are some situations where it is mandatory by statute that a contract be in writing for it to be legally enforceable. These include contracts for the sale of land, a transfer of shares, an assignment of intellectual property, amongst others. In such situations, the statutory prescription for a written contract must be complied with.
The jurisprudence on the enforceability of unsigned contracts
The jurisprudence of the superior courts of judicature adopts a pragmatic approach which seeks a way to enforce a contractual bargain even if not all of the execution formalities have been completed. The courts have established that in deserving cases, the lack of a signature in communicating acceptance of an offer will not of itself be a barrier to a legally binding contract coming into effect. The Supreme Court of Ghana, in the case of John Tenmottey Affuah and Okpattah v General Developments Company Limited, Civil Appeal No. J4/28/2015 dated 29th November, 2017 considered the circumstances under which an unexecuted document would give rise to legal consequences. The Supreme Court of Ghana cited with approval the UK case of Reveille Independent LLC v Anotech International (UK) Ltd (2015) EWHC 726 (Comm) where it was decided that the conduct of parties can amount to a waiver of the requirement of acceptance and communication of an acceptance of an offer. Thus, the Supreme Court of Ghana emphasised that an offer may be accepted by conduct in a manner where that conduct evidences a clear and unequivocal intention to accept the terms of the offer. In that regard, the Supreme Court stated that it is possible to accept an offer on terms set out in a draft agreement that is never actually signed. It highlighted that a party who has the right to sign a contract before being bound, may waive that right and still conclude the contract without insisting on signature. This position of the law has received earlier judicial confirmation by the Supreme Court of Nigeria in the cases of Ogudo v The State (2011) LPELR-860 (SC) and Awolaja and Others v Seatrade G.B.V. (2002) LPELR-615 (SC).
The fact that a transaction was performed on both sides will serve as evidence of the conduct of both parties such that it would be unrealistic to argue that there was no intention to enter into legal relations. Where there is a sufficient basis to show that an agreement has been reached based on conduct, it will necessarily require a close consideration of the factual circumstances. It must be such that an objective observer would have concluded that an agreement had been reached between the parties, on the written terms that had been exchanged, though unsigned. The only proviso would be the situation where it was specifically agreed between the parties that no contract would come into effect until the document was executed. In the absence of such proviso, courts have decided that where one of the parties has led the other party to believe that a binding contract was in place, and that other party has acted to their detriment in reliance on that representation, there would be a basis to argue that they should, as a matter of equity be estopped from denying that there was a binding contract. The evidence of both parties’ agreement outside a signature could be established through written correspondence, emails or other forms of communication that confirm an offer and acceptance.
Conclusion
While it is generally accepted that written contracts require signatures to be enforceable, the legal system acknowledges exceptions. Unsigned contracts may still be binding where there is evidence of an offer and acceptance; consistent course of dealing; partial performance or the application of promissory estoppel. Thus, it is important that businesses and contracting parties are aware of the nuances to navigate contractual relationships so as to ensure that agreements are not easily dismissed solely on the basis of missing signatures. Admittedly, though it is possible to show that an unsigned contract may be binding, this inevitably introduces some uncertainty such as determining the exact time the contract came into effect. It is thus advised that to avoid doubt, parties must make sure that all written contracts are properly executed by both parties before substantive work is commenced since it is clear that an unsigned contract may still bind the parties if their conduct demonstrates a waiver of such formal requirements.
God bless!
