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The plaintiff
entered into a loan agreement
with defendant on 19th June
2007, by the terms of which the
plaintiff granted the defendant
a loan facility of GH¢30,000.
Defendant was to pay only
interest on the loan sum for the
20 month loan period and pay the
full sum at the end of it. The
2nd defendants, as employers of
1st defendant signed an
undertaking on 13th June to pay
the loan with the end of service
benefit of the 1st defendant and
remit any funds the defendant
has with it to the plaintiff
when he ceases to be an employee
of parliament. They also
irrevocably and unconditionally
accepted full liability for the
loan if they failed to comply
with any of these obligations.
Please see exhibit F. On July
17th, plaintiff wrote exhibit 1
to defendant varying the credit
facility to a lower sum of GH¢23,000
and asked defendant to sign a
new offer letter. This
subsequent letter said that
'this offer letter supersedes
the previous offer letter dated
June 19 2007 and renders it null
and void'. The defendant failed
to execute this variation of the
old offer by signing it.
Notwithstanding the defendant's
failure to sign exhibit 1, the
plaintiff had debited the
defendant's accounts with GH¢6,000
to bring the defendant's
liability on the loan from GH¢30,000
to GH¢23,000. In protest against
this action, defendant directed
his employers, Parliament to
stop paying the interest on the
loan as agreed by the parties
and undertaken by Parliament so
to do. They also failed to repay
the principal debt at the end of
the 20 month period as
previously agreed by the parties
under exhibits D and F.
Plaintiff has sued for recovery
of this money from June 2007 to
date of final payment. The
defence of the 1st defendant is
that by the tenor of exhibit 1,
exhibit D had been rendered null
and void and so the parties had
no contract between them.
Secondly, the plaintiff's action
in unilaterally varying the loan
sum from GH¢30,000 to GH¢23,000
was a breach of their agreement
and led to losses for him. He
has counterclaimed for those
losses. The defendant argues
that when he opened an account
with plaintiff for the loan, he
indicated on the documentation,
tendered in court as exhibit 'A'
that his sources of funds for
the account would be the
business of operating a fishing
vessel. Further, that he had
been paid arrears of rent
allowance which he paid into the
same account and which he
intended to use to fuel his
fishing vessel. Thirdly, the
plaintiff is aware that when the
original loan sum of GH¢30,000
was credited to his account the
defendant directed the bank to
issue a banker's draft to a
company called Inter maritime
Services ltd and this was for
supply of diesel for the vessel
as well as paying Shippers and
so the plaintiff was at all
times aware that the defendant's
loan was used for his fishing
business. His argument was that
by debiting his account with GH¢6,600
without his consent, after the
GH¢30,000 had been used to pay
for the ship's needs, the
plaintiff act amounted to
conversion of the GH¢6,600 from
his account and this tort
deprived him of the further
capital he was going to use on
his vessel, leading to the
grounding of the vessel,
collapse of the business of the
vessel and substantial losses
for the vessel and himself. He
counter claimed for an order
compelling the plaintiff to pay
the cedi equivalent of 80,000$
as loss of earnings and profits
from his shipping business with
interest from July 2007, damages
for breach of contract and
recovery of GH¢8,800. Plaintiff
has denied being liable as per
defendant's position. The issue
for determination by this court
is which party is entitled to
their claim from the
documentation before the court
and the evidence. My findings
are that 1. The parties had a
binding contract in exhibit D
which was not nullified
by-exhibit 1 because exhibit 1
was not agreed by the defendant.
At best exhibit 1 amounted to an
offer to novate the contract in
exhibit D. This offer had to be
accepted expressly. It was not
accepted expressly but tacitly
by the conduct of the defendant,
allowing a variation of exhibit
D only in the sum granted as a
loan. 2. By clauses 2e and 3 of
exhibit A, the 1st defendant
gave the plaintiff leave to
manage his accounts with a wide
discretion which justified in
law the act of reducing the loan
sum disbursed into the
defendant's account 3. The
debiting of the defendant's
account with GH¢6,600 did not
amount to a breach of contract
by reason of clause 3 of exhibit
A, neither did it amount to
conversion because it was the
defendant who obtained the
benefit of the reduction. The
action amounted to a part
repayment of the loan and the
money went to the credit of the
defendant and not the plaintiff
4. That even if the issue of
exhibit 1 nullified the
operation of exhibit D as argued
by defendant, a position which
this court finds as having no
legal justification, the
defendant was still bound in law
and equity to repay the sum of
GH¢23,000 which remained with
him through affirming the loan
contract. 5. The defendant
failed to prove his alleged
special damages. Further to
that, a party who anticipated
specific losses if a contract
was not carried out in its exact
terms had to communicate those
circumstances to the other
before the execution of the
contract. In the absence of that
communication, even if there was
breach of the contract, the
injured party would not be
entitled to special damages
arising out of those specific
losses. Damages must be
calculated in accordance with
what is reasonably forseeable.
The defendant's arguments on his
counterclaim therefore have no
basis in law. 6. The plaintiff
is entitled to its claims
against both defendants. These
are my reasons for these
findings. The parties had a
binding contract in exhibit D
which was-not nullified by
exhibit 1 because exhibit 1 was
not agreed by the defendant. At
best exhibit 1 amounted to an
offer to vary the contract in
exhibit D and this offer, had to
be accepted expressly. It was
not accepted expressly but
tacitly by the conduct of the
defendant, allowing a variation
of exhibit D only in the sum
granted as a loan. Exhibit D was
duly executed by both parties
and implemented. Pursuant to it,
the defendant opened an account
with plaintiff, plaintiff
credited his account with GH¢
30,000 and defendant withdrew
this money. The contract was
already being performed and
could not be terminated except
by the discharge of its
obligations or termination which
was accepted by all parties. And
it was clear that this is what
the offer in exhibit 1 sought to
do - to discharge the original
contract in exhibit D in place
of the contract expressed In
exhibit 1. This is a form of
novation. To quote Chitty on
Contracts 28th Edition, (Sweet &
Maxwell) 1999, Volume One,page
1066 on a description of the
traditional understanding of
novation,. 'there is no doubt
that with the consent of both
contracting parties all
contracts of any kind may be
transferred, and the term 'novation'
has been introduced from Roman
Law to describe this species of
transfer. Novation takes place
where the two contracting
parties agree that a third, who
also agrees, shall stand in the
relation of either of them to
the other. There is a new
contract and it is therefore
essential that the consent of
all parties shall be obtained;
in this necessity for consent
lies the most important
difference between novation and
assignment… That acceptance may
be inferred from acts and
conduct, but ordinarily, it is
not to be inferred from conduct
without some distinct request.
It should, however be noted that
the effect of a novation is not
to assign or transfer a right or
liability, but rather to
extinguish the original contract
and replace it by another.'
Although novation traditionally
occurs when the contractual
obligation between two persons
is changed by a third party
moving into the shoes of one of
the parties, the discharge of an
original contract and the
replacement of the original
contract by a new one in
essentially the same transaction
may also be described as
novation. In Law of Contract,
EPP 2002, Bondzi-Simpson puts it
this way on page 125 - 'Novation
is a specie of discharge of
contract by agreement to
substitute at least one of the
parties or the contractual
terms' Or in the words of Abban
J in Japan Motors v. Randolph
Motors, novation is 'a
transaction by which, with the
consent of all the parties
involved, a new contract Is
adopted in place of another
which is already In existence
Novation primarily involves the
discharge of the original
obligation under an existing
contract and the creation of a
new one in its place' What was
required to be done for, this
novation of exhibit D to exhibit
was for the defendant to
expressly accept exhibit 1. This
was stated in the closing
paragraphs of exhibit 1 by the
setting out of a Memorandum of
Acceptance and the words 'Please
indicate your acceptance of this
facility and the associated
terms and conditions on the
attached copy of this letter
dated July 17th 2007 by
appending your signature on
every page and signing the
Memorandum of Acceptance under
seal and returning same to
Guaranty Trust Bank (Ghana Ltd
not later than August 6 2007.
Such were the terms needed to
bring exhibit 1 into being.
Defendant refused to comply,
leaving exhibit 1 a mere offer
that was not accepted. From the
tenor of the defendant's
arguments, he is alleging that
exhibit D lost its validity
after the issue of exhibit 1
because in the opening
paragraphs of exhibit 1 the
words 'this offer letter
supersedes the previous offer
letter dated June 19 2007 and
renders it null and void'. I beg
to differ from this position. An
offer which is articulated as
accepted only in writing does
not create a contract unless
accepted in writing and this is
trite learning. If exhibit 1
does not create a contract, then
none of its terms became
binding. To that extent,
defendant's argument that by the
plaintiff's own presentation in
exhibit 1, he defendant ceased
to be bound by exhibit D is one
made outside the purview of good
faith and unsustainable in law
and equity. It is my finding
that at all times, the parties
remained bound to their original
contract exhibit D. What then is
the effect of the plaintiff's
reduction of the defendant's
credits in his account by GH¢6,600.
I find my response in exhibits A
and K. Exhibit K shows that it
was on July 16th 2008 that the
bank rescheduled defendant's
loan without his consent and
contrary to the terms of exhibit
D. Indeed,that rescheduling
therefore was done before
exhibit 1 was proposed on 17th
July 2008.1n law, this act would
amount to a breach of contract
if no justification can be found
from the contractual terms of
their engagement, or as an
implied term of the contract
between the parties as banker
and customer. It is plaintiff's
argument that by the terms of
exhibit A, they were given the
mandate to take steps such as
they did in reducing the loan
sum. The contract between the
plaintiff and defendant as
banker and customer is in
exhibit A. Clause 2 e of this
document says I agree 'to be
bound by any notification of
change in conditions governing
the account directed to my last
known address and any notice or
letter sent to my known address
shall be considered as duly
delivered and received by me at
the time it would be delivered
in the ordinary course of post
Clause 3 also states ‘I also
agree that in addition to any
general lien or similar right to
which you as bankers may be
entitled by law you may at any
time and without notice to me
combine or consolidate all or
any of my accounts without any
liabilities to you and set off
or transfer any sums standing to
the. of any one or more of such
accounts or any other credit be.
it cash, Cheques, valuables,
deposits, securities, negotiable
instruments or other assets
belonging to me with you in or
towards the satisfaction of any
of my liabilities to you or any
other account or in any other
respect whether such liabilities
be actual or contingent primary
collateral and several or
joint.' I have looked at these
clauses and see that they give
the plaintiff mandate to do a
whole range of acts which will
include 'rescheduling a
premature loan settlement' by
correcting what the proper
figure on a loan should be. My
attention is particularly caught
by clause 2e. By agreeing to be
bound by any notification of
change in conditions governing
the account, and especially when
it is not disputed that this
account was purposely opened for
the loan, it is my evaluation
that when plaintiff realized a
computation of error in
calculating the appropriate sum
to grant as a loan, it did not
amount to a breach of contract
when they rescheduled the loan
sum and informed the defendant
of what they had done. The
contract sum is a condition of
the loan contract. And I use the
word 'condition' in terms of it
being a fundamental term of the
loan contract. Thus if there has
to be a change of such a term,
the plaintiff was well within
its rights given by exhibit A to
inform defendant of the need for
that change to be effected. It
amounted to informing the
defendant of the need to vary
the contract between the parties
and defendant had agreed to be
bound by notification of change.
Defendant at that point had an
option to decide whether it
would continue with the contract
or terminate it. He could not
consider himself discharged from
his obligations under the
contract because of the
variation to the loan contract
when he had expressly given the
plaintiff the authority to
notify him of any changes in the
conditions governing the loan
account. But suffice it to be
said that even if the plaintiff
did not have authority under
exhibit A or D to change the
terms of the loan agreement, the
worst legal implication of its
act would be that it had
breached its contract with
defendant by reducing the loan
sum on 16th July 2007 - a
situation I do not find as a
matter of law. It is important
to note that if there is a
breach in contract, the injured
party is not automatically
discharged from the contract. As
Chitty on Contracts 28th Edition
(Sweet & Maxwell) 1999, Volume
One, page 1219 puts it, 'the
rule is usually stated as
follows: 'any breach of contract
gives rise to a cause of action;
not every breach gives a
discharge from liability.The
simple legal position is that a
contract is not extinguished by
its breach. Repudiation because
of breach, rescission or
termination - whatever
terminology is used - must be
deliberately brought into
existence by an act of the
injured party and in the event
of the injured party not taking
steps to terminate the contract,
it continues to be bound by it.
Thus as soon as it came to the
notice of defendant that his
loan had been rescheduled to GH¢23,000
without his knowledge, he had
the option to terminate the loan
contract and claim whatever
damages he had encountered if he
could prove it. By choosing to
remain silent, pay interest in
July and August and retain the
use of plaintiff's money, he
affirmed the terms of the
variation that plaintiff had
introduced. To quote Chitty on
page 1107 'the right to
terminate may of course, be lost
where the innocent patty affirms
the contract or is held to have
waived the right to terminate'
and on page 1220 'where the
innocent party, being entitled
to choose whether to treat the
contract as continuing or to
accept the repudiation and treat
himself as discharged, elects to
treat the contract as
continuing, he is usually said
to have affirmed the contract'
An innocent party who is injured
by a breach of contract affirms
the contract when he treats it
as continuing. When an innocent
party is well aware of breach
which may lead to repudiation
and fails to act to bring the
agreement to an end, he should
be deemed to have waived the
right of termination through
affirmation. Discharge in this
case will not effected by
holding on to the money by
returning what is left of it.
The vital quotient in
determining whether an innocent
party elected to affirm a
contract or not is their
awareness of the breach and
their right. To quote Peyman v.
Lanjani 1984 3 All 703 at 704,
'for the purposes of the common
law doctrine of election, where
a person had an unrestricted
choice between two mutually
inconsistent courses of action
which affected his rights,
knowledge of the right to elect
was a precondition to making an
effective election and there
could be no knowledge of the
right to elect unless the person
knew his legal rights as well as
the facts giving rise to those
rights In the current case where
the defendant confirms receipt
of exhibit 1, and subsequent
communication, that awareness of
his rights to respond to the
reduction of the loan sum was
evidently present and an
election to affirm must
necessarily be attributed in the
face of his silence. Affirmation
may be express or implied. It is
implied if, 'with knowledge of
the breach and of his right to
choose, he does some unequivocal
act from which it may be
inferred that he intends to go
on with the contract regardless
of the breach or from which it
may be inferred that he will not
exercise his right to treat the
contract as repudiated' 'If the
innocent party unreservedly
continues to press for
performance or accepts
performance by the other party
after becoming aware of the
breach and of his right to
elect, he will be deemed to have
affirmed the contract' Please
see Chitty on pages 1220 and
1221. Although it is not my
evaluation that plaintiff
breached the loan agreement by
the change in the loan sum owing
to the terms of exhibit A, also
find that what occurred was a
variation which was affirmed
after it came to the knowledge
of defendant. It is my finding
that by retaining the use of the
remaining GH¢23,000, the
defendant affirmed the loan
agreement in exhibit D after its
variation. It is money had and
received and defendant is bound
to repay it. On the issue of the
defendant's counterclaim for
special damages, he cannot be
entitled to it for obvious
reasons. The award of damages is
guided primarily by.
forseeability which makes
remoteness a negative for
awarding damages. Thus for a
party to be entitled to special
damages, he should have
articulated the fact of the
possibility of that loss to the
other person prior to contract
or it should be reasonably
forseeable that such a loss
should be expected in the event
of breach. This is the test
laid.-clown in Victoria Laundry
(Windosr) Ltd v. Newman
Industries Ltd 1949 2 KB 528,
and Which still holds strong and
true in the common law. This is
the test articulated by Asquith
L J 'in cases of breach of
contract, the aggrieved party is
only entitled to recover such
part of the L0SS actually
resulting as was at the time of
the contract reasonably
forseeable as liable to result
from the breach.’ As much as I
continue to hold that plaintiff
did not breach its agreements
with defendant, it is pertinent
to note that the account was
held by plaintiff in his
personal capacity. The ship was
ostensibly owned by his
business. It was not part of any
agreement that the plaintiff was
giving a loan to support his
shipping business or that his
shipping business was supposed
to service the loan. Thus, had
there even been a breach of
contract, the alleged special
damages would have no place in
the relationship between the
parties. The counterclaim is
dismissed as frivolous and
vexatious. The 1st Defendant is
ordered to pay the plaintiff the
sum of GH¢31,536.93 as claimed
with interest thereon from March
2009 to date of final payment.
The 2nd defendant who is in
breach of its undertaking is
ordered to comply with this
judgment by complying with all
the terms of their undertaking
to remit the full amount of any
money such as provident fund,
severance and terminal benefits
and end of service benefits to
which defendant may be entitled
to the plaintiff in satisfaction
of this debt. Cost of GH¢2,000.00
COUNSEL:MR.CARLOS D'SOUZA
HOLDING BRIEF OF MRS.MARRIETA
BREW APPIAH OPPONG FOR PLAINTIFF
PRESENT MR.KOFI BOAKYE FOR 1ST
DEFENDANT PRESENT |
