NDK Financial Services v Ahaman Enterprises & 2 Others 2015 83 GMJ 94.

NDK Financial Services v Ahaman Enterprises & 2 Others 2015 83 GMJ 94.

 “…..consideration need not move from a promisee to validate a contract”

A Government of Ghana (GoG) contract was awarded to a Company for the hauling of electricity poles and other electrical materials. The Company obtained a loan facility from a Bank to enable it to execute the said contract.

The GoG guaranteed to make payment in the joint names of the Bank and the Company; however, payment was only made to the Company without reference to the Bank. Subsequently, the Company failed to pay same to the Bank to redeem their indebtedness.

The main issue for determination by the Supreme Court was, whether or not the letters of undertaking and guarantee given by the GoG to the Bank and the Company, constituted a legal basis that the GoG and the Company were to jointly pay the Bank all the sums due under the contract together with interest.

The Supreme Court upheld the decision of the Court of Appeal that the GoG and the Company where jointly liable to pay the Bank the sums due under the contract, notwithstanding the consideration in respect of the contracts between the GoG and the Company on the one hand, and the Company and the Bank on the other hand, had been supplied by a person other than the Company, who is the “promisee”.

Insight: It is the basic premise and presumption of guarantor agreements that the guarantor is separate from the promisee, as the former is often warranting that the lender shall be paid, if not by the promisee, then by the guarantor—thereby creating a joint obligation of both those parties. This judgement is notable where debt financing and related guarantor undertakings, are commonplace for high value infrastructure projects.

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