27 Aug PRESTEA SANKOFA GOLD LTD. VRS, ELIZABETH KISSI ESSUMAN AND FINALI LTD. SUIT NO. H1/40/2025 (COURT OF APPEAL, CIVIL DIVISION)
“If Parliament had wished every future assignee to have a statutory right to compel consent, it would have said so; it did not. Section 5(1) of Act 25 is therefore not engaged and also inapplicable to cloth Respondent with capacity to sue Appellant in respect of obligation which is owed to 1st Defendant and does not manifestly or impliedly contemplate unlimited number of future potential purchasers or assignees like Respondent.”
Prestea Sankofa Gold Ltd, the Plaintiff/ Respondent (hereinafter referred to as “the Respondent”), entered into a written agreement in April 2010 to purchase Plot 161, Airport Hills (the Property) from Mrs. Elizabeth Kissi Essuman (the 1st Defendant). The Property was subject to a fifty-year sub-lease dated 14th March 1997 (the Sub-lease), granted by Finali Ltd, the 2nd Defendant/Appellant (hereinafter referred to as the Appellant). A key provision of that Sub-lease clause 2(xix) prohibited any assignments, sub-letting, or other dispositions “without the previous written consent of the Lessor, such consent not to be unreasonably withheld.”
After completing payment of the purchase price, the Respondent took possession and carried out some refurbishment on the property. The Appellant, however, refused to give its written consent as required by clause 2(xix) of the Sub-lease, alleging that the Plaintiff was operating the premises for commercial purposes and pointing to other defects.
Subsequently, the 1st Defendant purported to rescind the sale and offered to refund the purchase price, which led to the Respondent bringing an action against the 1st Defendant and Appellant at the High Court. The High Court ruled in favour of the Respondent, holding that consent had been unreasonably withheld. The High Court ordered the Appellant to issue its written consent to the 1st Defendant, and awarded the Respondent GH¢1,000,000 in general damages and GH¢500,000 as costs. The Appellant, dissatisfied with the High Court’s decision, appealed to the Court of Appeal.
The principal legal question before the Court of Appeal was whether clause 2(xix) of the Sub-lease purported to confer a benefit on a third party within the meaning of section 5(1) of the Contracts Act, 1960 (Act 25), thereby allowing the Respondent to directly enforce the covenant against the Appellant despite not being a party to the sub-lease.
The Respondent’s position was that clause 2(xix) effectively benefits any prospective purchaser by limiting the Appellant’s discretion and by promising that consent will not be unreasonably withheld. Accordingly, the clause should be enforceable by the Respondent under section 5(1) of Act 25.
The Appellant countered that clause 2(xix) was merely regulatory and protective in character, as it governs the relationship between the Appellant and the 1st Defendant only, preserves the residential character of the estate, and enables the Appellant to vet potential transferees. In the Appellant’s submission, the covenant was not addressed to, nor intended to create enforceable rights in, unnamed future purchasers, such as the Respondent.
The Court of Appeal agreed with the Appellant’s position. It held that clause 2(xix) did not expressly or implicitly confer a benefit on third parties within the meaning of section 5(1) Act 25. The Court emphasized that the statutory exception to privity is rooted in the contracting parties’ intention to create enforceable rights for a defined third party or class. Clause 2(xix), being framed as a protective condition on the 1st Defendant’s freedom to dispose of the lease, was inward-facing and regulatory, and it did not contain the requisite language or contextual indicators of an intention to create a freestanding cause of action in future transferees. The Respondent was thus only an incidental beneficiary and therefore lacked the locus standi to sue the Appellant on the covenant.
Accordingly, the appeal was allowed and the High Court’s orders against the Appellant were set aside.
Insight: The decision reaffirms two practical principles:
- Section 5(1) of Act 25 does not displace privity in land transactions by automatically converting protective landlord covenants into direct rights for all future purchasers. A clear intention to benefit a defined third-party or class is necessary.
- Parties who want transferees to have an enforceable right must ensure that the lease expressly provides for this (for example, by naming a class of permitted assignees or by inserting an express third-party beneficiary clause). Otherwise, purchasers should insist on vendor protections (vendor covenants to procure consent, escrow arrangements, warranties, and remedies). This is because until an assignment is completed and executed, the purchaser’s contractual remedies typically lie against the vendor.
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AUTHOR:
Ernest Kofi Boateng
Legal Associate