RE: Ghana & Her Oil Contracting: PSA or Licensing

With reference to my article titled; “Ghana & Her Oil Contracting: PSA or Licensing?” Published by ghanaweb.com on Tuesday February 10, 2009, many emails have been sent to me congratulating me for given Ghana such an important education/ information. However, some of the mails wanted to enquire whether Ghana could make any changes in the oil contracts after they have been found out to be more favourable to the foreign contractors instead of Ghana taken the maximum control. The question was:

“CAN GHANA CHANGE THE CONTRACT DUE TO A MISTAKE?”

This is what I have to say.

Mistake is one way in which a contract can be challenged. A mistake must be so fundamental as to negate the apparent consent, such a mistake is said to be operative and it renders the contract void ab initio. Any contract entered into because of a mistake is made void; that is to say, that contract had never in law come into existence. But for the mistake to render the contract void, it must be so fundamental to the existence or the performance of the contract.

AREAS Of MISTAKE

There are three main areas of mistake. These are: (i) Unilateral mistake – where one party is mistaken as to the nature of the subject matter, the terms of the contract or the identity of the other party and believes that the other party has the same belief whereas the other party knows the truth and knows that the other is mistaken: Hartog v Colin and Shields [1939] 3 All ER 566

(ii) Mutual mistake- where both parties are mistaken but it is not clear whether the mistake must be the same one or not. In this case, neither party is aware of each other’s mistake. The parties are at cross-purposes. An example of this type can be seen in the case of Raffles v Wichelhaus [1864] 2 H & C 906 where it was held that the contract was void for a fundamental mistake of the fact that had prevented the formation of the agreement. In that case the offer and acceptance of the parties failed to coincide.

(iii) Common mistake – this is where the mistake is common in the sense that both parties made the same mistake as to some fundamental aspect of the contract: Bell v Lever Brothers [1932] AC161.

“A mistake will not affect assent unless it is the mistake of both parties and is as to the existence of some quality which makes the thing without the quality essentially different from the thing it was believed to be”-Lord Atkin.

The doctrine of mistake in equity is different from the doctrine of mistake at common law. This is because; the scope of the doctrine in equity is wider than as it is at common law. The effect of a mistake in equity renders a contract voidable whereas mistakes at common law render a contract void. (McKendrick, E., Contract Law, 2nd edition, 2003, Oxford University Press)

The court in equity have greater flexibility to set a contract aside on terms as seen in the case of Sole v Butcher [1950] 1 KB 671 CA., where the majority of the court of Appeal held that the contract could be rescinded on equitable principles.

“The law relating to mistake is in a state of flux”. This is because there is much flexibility and certainty in dealing with some cases of mistaken contracts, which makes it very easy for a party to escape especially where that party had entered into a bad bargaining as seen in Ghana’s case.

IDENTITIES

A mistake as to the identity must be of fundamental or crucial importance before or at the time of contracting to be operative. (Richards, P., Contract Law, 7th edition chapter 10) For example, were the identities of the contractors (Tullow, Cosmos, etc) very important to Ghana during the contracting stage? It appears the identities of the contractors are/were not very important or crucial to Ghana under the circumstances. Ghana wanted to know whether it has got some potential for hydrocarbon resources. Ghana was as a result looking for contractors who would be able to search, bore for and get the petroleum without necessarily being company “A” or company “B”. Therefore, whether Ghana or GNPC intended to deal with Tullow or Cosmos or any other Oil company is immaterial to render their contracts void.

In Ingram v Little [1960] 3 W.L.R. 504, CA, two sisters jointly owned a car, which they advertised for sale. A rogue called and agreed with one of the sisters to purchase the car. When he preferred a cheque for the amount the sisters adamantly refused to accept it, where upon the rogue stated that he was P.G.M. Hutchinson and that he had substantial business interest. Whilst the discussion were taking place the other sister checked the name and address of P.G.M. Hutchinson in the telephone directory, which seemed to corroborate his story. The sisters then agreed to let him have the car and accepted his cheque. The cheque was dishonoured and the rogue, who was not P.G.M. Hutchinson, sold the car to a third party who purchased the vehicle in good faith.

The plaintiffs sued the defendant in conversion alleging that the contract was void for mistake as to the identity and succeeded, because the identity of P.G.M. Hutchinson was very crucial in that circumstance. In Ghana’s case, the oil contractors’ identities do not seem very crucial as they are/were the contractors Ghana intended to deal with.

In Lewis v Averay [1971] 3 W.L.R. 603 CA, the Court of Appeal held that the plaintiff’s action must fail since he intended to deal with the person in front of him irrespective of his identity and that the contract was subsequently only voidable for fraudulent misrepresentation.

MISREPRESENTATION

A misrepresentation can be defined as an unambiguous false statement of fact, which is addressed to the party misled, and which induces that party to enter into a contract. (McKendrick, E., Contract Law, 2nd edition, Oxford University Press, 2003, p630)

Now, has there been any misrepresentation? Like for example, statements of opinion, statements made by conduct, and or statement of intention and inducement? Did Ghana or GNPC intend to sign a PSA contract but ended up signing a Concession or a different contract? And did the contractors know the truth and know that Ghana was mistaken but failed to address the situation? If that was the case and Ghana would be able to prove with evidence, then international arbitration or a court may be able to set the contract aside and allow the parties to enter into a new contract which may be more profitable or more economical to Ghana. If not, then the contract may hold as it stands and Ghana cannot make any changes until that contract expires.

The general rule is that mere non-disclosure does not constitute misrepresentation, and that in the absence of a duty to speak there can be no liability in fraud, however dishonest the silence. However, in certain circumstances a combination of silence together with a positive representation may itself create a misrepresentation. Such a situation may be called partial non-disclosure, and such may be explained as either instances of actual misrepresentation or as cases where a duty to speak arises.

From facts, the Oil Companies (contractors) in Ghana have no contractual duty to disclose any information to Ghana concerning which type of Oil and Gas contract would be a better deal for Ghana. It was the duty of Ghana government to reasonably enquire for the necessary information for herself before going ahead to sign the contracts. It is believed that Ghana entered into the agreement voluntarily without necessarily looking for the best deal or seek for the assistance of “more qualified” professionals in the OIL and GAS field and therefore Ghana would have herself to blame if the contracts have turned out to be unfavourable in terms of apportionment.

CONCLUTION

The party alleging mistake must last of all show that he has taken all reasonable steps to attempt to verify the identity of the person or company with whom he is about to contract. This requirement must be shown whether or not the contract is inter absentes or inter praesentes. ( Richards, P., Law of Contract, 7th edition, chapter 10)

In cases where the parties are inter praesentes; it is very difficult to refuse the presumption that the party-alleging mistake intended to deal with the person or the company in front of him. As a result, successful actions are fairly rare.

Hence, Ghana would not be able to make any changes in the oil contracts if they are now considered as unprofitable or uneconomical or unfair as explained above. The only thing Ghana can do as a result would be to look for Conciliation or an Expect determination to critically go through the contracts again to redetermine the percentage interests of both the parties base on an equitable principle through mutual agreement.

Author: PK Opoku Bonna, LLB