In the context of Ghanaian banking law, defenses under a contract are critical mechanisms that allow parties, such as customers or borrowers, to challenge the enforceability of agreements like loan contracts, guarantees, or account opening terms. These defenses stem from common law principles adopted in Ghana, as outlined in the Contract Act, 1960 (Act 25), and are reinforced by the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930), which emphasizes fair dealing and consumer protection. From my experience in compliance at Ecobank Ghana, these defenses often arise in disputes over lending practices, especially post the 2017-2019 banking cleanup where governance lapses led to invalid contracts, or during the 2022-2024 Domestic Debt Exchange Programmed (DDEP) where borrowers claimed undue pressure. Below, I examine the scope of each defense, integrating practical banking examples and referencing key cases for depth. The Bank of Ghana (BoG)’s Corporate Governance Directive 2018 further mandates banks to avoid practices leading to such defenses, promoting ethical resilience and profitability.

(i) Non est Factum (Not my deed) 

The defense of non est factum allows a party to argue that a signed document is not their deed because they were fundamentally mistaken about its nature or character, rendering the contract void. Its scope is narrow: it applies only where the mistake is radical (not mere content but the essence of the document), the signer was not careless, and typically involves vulnerable parties like the illiterate, elderly, or those misled by fraud. In banking, this arises in loan agreements or guarantees where a customer signs believing it’s a different document, e.g., a simple receipt instead of a mortgage charge.

Practically, at GCB Bank, we mitigate this by requiring thumbprinting for illiterates under Act 930 and clear explanations, but failures can lead to unenforceability. Key conditions include: no negligence by the signer (as mere failure to read isn’t enough), and the document must differ radically from what was intended.

In Ghanaian jurisprudence, this defense was upheld in Quao v Squire [1978] GLR 270, where a guarantor misled into executing a conveyance instead of a guarantee successfully pleaded non est factum, voiding the deed. Similarly, in Ebenezer Antwi Bawua v Kwabena Kyeremeh & Anor [2016], the plea was available to an illiterate defendant, emphasizing protection for vulnerable parties. Post-DDEP, banks like Stanbic ensure video recordings of signings to counter such claims, aligning with BoG’s sustainable banking principles for ethical practices.

(ii) Undue Influence 

Undue influence occurs when one party exploits a relationship of trust and confidence to induce another into a contract, making it voidable. Its scope covers actual undue influence (overt pressure) and presumed undue influence (from fiduciary relationships like banker-customer or spousal ties). In banking, this is common in guarantees where a dominant party (e.g., husband) pressures a spouse to secure a loan, or where a bank advisor exploits trust.

The remedy is rescission, but bars include delay or affirmation. Scope limits: must prove inequality and unfair advantage; mere persuasion isn’t enough.

From experience at Access Bank Ghana during recapitalization under BoG Notice No. BG/GOV/SEC/2023/05, we scrutinize spousal guarantees for influence via independent advice requirements. In Poku v Ghana, the court found no undue influence in a land transaction, as evidence lacked duress or fraud. Internationally influential, Royal Bank of Scotland v Etridge (No 2) [2001] (adopted in Ghana) clarified banks’ duty to ensure independent counsel for guarantors to avoid presumed influence in marital cases. In digital banking trends as of 2025, BoG’s Cyber Directive 2020 extends this to online contracts, preventing algorithmic pressures.

(iii) Misrepresentation 

Misrepresentation involves a false statement of fact inducing a party into a contract, rendering it voidable with remedies like rescission or damages. Scope: fraudulent (intentional, widest remedies), negligent (reasonable belief but careless), or innocent (honest mistake, limited to rescission). It must be material, relied upon, and cause entry into the contract; opinions or future promises typically don’t qualify unless factual.

In banking, this defense arises in loan mis-selling, e.g., exaggerating investment returns or hiding fees, as seen in post-cleanup disputes at collapsed banks like UT Bank. Practical mitigation includes clear disclosures under Act 930 and BoG’s Liquidity Guidelines.

Ghanaian cases illustrate: In Kpeglo v SCOA Motors [1962] 2 GLR 82, the court voided a contract induced by fraudulent misrepresentation about vehicle condition. A 2022 Supreme Court case emphasized that misrepresentation must operate on the mind, causing entry. At Ecobank, we use standardized forms with risk warnings to prevent claims, enhancing compliance and reducing litigation costs amid 2025 fintech integrations under Act 987.

(iv) Illegality 

Illegality renders a contract unenforceable if it contravenes statute, public policy, or common law (e.g., criminal acts). Scope: absolute (void ab initio, no remedies) or relative (severable parts enforceable). Includes statutory illegality (e.g., unlicensed banking under Act 930) and common law (e.g., champerty). Recent shifts allow restitution if not in pari delicto (equal fault).

In banking, this defense voids loans for illegal purposes like money laundering, or contracts breaching BoG directives. During the cleanup, many contracts at Capital Bank were illegal due to governance violations.

Ghanaian law evolves: A 2022 High Court ruled a contract not illegal if illegality isn’t foundational. The SSRN paper critiques inherited common law as moribund, advocating broader classification including moral turpitude. In Patel v Mirza [2016] (influential), restitution was allowed despite illegality if public interest served. Practically, BoG’s anti-money laundering under Basel III adaptations requires due diligence; failures post-DDEP led to sanctions, underscoring ethical banking for profitability.