Parliament has passed the Contract (Amendment) Bill 2022 into law, in a bid to streamline public sector contracts and curb unwarranted interest payments that have bane on state finances.

Prior its amendment, the Contracts Act 1960 (Act 25) did not make explicit provisions regarding persons authorised to enter into contracts on behalf of the state, as well as a common pathway for the calculation of interests due on government contracts, with the report of the Committee on Constitutional, Legal and Parliamentary Affairs noting that the lack of restrictions on persons qualified to enter into contracts on behalf of the government had the tendency to allow any persons in authority to enter into contracts without the knowledge or authorization of the sector ministers vested with the overall responsibility and executive mandates over the administration of the sector.

Additionally, it said the liberalisation regarding mode of calculation of interest due parties in government contracts, also had the tendency for abuse of discretionary powers by persons who enter into contracts on behalf of the state.

The amendment, which parliament completed before it went on recess, therefore sought to stamp out loopholes in the law, by defining clearly, persons who are qualified to enter into contracts on behalf of the same. It also provided the formula for calculating interests due parties under state contracts.

“The bill, therefore, makes explicit provisions for persons who are authorised to enter into a contract or transaction on behalf of the government. The bill further provides for the payment of interest on any sum of money due under a contract or a transaction entered into on behalf of the government to be calculated at simple interest,” the committee’s report read in part.

The new direction, according to the committee’s chair and Member of Parliament for Asante-Akim Central constituency, Kwame Anyimadu-Atwi, aims to ultimately protect the interests of the state with regard to interest payments and effectively reduce the cost of engaging in a contract or transaction by the state.

In explaining the reasons for the proposed amendments to the committee, the Deputy Attorney General, Diana Asonaba Dapaah, indicated the need for consistency in all state contracts with respect to payment of any interest.

The committee in its report however, expressed concern that the proposed amendment appears to violate the principle of freedom of contract which enjoins all parties in a contract to bargain and create the terms of their agreement devoid of outside interference, such as state regulations, a view that the Deputy Attorney General opposed.

She maintained that the amendment is only seeking to create a similar condition as provided under Article 181 of the 1992 constitution, regarding prior approval of parliament for all international transactions entered into by the government on behalf of the state.

She further added that the proposed amendments serve as a guide to all state authorities as well as other contracting parties under government contracts regarding decisions on payment of any possible interest by the state.

Persons authorised to enter into contracts

The committee noted that the proposed amendments seek to authorise only ministers of state or persons authorised by ministers to enter into contract on behalf of the state.

The mischief the amendment is trying to cure, according to the Deputy Attorney General is, to avoid a situation where it may be possible for persons in authority to enter into contracts on behalf of the state without the knowledge or authorisation of the sector minister who is vested with the overall responsibility over the administration of the sector by the President.

The committee however observed that the proposed amendment was applicable only to the executive arm of government to the exclusion of the other two organs of government; the legislature and judiciary arms of governments which are not headed by ministers and are allowed by law to enter into contracts.

Consequently, further amendment has been preferred to allow other persons authorised by law to enter into contracts on behalf of the state.

“A person who wilfully enters into a contract contrary to this section commits an offence and is liable on summary conviction to a fine of not less than 5000 penalty units and not more than 10,000 penalty units or to a term of imprisonment of not less than 10 years and not more than 15 years or to both,” the proposed amendment states.

“The committee after extensive deliberations on the bill was of the view that the introduction of controls into government contracts with respect to persons authorised to enter into a contract on behalf of the state as well as mode of calculating interest payments due other parties in the contract is a right approach,” the report said.