Author: Addison Bright Sloane

There is no standard contract model in Ghana. Different businesses use different types of contract for their outsourcing services.

However, simple outsourcing contract models are preferred by businesses. A company would usually enter into a direct outsourcing relationship with itself. Where a parent company is procuring services for itself and other companies within the group the contract model may be different. The parent company may negotiate standard terms directly with the service provider but require companies within the group to sign their contracts directly with the service provider. The service provider may insist on a parent company guarantee with respect to subsidiary companies which do not have substantial balance sheets. Alternatively, the parties may agree an agency-type agreement.

In the telecommunications industry purchase orders are used for procurement services. Data protection clauses, security protection clauses and confidentiality clauses are included in the purchase orders and are fundamental clauses to be observed in the agreements.

Other contractual models commonly used for outsourcing in Ghana include joint ventures, partnerships, build-operate-transfer structures, managed services agreements, PPP arrangements and Framework Agreements.

In certain cases, the type of contract model is specified by legislation. For example, L.I.2204 provides that a non-indigenous company which intends to provide goods and services to a contractor, a subcontractor, licensee, the corporation or other allied entity within Ghana must incorporate a joint venture company with an indigenous Ghanaian and afford that indigenous Ghanaian company an equity participation of at least 10%.

The Ghana Investment Promotion Centre Act, 2013 (“Act 865), also provides that a person who is not a citizen may participate in an enterprise in Ghana if that individual enters into a joint enterprise with a citizen, in which case the foreigner must invest foreign capital of not less than USD200,000 in cash or capital goods relevant to the investment or a combination of both by way of equity participation and the partner who is a citizen must have at least 10% equity participation in the joint enterprise.

PPPs in Ghana are currently regulated by the National Policy for PPPs in Ghana (the “PPP Policy”). Except for unsolicited bids, the selection of private sector parties in PPP transactions shall be carried out through competitive bidding methods. The PPP Policy, however, requires that the selection and procurement of a transaction adviser to assist and advise a contracting authority on the PPP project must comply with the procurement procedures under the Act. There are currently efforts being made to prepare a specific law to regulate PPPs in Ghana, including regulating the procurement process for a private partner.

Captive Centres are wholly owned subsidiaries of parent companies which are located in a jurisdiction other than that of its parent company but provides outsourced services to the parent company.

Shared Services refers to the centralisation of several functions from various departments of an organisation formally performed in different divisions or locations. The first shared services centre in Ghana was opened by World Vision in 2017. The Shared services Centre provides centralised transactions in the areas of finance, procurement and information technology to 15 national offices and other World Vision offices across the world from a central location. The reason for taking this initiative was to improve effectiveness of World Vision by executing business processes with greater scale and efficiency.

These are both slowly evolving trends in Ghana.

The main customer protections and remedies include the following:

• the parties should agree a well-structured approach to transition planning with transition arrangements either be set out in the body of the main contract or in a separate agreement attached as a schedule to the main agreement;
• the customer must have audit rights under the contracts;
• there must be comprehensive provisions with respect to disaster recovery, escrow and business continuity with respect to the outsourced services;
• it is usual for the customer to require the service provider to hold a certain type of insurance with an agreed value threshold;
• the contract must include provisions on benchmarking, data protection compliance and security;
• subcontractors must be subject to the prior approval in writing by the customer; and
• dispute resolution.

Further, more detailed, protections and remedies include:

Scope of Work and Service Levels

These are either incorporated in the main body of the agreement or in a separate service level agreement which is attached as a schedule to the main agreement. Service levels are monitored at regular intervals agreed between the parties, usually on a monthly basis. They are linked to service credits which is essentially financial compensation in the event of non-performance by the service provider.

Some service providers may wish to include claw back provisions in the form of “service debits” where they exceed the service levels specified in the contract. There must also be clear reporting and escalation mechanisms built into the outsourcing contract. The service levels and service credit regime should not be used punishment or a way to claw back money.  It should encourage good behaviour by the service provider and align the objectives of the parties.

Warranties, Indemnities and Liabilities

There are standard warranties and indemnities from the supplier mainly relating to its commitment, compliance with certain codes of conduct, standard of work and performance. This would be linked to breach and liability for failure on the part of the supplier. Any heads of claim for which liability is excluded must be clearly set out. Liability caps with respect to actionable claims should be carefully negotiated.

Intellectual Property Rights

The customer would seek to retain its intellectual property rights in and to all information, data and/or other materials it provides to the supplier for the purposes of providing the services. The supplier usually retains all the intellectual property rights it uses to provide the services. Any bespoke intellectual property rights created by the supplier in the course of providing the services are typically owned by the customer.

Termination Provisions

Termination must include an exit plan for an orderly handover following termination of the outsourcing relationship. It is important that the exit plan is regularly updated throughout the duration of the contract. Each party’s rights and obligations at breach and on termination must be clearly set out in the contract. The events of termination, consequences of termination and the rights and duties of each party following termination must be clear.

The general rule under the law of contract in Ghana is that a party to an agreement will have the right to terminate where there has been a breach of a fundamental or material term of the agreement by the other party.

Parties are generally free under Ghanaian law to specify grounds of termination of contracts. In an outsourcing relationship, the risk to the supplier and the risk to the customer upon termination are different. While they both stand to lose revenue, there are additional potential losses for the customer such as significant disruption to its business and loss of reputation, depending on the type of services which had been outsourced. This difference should be recognised in negotiation of the termination arrangements between the parties.

Examples of provisions that may be set out as grounds for termination by either party in an outsourcing contract are as follows:

• material breach by a party which is not capable of remedy or is capable of remedy but is not remedied after a certain period;
• a non-material breach which is not remedied after an agreed period of time to enable the offender to cure the breach;
• insolvency event affecting one party or threatened insolvency of one of the parties; and
• force majeure.

The customer may include the following additional termination rights:

• non-retention by the supplier of certain key employees prior to the minimum agreed period;
• change of control of the supplier; and
• termination for convenience. This is usually accompanied by a pre-determined financial compensation to the supplier which varies in accordance with how far into the contract the customer wishes to exercise such right.

An injured party to a contract (one who has suffered a breach) is entitled to recover any loss which results from the breach as long as the loss is not remote or is not one which could have been avoided by taking reasonable steps in mitigation.

Direct Loss

A direct loss occurs as a natural result of a breach, and in the usual course of things. It is a loss which is foreseeable as the natural result of a breach. Examples are loss of profit or goodwill. Direct losses are recoverable under Ghanaian law.

Indirect Loss

An indirect or consequential loss is a loss that is attributable to a special or extraordinary circumstance and which is not in the usual course of things. Indirect losses are only recoverable it they were foreseeable or could have been mitigated.

Loss of Profit and Goodwill

Where the loss of profit is as a result of a breach of contract, then the court will compensate a plaintiff where it establishes that the loss was occasioned as a result of certain expenses incurred by the plaintiff in anticipation of the defendant’s performance of the contract.

In relation to loss of goodwill, the Protection Against Unfair Competition Act, 2000 (Act 589) provides that any act or practice in the course of industrial or commercial activities that damages or is likely to damage the goodwill or reputation of another person’s enterprise or its activities constitutes an act of unfair competition whether or not the act or practice causes confusion.

Examples of what constitutes damage to another person’s goodwill or reputation include damage resulting from the dilution of the goodwill or reputation attached to:

• a trade mark, whether registered or not;
• a trade name;
• a business identifier other than a trade mark or a trade name;
• the appearance of a product; and
• the presentation of a product or service.

A person damaged by an act of unfair competition may bring an action for:

• an order for injunction to prevent further acts of unfair competition;
• a provisional order to prevent unlawful acts or to preserve relevant evidence; and
• any other remedy that the court may consider fit to order.

There is no legislation or legal framework with respect to the above, however, there are terms in the Sale of Goods Act, 1962 (Act 137) that are implied into every contract for the sale of goods.

These implied terms include an:

• implied term that the specific goods are in existence;
• implied undertaking as to title;
• implied term that where a sale is by description the goods must correspond to the description;
• implied term that where a sale is by sample the goods must correspond to the sample;
• implied term as to the quality and fitness for purpose of the goods;
• implied term as to the quantity of goods; and
• implied term on the delivery of the goods.

Therefore, where the outsourcing contract relates to the sale of goods, these implied terms may apply.

Ghanaian courts do recognise both express and implied terms in a contract. According to the courts, implied terms may include custom and practice and statutory rights of the parties. Therefore, these would also apply in an outsourcing relationship. Generally, the common law remedy of damages and equitable remedies such as injunction and specific performance are also applicable. Implied terms tend to be relevant where the express terms either do not adequately address the relevant matter or fail to address the matter.

There is no legislation or legal framework in Ghana which specifically governs employee transfers with respect to outsourcing. However, the Labour Act contains some provisions which may be applicable in certain specified circumstances.

The Labour Act grants an employer the right to transfer an employee in their employment and there are specific provisions in the Labour Act relating to public sector employees.

Where the outsourcing transaction involves the introduction of major changes in production, programme, organisation, structure or technology of an undertaking that are likely to entail terminations of employment of the customer’s workers, the customer is required to notify the Chief Labour Officer in writing with certain specified information and where applicable, the employee’s trade union no later than three months before the changes. There is also a requirement to have consultations with the trade union with the objective of taking measures to mitigate the effects of the termination on the relevant employees, eg, finding them alternative employment. This may prolong the outsourcing process.

Compensation provisions apply where the outsourcing results in an employee’s redundancy or the “diminution” in the terms and conditions of their employment. In determining whether an employee has suffered any diminution in his or her terms and conditions of employment, account shall be taken of the past services and accumulated benefits, if any, of the employee in respect of the employment with the customer prior to the changes. Redundancy disputes may be referred to the National Labour Commission for settlement. The decision of the National Labour Commission shall, subject to any other applicable law, be final. These provisions do not apply to casual employees, employees on fixed time contracts and employees serving a period of probation or qualifying period of employment of reasonable duration determined in advance.

See 5.1 Rules Governing Employee Transfers.

There is no automatic transfer of employees by operation of law in an outsourcing contract. In practice, employee transfers within the context of outsourcing are a matter of negotiation between the customer and the supplier of the services. It is a risk allocation and balancing exercise whereby each party signs up to representations, conditions, warranties and indemnities in favour of the other party. The customer would, for instance, usually require key employees who transfer to the supplier by reason of the outsourcing to continue to be employed by the supplier for an agreed minimum term. Risk allocation provisions cover the commencement, duration and termination of the contract.

In an outsourcing contract, the assets which are necessary for delivery of the services may be transferred to the supplier. These assets fall into two categories, movable and immovable. Different formalities apply to each category of asset in order to make it valid. A supplier will require various warranties and indemnities from the customer regarding ownership of the assets including the right to transfer the asset and the state of repair of the asset.

It is important that the supplier conducts due diligence on all assets to be transferred and the contracts relating to the assets in order to identify risks and potential future costs. Provision must be made for selling to the customer equipment purchased in its name for its sole use upon expiry or earlier termination of the outsourcing contract.

The provisions dealing with asset transfer can be embodied in the outsourcing agreement in cases where there is a simple and limited transfer of assets. Where the assets are significant it is easier to enter into a separate agreement.

Movable Assets (eg, Hardware)

The parties are generally free to agree the mode of transfer of such assets as well as their value. However, it is recommended that the parties enter into a formal assignment. The terms of lease agreements with respect to leased equipment will need to be reviewed by the supplier. The customer would need to obtain the consent of the lessor for the transfer, assignment or novation of the relevant contract.

Immovable Assets (Premises)

Due diligence must be done on the title to prove ownership before land or the premises can be transferred. A deed of conveyance is then executed between the parties. The parties must ensure that stamp duty is paid to the Ghana Revenue Authority and the document is duly stamped prior to its submission for registration at the Lands Commission office in the region in which the land is situated. Stamping is a condition precedent for registration. The Stamp Duty Act, 2005 (Act 689) requires that the instrument is stamped within two months of its execution. With regard to leasehold property, a supplier that is foreign can only be given a maximum leasehold term of 50 years, which is usually renewable. The same processes apply with respect to leasehold property. However, the consent of the landlord must be obtained.

Intellectual Property

In most cases the customer would lease (and not transfer) its licence to the supplier. Where the customer agrees to transfer its intellectual property, the transfer should be documented in writing in the form of a licence agreement.

Key Contracts

Key contracts entered into by the customer may be assigned once all the parties agree to it. Where prior consent is not needed the other party to the contract must be given notice of the assignment.