BOOHENE FOODS LTD. v. NATIONAL SAVINGS AND CREDIT BANK AND ANOTHER
1989
HIGH COURT
GHANA
CORAM
- BROBBEY J
Areas of Law
- Banking and Finance Law
- Contract Law
- Corporate Law
- Tort Law
1989
HIGH COURT
GHANA
CORAM
AI Generated Summary
The National Savings and Credit Bank’s Tema branch accountant, S.O. Addo, wrote “payment guaranteed” on the reverse of a post‑dated cheque tendered by Agyaboo Enterprise for the purchase of rice from the plaintiffs. Relying on that written and signed guarantee, the plaintiffs supplied rice worth ¢5 million. When the cheque was later presented, the bank dishonoured it, arguing lack of authority because Addo was a B signatory, non‑compliance with internal guarantee formats, fraud, and that the plaintiffs had notice of irregularities. Brobbey J. held that under section 14 of the Contracts Act, a guarantee need only be in writing and signed; internal formats and limits, not publicised, did not bind third parties. The indoor management rule and vicarious liability principles made the bank liable for the accountant’s acts within his role. The bank was ordered to pay ¢5 million with simple interest at the prevailing bank rate from 24 December 1987; special and general damages were dismissed, and costs awarded.
JUDGMENT OF BROBBEY J.
The facts which resulted in this case are as follows: The second defendant company offered to buy rice from the plaintiff company by presenting a post-dated cheque in payment thereof. The plaintiff company declined to sell the rice against that post-dated cheque. The second defendant represented the same cheque, but this time with a guarantee written at the back. On the basis of that guarantee, the cheque was accepted by the plaintiff's and the rice valued at ¢5 million was supplied to the second defendant. The cheque was tendered as exhibit A. The exact words of the guarantee which induced the plaintiffs to accept the cheque were "payment guaranteed." Below those words appeared the signature of one S.O. Addo, who signed in his capacity as the accountant [p.178] of the Tema branch of the National Savings and Credit Bank (hereafter referred to as the first defendants). The cheque did not merely bear the signature of the accountant but also had on it the official stamp of the accountant of the branch bank. The cheque was dated 25 October 1987. From the tenor of the evidence of the witnesses who testified on behalf of the plaintiffs, the rice was supplied after the cheque had been indorsed.
When the plaintiffs presented the cheque for payment, the bank whose accountant wrote the guarantee on the cheque, namely the first defendants, dishonoured it. The plaintiffs consequently issued a writ claiming:
(a) ¢5 million accruing thereof;
(b) 33½ per cent interest from the period that the amount has been outstanding;
(c) ¢1 million special damages; and
(d) general damages."
The first defendants refused to pay on the face of the cheque for four main reasons. First, they contended that the accountant who wrote the guarantee on the cheque had no mandate to commit the bank because he was a B signatory. Secondly, the guarantee written on the back of the cheque did not conform to the format in which guarantees were ordinarily given by the first defendant-bank. Thirdly, since the accountant knew that he had no mandate to commit the bank up to ¢5 million and further that his action was not in accordance with the written instructions in the bank, what he wrote was not merely unauthorised but also fraudulent and could not bind the bank. Finally, they contended that the plaintiffs had notice of the irregularity of the mandate and so the plaintiffs took a chance by not verifying from the manager himself before presenting the cheque for payment.
W