The enforcement of commercial contracts in Ghana

Abstract

Using case studies of manufacturing and trading firms, this paper documents how commercial contracts are enforced in Ghana. Interviews were guided by a conceptual framework emphasizing credible enforcement mechanisms and information asymmetries. Results show that compliance with contractual obligations is mostly motivated by the desire to preserve personalized relationships based on mutual trust. Harassment is the main form of debt collection. Other enforcement mechanisms — court action, reputation effects, use of illegitimate force — are less important. Contract renegotiation is common. The absence of reputation mechanism limits the economic reach of firms.