The enforcement of commercial contracts in Ghana

Discussion Papers " . 56889 ,. The Enforcement of Commercial Contracts in Ghana Marcel Fa/chomps RPED Paper No. 22 The views and interpretations expressed in this study are solely those of the author. They do not necessarily represent the views of the World Bank or its member countries and I should not be attributed to the World Bank or its affiliated organizations.  1 The> Enforcement of Commercial Contracts in Ghanal Marcel Fafchamps Stanford University March 1994 Commercial contracts for the delivery and the sales of goods are a good deal more complicated than the elementary market transactions portrayed in economic textbooks. Firms must be able to place and take orders, to arrange the future delivery of goods and services, to dissociate the timing of payment from the physical delivery of goods, and to seek or provide warranty. Cash- and-carry transactions make the conduct of business unwieldy and cumbersome, except perhaps for extremely small enterprises. By entering into contracts with delayed obligations firms put themselves partly at the mercy of contractual partners. The whole production process may come to a halt if essential inputs are not delivered on time. Inputs of deficient quality could result in inferior output and damage the equipment. Late payment by clients deprives the finn from necessary working capital. A single bad debt may wipe out the profits made on many transactions. To prosper firms must be able to rely on their business partners. The existence of contract enforcement mechanisms is therefore a necessary condition for a vibrant business community to develop (North (1990), Benson (1990