Building Contract (Ghana)

A Building Contract in Ghana sets out the rights, duties and consideration binding the parties to it.

The building and construction industry in Ghana is regulated by the Ghana Institute of Construction (GhIC) and the Ghana Institute of Architects (GIA), whose members prepare architectural and engineering designs for submission to the relevant Metropolitan, Municipal, or District Assembly (MMDA) for building permit approval. Section 40 of the Local Governance Act 2016 (Act 936) empowers district assemblies to control development and to require building permits for all new constructions and major renovations. No building works may lawfully commence in Ghana without a valid building permit issued by the relevant MMDA.

The Public Procurement Act 2003 (Act 663), as amended, governs the procurement of construction services by government entities in Ghana. Private sector employers commonly use the standard forms of building contract published by the Association of Ghana Industries (AGI) or adapted versions of the FIDIC Red Book (Conditions of Contract for Construction) or the Joint Contracts Tribunal (JCT) standard building contract, modified for Ghanaian law. Quantities are measured in accordance with the Standard Method of Measurement published by the Ghana Institution of Surveyors (GhIS).

A Building Contract differs from a Labour-Only Contract (where the contractor supplies only labour and the employer supplies materials) and from a Design-and-Build Contract (where the contractor is also responsible for design). Under a traditional building contract in Ghana, the employer appoints a separate architect or engineer who designs the works and then administers the contract — certifying payment, issuing instructions, and assessing claims — on behalf of the employer. All payments under a Building Contract in Ghana are subject to withholding tax under the Income Tax Act 2015 (Act 896), administered by the Ghana Revenue Authority (GRA), at the applicable rate for resident contractors.

The National Construction Authority (NCA) was established under the National Construction Authority Act 2011 (Act 820) to regulate the construction industry in Ghana. All construction companies undertaking building works above a prescribed value in Ghana must be registered with the NCA and must hold a valid NCA licence in the appropriate category (D1 to D3 for civil works, B1 to B3 for building works). Employers should verify their contractor's NCA registration before executing a Building Contract in Ghana.

The Environmental Protection Agency Act 1994 (Act 490) administered by the Environmental Protection Agency (EPA) requires that building projects with potential environmental impact obtain an environmental permit before construction commences. This is particularly relevant for large commercial or industrial buildings and for construction near wetlands, rivers, or ecologically sensitive areas. The Ghana Standards Authority (GSA) publishes standards for building materials and construction methods applicable to building works in Ghana, and contractors are required to use materials that meet the applicable GSA standards.

A Building Contract in Ghana is required whenever a contractor is engaged to carry out building or construction works, and is particularly important in the following circumstances.

A Building Contract is needed when a property owner in Ghana engages a contractor to build a new residential house, whether a detached bungalow, storey building, or apartment block, after obtaining a building permit from the relevant Metropolitan, Municipal, or District Assembly (MMDA) under the Local Governance Act 2016 (Act 936). The contract protects the homeowner against incomplete works, poor quality, and cost overruns.

A Building Contract is required when a company incorporated under the Companies Act 2019 (Act 992) develops commercial real estate — offices, retail units, warehouses, or mixed-use buildings — and engages an NCA-registered contractor. Financiers such as banks licensed by the Bank of Ghana (BoG) will require a signed building contract as part of their project finance documentation.

A Building Contract is needed when a government ministry, district assembly, or state institution procures building construction through competitive tendering under the Public Procurement Act 2003 (Act 663). The contract supplements the standard procurement form and governs the technical obligations, payment mechanism, and dispute resolution between the public employer and the successful contractor.

A Building Contract is required when a developer in Accra, Kumasi, Takoradi, or Tamale engages an NCA-registered building contractor to construct housing estate units for sale or rental. Real estate developers and mortgage lenders supervised by the Bank of Ghana require building contracts as security documentation.

A Building Contract is needed when a church, school, NGO, or private investor finances construction works in Ghana using donor funds. International donors and development finance institutions typically require a formal building contract as a disbursement condition, setting out the quality standards, programme, and remedies available if the contractor defaults.

A Building Contract is needed when any renovation or extension of an existing building exceeds a value threshold above which the relevant MMDA requires a building permit. Executing a formal contract confirms the employer has legal remedies if the renovation contractor fails to complete the works to the specified standard.

Parties in Ghana should execute a Building Contract (Ghana) before any building works commence. Under the Contracts Act 1960 (Act 25), the High Court (Commercial Division) in Accra enforces written building contracts according to their terms. The National Construction Authority (NCA) under Act 820 registers and licences contractors. The Ghana Revenue Authority (GRA) administers withholding tax on construction payments under the Income Tax Act 2015 (Act 896).

A valid Building Contract in Ghana under the Contracts Act 1960 (Act 25) and the National Construction Authority Act 2011 (Act 820) must contain the following essential elements.

Parties and Recitals: Full legal names and addresses of the employer and the contractor, the contractor's NCA licence number and category, the contractor's company registration number (ORC) if incorporated, and the date of the contract. The recitals should reference the building permit number issued by the relevant MMDA under the Local Governance Act 2016 (Act 936).

Scope of Works: A precise description of the building works to be executed, incorporating by reference the approved architectural drawings, structural engineer's drawings, bill of quantities (BoQ) prepared by a Ghana Institution of Surveyors (GhIS)-registered quantity surveyor, and specification documents. The scope must be clear enough to define the contractor's obligations and distinguish variations from original works.

Contract Price and Measurement: The contract sum in Ghana Cedis (GHS), whether the contract is a lump sum, a re-measurement contract based on the BoQ, or a cost-plus arrangement, and the mechanism for valuing variations instructed by the employer or architect. The contract should confirm whether the contract sum is inclusive or exclusive of VAT at the rate applicable under the Value Added Tax Act 2013 (Act 870).

Programme and Completion Date: The construction programme (typically a Gantt chart or bar chart schedule), the date for completion of the works, and the procedure for granting extensions of time for weather, variations, or other employer-caused delays. Liquidated and ascertained damages (LADs) for delay should be stated as a daily or weekly rate in GHS.

Payment Certificates: The frequency and process for interim payment applications, valuation by the quantity surveyor or architect, issuance of payment certificates, the final date for payment, and the applicable withholding tax rate under the Income Tax Act 2015 (Act 896) to be deducted by the employer and remitted to the Ghana Revenue Authority (GRA).

Retention: The retention percentage (typically 5% to 10% of certified sums), the retention release mechanism (half on practical completion, balance on expiry of defects liability period), and whether the contractor may substitute a retention bond from a Bank of Ghana-licensed institution in lieu of cash retention.

Defects Liability: The defects liability period (typically 6 or 12 months after practical completion), the contractor's obligation to remedy defects notified by the employer or architect, and the employer's right to engage a third party to remedy defects at the contractor's cost if the contractor fails to act within the specified period.

Insurance: The contractor's obligations to maintain contractor's all-risk insurance, employer's liability insurance, and third-party public liability insurance, with the employer noted as an additional insured. Professional indemnity insurance for any design element carried out by the contractor.

Governing Law and Dispute Resolution: Ghana law, with disputes referred first to the contract administrator (architect or engineer), then to mediation or adjudication, and finally to arbitration under the Alternative Dispute Resolution Act 2010 (Act 798) or to the High Court (Commercial Division) in Accra. Parties should also address adjudication as a swift interim relief mechanism for payment disputes during the construction period. Forms-legal.com provides this Building Contract (Ghana) as a professionally drafted starting point for construction projects in Ghana. The Contracts Act 1960 (Act 25) governs contractual obligations. The NCA Act 2011 (Act 820) regulates contractors. The Ghana Revenue Authority (GRA) administers withholding tax on construction payments under the Income Tax Act 2015 (Act 896).