Agricultural Law and Economics in Sub-Saharan Africa: Cases and Comments - Chapter 5, Contracts Involving Illiterate Parties

Elsevier, Agricultural Law and Economics in Sub-Saharan Africa: Cases and Comments, Chapter 5, 2016, Pages 141–184
Frederick O. Boadu


Countries in sub-Saharan Africa are following market-led development approaches that are driven by robust interaction in a market where rules of the game are well defined. Defining the rules for markets in societies where there is a large number of illiterates interacting with literates may engender “information asymmetry” in contracting, that is, a situation where one of the parties to a contract, the literate party, has more information that is not available to the illiterate party. Information asymmetries lead to adverse selection and moral hazard. Contracts that are burdened with these problems cannot be value-maximizing, and courts step in to fill the gaps. Countries have enacted Illiterate Protection Laws intended to protect illiterates in their interaction with literate parties in the marketplace. These laws foster a “meeting of the minds” of parties so that contractual outcomes will be value-maximizing.