Proposed Contract Law reforms

August 7, 2020 - Reading Time: 2 minutes - By The Vellum Team

Hope for Reforms

After decades of using the English law of contract, Kenya is at the verge of having its own elaborate Law of Contract Act. The existing Act is arguably the shortest Act with 4 sections. Previous attempts to amend it have not been so successful, most notably the recent proposed amendment in the Law of Contract (Amendment) Bill, 2019 sponsored by Hon. Waititu Francis Munyua. The Bill seeks to amend the Act so that in case of a default by the principal borrower, the creditor would first realise the assets of the principal borrower before proceeding to realise the assets of the guarantor. President Uhuru Kenyatta however, sent back the proposed amendment to Parliament with his reservations and the Bill collapsed.

Enabling Electronic Contracts 

The Law of Contract Bill 2020, aims to provide a framework for contractual relations including electronic contractual transactions. The Bill provides new definitions such as what constitutes contracts in electronic form, force majeure and e-signatures. The Bill affirms contract offers, acceptance and execution may occur via electronic means meaning 

The Fundamentals

The legal requirements of a valid contract will still be:

  • Free consent of parties with capacity to contract;
  • Lawful consideration;
  • A lawful object; 
  • He parties’ intention to be legally bound; and 
  • At least 2 witnesses to witness the contract. 

The bill recognises the different types of contracts, based on how they are formed. Contracts may be oral, written, partly oral and partly written, and they may also be implied from the conduct of the parties.

Some Contracts Required to be in Writing 

Some contracts are required to be written (and not oral) including: 

  • Any contract whose subject matter exceeds One Thousand Kenyan Shillings (KES1,000.00) 
  • Contract of guarantee or indemnity and 
  • Other contracts that must be in writing under other legislation- Most notable being contracts involving interest in land as required in the Land Act and Land Registration Act.

A contract will be considered to be in writing where it is in electronic form, accessible in a manner usable for subsequent reference or simply in words. The terms of a contract may be incorporated in the contact document expressly or by reference. No contract in writing will be unenforceable because it is not under seal.

Principle Highlights 

  • Contracts generally considered confidential 
  • Contract in restraint of marriage of any person other than a minor considered void.
  • Contract in restraint of trade considered void.
  • Contract in restraint of legal proceedings considered void.

If passed, the Bill would repeal the current law of Contract Act. 

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