Most commercial contracts are signed in a hurry. The price and the deliverables get attention; the rest is treated as boilerplate. Then a shipment is late, a customer stops paying or a supplier walks away — and the "boilerplate" decides who bears the loss.
This guide explains the clauses Kenyan businesses should review carefully before signing a commercial contract, whether it is your own template or the other side's standard terms.
The legal backdrop
Kenyan contract law is built largely on common-law principles, applied through the Law of Contract Act and decisions of Kenyan courts. A few points matter in everyday practice:
- Writing. Many contracts can be oral, but anything significant should be written and signed. Some contracts — notably contracts for the disposition of an interest in land — must be in writing to be enforceable.
- Stamp duty. Certain instruments attract stamp duty. Unstamped documents can face problems when a party later needs to rely on them.
- Time limits. Claims for breach of contract are subject to limitation periods under the Limitation of Actions Act — generally six years from when the cause of action arose.
- Foreign parties. When one party is outside Kenya, governing law, dispute forum and enforcement need special care.
The clauses that matter most
1. Scope and specifications
Vague scope causes more disputes than anything else. The contract should describe exactly what is being supplied or performed, to what standard, by when and how acceptance works. Attach specifications, service levels or a statement of work rather than relying on emails.
2. Price, payment and adjustment
Check when payment falls due, what triggers an invoice, what happens to late payment (interest, suspension rights), and whether prices can change — for example with currency movements, taxes or input costs. For long contracts, a clear price-adjustment mechanism prevents arguments later.
3. Liability caps and exclusions
Limitation of liability clauses cap what one party can recover from the other, and often exclude indirect or consequential losses such as lost profits. Ask:
- Is the cap realistic compared with the value and risk of the contract?
- Does it apply to both parties equally?
- What is carved out of the cap — for example fraud, confidentiality breaches or IP infringement?
4. Indemnities
An indemnity is a promise to reimburse specific losses — for example third-party claims caused by defective goods. Indemnities can be broader than ordinary damages, so understand exactly what you are agreeing to cover.
5. Warranties
Warranties are promises about quality, title, compliance with law or fitness for purpose. Check how long they last and what remedies follow if they are breached: repair, replacement, refund or damages.
6. Termination rights
When can each party end the contract? Look at termination for breach (and whether there is a cure period), termination for convenience, insolvency triggers and change of control. Then check what happens on termination: payment for work done, return of materials, transition support and surviving obligations.
7. Force majeure
Force majeure clauses excuse performance when events beyond a party's control prevent it. The clause should define the events covered, require prompt notice, set out mitigation duties and say what happens if the event lasts too long.
8. Confidentiality and intellectual property
Who owns what is created under the contract? Can each party use the other's confidential information, and for how long? These clauses matter especially in technology, services and distribution agreements.
9. Exclusivity and restrictive covenants
Exclusivity can be valuable, but it can also lock your business into one supplier or one territory. Make sure exclusivity is matched by minimum commitments and has a clear end date.
10. Dispute resolution and governing law
Decide in advance how disputes will be resolved. Options include escalation between senior managers, mediation, arbitration under the Arbitration Act 1995, or the courts. Arbitration is often preferred where the counterparty is foreign, because arbitral awards can be enforced internationally. Name the governing law expressly.
Common contract mistakes
- Signing the other side's standard terms without reading the liability and termination clauses.
- Using a template written for another country's law.
- Letting the scope live in emails rather than the contract.
- Forgetting to stamp documents that require it.
- Allowing claims to run out of time while negotiations drag on.
For investors and buyers, contract review is also a core part of corporate due diligence, because key contracts can often be terminated on a change of ownership.
Who should take advice
- Businesses negotiating significant supply, distribution, agency or service contracts.
- Companies standardising their terms of business.
- Foreign businesses contracting with Kenyan counterparties.
- Managers dealing with a contract that is not being performed.
A practical illustration
This example is illustrative only. It does not describe a real client or matter.
A Kenyan agro-processor signs a supplier's standard terms to buy processing equipment. The terms limit the supplier's liability to the cost of replacing defective parts, exclude all lost profits, and require disputes to be arbitrated in the supplier's home country under its law.
The equipment fails repeatedly during the first harvest season. The processor loses contracts with buyers, but the supplier's liability is capped at a fraction of the loss, and pursuing a claim abroad is expensive and slow.
A short review before signing could have negotiated a higher cap linked to the contract value, performance warranties, a commissioning test before final payment and a neutral dispute forum. Those terms are often negotiable, even with large suppliers, before the contract is signed.
Key takeaways
- Most contract disputes turn on scope, payment, liability, termination and dispute resolution clauses.
- Read the other side's standard terms as carefully as your own template.
- Liability caps and indemnities should be proportionate and, ideally, mutual.
- Choose governing law and forum deliberately, especially with foreign counterparties.
How WTT Lichuma can help
Our commercial law practice drafts, reviews and negotiates contracts for Kenyan and international businesses. We focus on the clauses that carry the most risk and explain them in plain language, so you can make commercial decisions with your eyes open. Learn more about our commercial contract advice, or use our fixed contract review service when you need a quick, focused review before signing.
If a contract dispute has already arisen, our team can advise on arbitration and other routes to resolution.
Frequently asked questions
Is an email agreement a binding contract in Kenya?
It can be, if the essential elements of a contract are present. But informal agreements are hard to prove and often leave key terms unaddressed. Significant deals should be properly documented.
What is a limitation of liability clause?
A clause that caps the amount one party can recover from the other, and often excludes certain types of loss. It should be proportionate to the contract's value and risk.
How long do I have to sue for breach of contract?
Generally six years from when the cause of action arose, under the Limitation of Actions Act. Take advice early, as specific circumstances can differ.
Should I use arbitration in my contracts?
Often, for higher-value or cross-border contracts. It offers privacy and international enforceability, but it is not always the best choice for smaller or urgent matters.
To review a contract before you sign, contact our commercial team.
This article is general information on Kenyan law at the date of publication. It is not legal advice for your situation, and reading it does not create an advocate–client relationship. Speak to an advocate before acting on it.