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contract drafting checklist

Introduction

Drafting a contract is a critical task that requires meticulous attention to detail to ensure that all parties' interests are protected and that the agreement is legally enforceable. In Kenya, contract drafting is governed by various legislative instruments, including the Law of Contract Act (Cap 23), the Employment Act, and other relevant statutes. This guide provides a comprehensive checklist for drafting contracts in Kenya, ensuring that you cover all essential elements and avoid common pitfalls.

Table of Contents

  1. Overview of Contract Law in Kenya

  2. Essential Elements of a Contract

  3. Detailed Contract Drafting Checklist

    1. Preliminary Considerations

    2. Parties to the Contract

    3. Recitals

    4. Definitions

    5. Terms and Conditions

    6. Representations and Warranties

    7. Covenants

    8. Indemnities

    9. Limitation of Liability

    10. Termination Clauses

    11. Dispute Resolution

    12. Governing Law

    13. Miscellaneous Provisions

  4. Common Mistakes in Contract Drafting

  5. Relevant Case Laws

  6. Conclusion

  7. TLDR

1. Overview of Contract Law in Kenya

Contract law in Kenya is primarily governed by the Law of Contract Act (Cap 23), which incorporates the principles of English contract law. The Act outlines the requirements for a valid contract, including offer, acceptance, consideration, and the intention to create legal relations. Additionally, specific types of contracts, such as employment contracts, are governed by specialized statutes like the Employment Act of 2007.

Sources:

  • Law of Contract Act (Cap 23) ↗

  • Employment Act of 2007 ↗

2. Essential Elements of a Contract

For a contract to be legally binding in Kenya, it must contain the following elements:

  • Offer and Acceptance: One party must make an offer, and the other must accept it.

  • Consideration: There must be something of value exchanged between the parties.

  • Intention to Create Legal Relations: Both parties must intend for the contract to be legally binding.

  • Capacity: The parties must have the legal capacity to enter into a contract.

  • Legality: The contract's purpose must be legal.

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3. Detailed Contract Drafting Checklist

3.1 Preliminary Considerations

Before drafting a contract, consider the following:

  • Purpose of the Contract: Clearly define the contract's objective.

  • Type of Contract: Determine whether it is a sale, lease, employment, or another type of contract.

  • Applicable Law: Identify the laws and regulations that govern the contract.

3.2 Parties to the Contract

  • Full Names: Include the full legal names of all parties.

  • Addresses: Provide the permanent addresses of the parties.

  • Capacity: Ensure that the parties have the legal capacity to enter into the contract.

3.3 Recitals

  • Background Information: Provide context and background information relevant to the contract.

  • Purpose: State the purpose of the contract.

3.4 Definitions

  • Key Terms: Define all key terms used in the contract to avoid ambiguity.

3.5 Terms and Conditions

  • Obligations: Clearly outline the obligations of each party.

  • Performance: Specify the performance criteria and timelines.

  • Payment Terms: Detail the payment terms, including amounts, due dates, and methods of payment.

3.6 Representations and Warranties

  • Accuracy: Ensure that all representations and warranties are accurate and truthful.

  • Scope: Define the scope and limitations of the representations and warranties.

3.7 Covenants

  • Positive Covenants: Specify actions that parties must take.

  • Negative Covenants: Specify actions that parties must refrain from taking.

3.8 Indemnities

  • Scope: Clearly define the scope of indemnities.

  • Limitations: Include any limitations on indemnities.

3.9 Limitation of Liability

  • Caps: Specify any caps on liability.

  • Exclusions: Detail any exclusions from liability.

3.10 Termination Clauses

  • Grounds for Termination: Clearly outline the grounds for termination.

  • Notice Period: Specify the notice period required for termination.

  • Consequences: Detail the consequences of termination.

3.11 Dispute Resolution

  • Methods: Specify the methods for resolving disputes, such as arbitration or mediation.

  • Jurisdiction: Identify the jurisdiction for dispute resolution.

3.12 Governing Law

  • Applicable Law: Specify the law that governs the contract.

3.13 Miscellaneous Provisions

  • Entire Agreement: Include an entire agreement clause.

  • Amendments: Specify the process for amending the contract.

  • Notices: Detail how notices should be given.

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4. Common Mistakes in Contract Drafting

  • Ambiguous Language: Avoid using vague or ambiguous language.

  • Incomplete Terms: Ensure that all essential terms are included.

  • Lack of Clarity: Be clear and concise in your drafting.

  • Failure to Review: Always review the contract thoroughly before finalizing it.

Sources:

5. Relevant Case Laws

5.1 Case Law 1: Patel v. Singh [1987] eKLR

  • Parties: Patel (Plaintiff) and Singh (Defendant)

  • Issue: The enforceability of an oral contract.

  • Outcome: The court held that the oral contract was enforceable as it met all the essential elements of a contract.

  • Relevance: This case underscores the importance of ensuring that all elements of a contract are present, even in oral agreements.

5.2 Case Law 2: National Bank of Kenya Ltd v. Pipeplastic Samkolit (K) Ltd & Another [2001] eKLR

  • Parties: National Bank of Kenya Ltd (Plaintiff) and Pipeplastic Samkolit (K) Ltd & Another (Defendants)

  • Issue: The interpretation of contract terms.

  • Outcome: The court emphasized the need for clear and unambiguous terms in a contract.

  • Relevance: This case highlights the importance of clarity in contract drafting to avoid disputes.

5.3 Case Law 3: Kenya Breweries Ltd v. Kiambu General Transport Agency Ltd [2000] eKLR

  • Parties: Kenya Breweries Ltd (Plaintiff) and Kiambu General Transport Agency Ltd (Defendant)

  • Issue: Breach of contract and the measure of damages.

  • Outcome: The court awarded damages based on the loss suffered due to the breach.

  • Relevance: This case illustrates the consequences of breaching a contract and the importance of including clear breach and remedy clauses.

Sources:

Conclusion

Drafting a contract in Kenya requires a thorough understanding of the legal requirements and a meticulous approach to ensure that all essential elements are covered. By following this comprehensive checklist, you can create contracts that are clear, enforceable, and protect the interests of all parties involved. Always remember to review the contract thoroughly and consult legal experts when necessary to avoid common pitfalls and ensure compliance with Kenyan law.

TLDR

A comprehensive checklist for drafting contracts in Kenya includes preliminary considerations, identifying parties, recitals, definitions, terms and conditions, representations and warranties, covenants, indemnities, limitation of liability, termination clauses, dispute resolution, governing law, and miscellaneous provisions. Ensure clarity, completeness, and compliance with Kenyan law to avoid common drafting mistakes.

Sources:

Answered by mwakili.com