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What are the recommended provisions for a Supply Agreement?
Recommended Provisions for a Supply Agreement in Kenya
Introduction
A supply agreement is a legally binding contract between a supplier and a buyer, outlining the terms of the arrangement regarding the supply of goods or services. These agreements are prevalent across various industries, including manufacturing, retail, healthcare, and technology. In Kenya, supply agreements are governed by several legal frameworks, including the Law of Contract Act, the Sale of Goods Act, and specific industry regulations. This document will outline the recommended provisions for a supply agreement in Kenya, ensuring that both parties' interests are protected and that the agreement is enforceable under Kenyan law.
Table of Contents
Parties to the Agreement
Definitions and Interpretations
Scope of Supply
Price and Payment Terms
Delivery and Acceptance
Warranties and Representations
Intellectual Property Rights
Confidentiality
Indemnity and Liability
Force Majeure
Termination
Dispute Resolution
Governing Law
Miscellaneous Provisions
1. Parties to the Agreement
The agreement should clearly identify the parties involved, including their legal names, addresses, and contact information. This section should also specify the roles of each party, i.e., the supplier and the buyer.
Example:
"This Supply Agreement ("Agreement") is made and entered into as of [Date], by and between [Supplier's Full Legal Name], a company incorporated under the laws of Kenya with its principal place of business at [Supplier's Address] ("Supplier"), and [Buyer's Full Legal Name], a company incorporated under the laws of Kenya with its principal place of business at [Buyer's Address] ("Buyer")."
2. Definitions and Interpretations
This section should define key terms used throughout the agreement to avoid any ambiguity. Common terms include "Goods," "Services," "Delivery Date," "Purchase Order," etc.
Example:
"In this Agreement, unless the context otherwise requires, the following terms shall have the meanings ascribed to them below:
"Goods" means the products specified in Schedule A.
"Services" means the services specified in Schedule B.
"Delivery Date" means the date on which the Goods are to be delivered as specified in the Purchase Order."
3. Scope of Supply
This section should detail the goods or services to be supplied, including specifications, quantities, and any applicable standards or certifications.
Example:
"The Supplier agrees to supply and the Buyer agrees to purchase the Goods and Services as specified in Schedule A and Schedule B, respectively. The Goods shall conform to the specifications set forth in Schedule C."
4. Price and Payment Terms
This section should outline the pricing structure, payment terms, and any applicable taxes or duties. It should also specify the currency of payment and the method of payment.
Example:
"The price for the Goods and Services shall be as specified in Schedule D. All payments shall be made in Kenyan Shillings (KES) within thirty (30) days from the date of the invoice. The Buyer shall be responsible for all applicable taxes and duties."
5. Delivery and Acceptance
This section should specify the delivery terms, including the delivery date, location, and any applicable Incoterms. It should also outline the process for acceptance of the goods or services.
Example:
"The Supplier shall deliver the Goods to the Buyer's premises at [Delivery Address] on or before the Delivery Date. The Buyer shall inspect the Goods within five (5) business days of delivery and notify the Supplier of any defects or non-conformities. If no such notice is given, the Goods shall be deemed accepted."
6. Warranties and Representations
This section should outline the warranties provided by the supplier, including any warranties of quality, fitness for purpose, and compliance with applicable laws and regulations.
Example:
"The Supplier warrants that the Goods shall be free from defects in material and workmanship for a period of twelve (12) months from the date of delivery. The Supplier further warrants that the Goods shall comply with all applicable laws and regulations in Kenya."
7. Intellectual Property Rights
This section should address the ownership and use of any intellectual property rights related to the goods or services, including any licenses granted.
Example:
"All intellectual property rights in the Goods and any related documentation shall remain the property of the Supplier. The Supplier grants the Buyer a non-exclusive, non-transferable license to use the Goods for the purpose specified in this Agreement."
8. Confidentiality
This section should outline the obligations of both parties to maintain the confidentiality of any proprietary or confidential information disclosed during the term of the agreement.
Example:
"Each party agrees to keep confidential and not to disclose to any third party any confidential information received from the other party, except as required by law or with the prior written consent of the disclosing party."
9. Indemnity and Liability
This section should specify the indemnification obligations of each party and any limitations on liability.
Example:
"The Supplier shall indemnify and hold harmless the Buyer from and against any and all claims, damages, losses, and expenses arising out of or in connection with the Supplier's breach of this Agreement. In no event shall either party be liable for any indirect, incidental, or consequential damages."
10. Force Majeure
This section should outline the circumstances under which a party may be excused from performing its obligations due to events beyond its control.
Example:
"Neither party shall be liable for any failure or delay in performing its obligations under this Agreement if such failure or delay is due to a force majeure event, including but not limited to acts of God, war, terrorism, labor strikes, or natural disasters."
11. Termination
This section should specify the conditions under which the agreement may be terminated by either party, including any notice requirements and the consequences of termination.
Example:
"Either party may terminate this Agreement upon thirty (30) days' written notice to the other party if the other party breaches any material term of this Agreement and fails to cure such breach within such thirty (30) day period. Upon termination, the Buyer shall pay the Supplier for all Goods and Services delivered up to the date of termination."
12. Dispute Resolution
This section should outline the process for resolving any disputes that may arise under the agreement, including any requirements for negotiation, mediation, or arbitration.
Example:
"Any disputes arising out of or in connection with this Agreement shall be resolved through good faith negotiations between the parties. If the parties are unable to resolve the dispute through negotiation, the dispute shall be submitted to mediation in accordance with the rules of the Chartered Institute of Arbitrators, Kenya Branch. If mediation fails, the dispute shall be finally resolved by arbitration in Nairobi, Kenya, in accordance with the Arbitration Act, 1995."
13. Governing Law
This section should specify the law that will govern the agreement and the jurisdiction in which any legal proceedings may be brought.
Example:
"This Agreement shall be governed by and construed in accordance with the laws of Kenya. Any legal proceedings arising out of or in connection with this Agreement shall be brought in the courts of Kenya."
14. Miscellaneous Provisions
This section should include any additional provisions that are necessary for the effective operation of the agreement, such as notices, amendments, and entire agreement clauses.
Example:
Notices: "All notices required or permitted under this Agreement shall be in writing and shall be deemed given when delivered personally, sent by registered mail, or sent by email to the addresses specified in this Agreement."
Amendments: "This Agreement may only be amended by a written agreement signed by both parties."
Entire Agreement: "This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement."
Relevant Case Laws and Legal Precedents
Kenya Pipeline Company Limited v. Glencore Energy (UK) Limited [2015] eKLR
Relevance: This case highlights the importance of clear terms in supply agreements, particularly regarding delivery and acceptance of goods.
Outcome: The court held that the supplier was liable for damages due to late delivery, emphasizing the need for precise delivery terms in supply agreements.
Kenya Breweries Limited v. Kiambu General Transport Agency Limited [2000] eKLR
Relevance: This case underscores the significance of indemnity clauses in supply agreements.
Outcome: The court upheld the indemnity clause, requiring the supplier to compensate the buyer for losses incurred due to defective goods.
National Oil Corporation of Kenya v. Prisko Petroleum Network Limited [2014] eKLR
Relevance: This case illustrates the enforcement of confidentiality clauses in supply agreements.
Outcome: The court enforced the confidentiality clause, preventing the disclosure of proprietary information.
Conclusion
A well-drafted supply agreement is essential for establishing clear expectations, responsibilities, and terms between a supplier and a buyer. By including the recommended provisions outlined above, parties can ensure a stable and reliable supply chain, minimize misunderstandings, and protect their interests. It is also crucial to consider relevant case laws and legal precedents to ensure the enforceability of the agreement under Kenyan law.
TLDR
A comprehensive supply agreement in Kenya should include provisions on parties to the agreement, definitions, scope of supply, price and payment terms, delivery and acceptance, warranties, intellectual property rights, confidentiality, indemnity, force majeure, termination, dispute resolution, governing law, and miscellaneous provisions. Relevant case laws emphasize the importance of clear terms, indemnity clauses, and confidentiality in such agreements.
Sources
Kenya Pipeline Company Limited v. Glencore Energy (UK) Limited [2015] eKLR ↗
Kenya Breweries Limited v. Kiambu General Transport Agency Limited [2000] eKLR ↗
National Oil Corporation of Kenya v. Prisko Petroleum Network Limited [2014] eKLR ↗
Answered by mwakili.com