Most contract disputes that reach court are avoidable. The same drafting failures recur across industries and across deal sizes; a short pre-signing review by counsel typically catches all of them.
Mistake 1 — Vague payment terms
Contracts that specify a price without payment milestones, due dates and consequences for late payment leave the supplier exposed. Specify amounts, due dates, late-payment interest (commonly 1.5% per month), and a clear right to suspend performance after a defined number of days in arrears.
Mistake 2 — No governing law or jurisdiction clause
Cross-border contracts without an express choice of law and forum invite expensive jurisdictional disputes. Default to Kenyan law and the courts of Kenya for domestic deals; specify a neutral arbitral forum (commonly NCIA or LCIA-MIAC) for cross-border matters.
Mistake 3 — Unenforceable penalty clauses
Kenyan courts will not enforce a liquidated damages clause that operates as a penalty rather than a genuine pre-estimate of loss. Anchor the figure to the parties' best estimate of likely damage and document the reasoning.
Mistake 4 — Oral variations
Section 3 of the Law of Contract Act requires certain contracts to be in writing. Even where not strictly required, oral variations create evidentiary disputes. Include an entire-agreement clause and a no-oral-modification provision, and stick to it.
Mistake 5 — Inadequate termination provisions
A contract without clear termination triggers, notice periods and consequences (return of property, survival of confidentiality, accrued rights) is hard to exit cleanly. Distinguish termination for cause from termination for convenience and specify each in detail.
Mistake 6 — Missing IP and confidentiality protection
Where work product, customer data or know-how is exchanged, intellectual property ownership and confidentiality obligations must be expressly addressed. Default common-law positions rarely match the parties' commercial intentions.
Mistake 7 — Stamp duty and execution defects
Many commercial agreements require stamping under the Stamp Duty Act within 30 days of execution; unstamped agreements are inadmissible as evidence until stamped (with penalties). Corporate execution should follow the company's articles — typically two directors or one director plus the company secretary.
Citations & further reading
Frequently asked questions
Must commercial contracts in Kenya be in writing?
Some categories must be (land, guarantees, agreements not performable within a year, sales of goods above a certain value under historical formalities). All commercial contracts should be in writing as a matter of prudent practice.
Are electronic signatures valid in Kenya?
Yes. The Kenya Information and Communications Act and the Business Laws (Amendment) Act, 2020 recognise electronic signatures, provided they reliably identify the signatory and indicate their approval of the content.
Is arbitration better than litigation for commercial disputes?
Often, for confidential, technically complex or cross-border matters. The Nairobi Centre for International Arbitration provides a credible local forum, and Kenya is a party to the New York Convention for enforcement of awards.
Related practice areas
This article is for general information only and does not constitute legal advice. Readers should obtain specific counsel on their particular matters.