Keith Mack
In Kenya, a contract can be discharged or terminated in several ways. Firstly, a contract may be discharged upon the frustration of its purpose, such as in the event of a party's death or due to unforeseen circumstances beyond the control of the contracting parties, like natural disasters or changes in legislation. Secondly, a contract can be discharged through a breach, where one party fails to fulfil their obligations as stipulated in the contract. This can be further categorised into minor or material breaches, and actual or anticipatory breaches. In the event of a breach, the aggrieved party may seek legal remedies, including termination of the contract or compensation. Oral contracts are also valid in Kenya, although certain types of agreements, such as those involving land or interests in land, are required to be in writing to carry legal weight.
| Characteristics | Values |
|---|---|
| Contractual discharge by frustration | Occurs when a contract becomes impossible to perform due to unforeseen circumstances beyond the control of the parties involved, such as death, natural disasters, government actions, or supervening events. |
| Breach of contract | Includes minor and material breaches, actual and <co: 13,14>anticipatory breaches. It occurs when a party fails to perform their obligations or offers unsatisfactory performance. It can lead to legal remedies such as rescission, termination, compensation, or specific performance. |
| Oral contracts | Oral contracts are valid in Kenya, except for certain types of agreements that require a written contract, such as the disposition of land or interests in land, or contracts lasting more than a year. |
| Variation of contract | A variation to the contract must be done by mutual agreement to be valid. A major variation without mutual agreement may render the contract voidable for the aggrieved party. |
| Validity | A contract is considered valid when there is an offer, mutual acceptance, and exchange of consideration. |
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What You'll Learn
Frustration of contract
In Kenya, a contract can be discharged or terminated by frustration due to a supervening event—an unforeseen event beyond the control of the parties involved. This means that the contract has become impossible to perform, rather than merely difficult. For instance, in the case of a singer who dies before a scheduled concert, their contractual obligation to the concert organiser and implicit contract with concertgoers is frustrated because it is impossible for a dead person to perform.
Frustration of purpose occurs when an unforeseen event undermines a party's principal purpose for entering into a contract, and both parties were aware of this principal purpose when the contract was made. For example, if an individual takes out a mortgage for a new home and the house is destroyed at no fault of their own, they may be exempt from the remainder of the mortgage as the principal purpose of the contract (to have a house to live in) has been compromised.
It is important to note that frustration of purpose is distinct from the doctrine of impossibility. While impossibility concerns the duties specified in the contract, frustration of purpose concerns the reason a party entered into the contract. For example, if a property is leased for commercial use but the city rezones the property to forbid commercial uses, both parties are excused from performing the contract by impossibility. However, if the lessee's primary purpose for entering into the lease was to serve a specific type of food that suddenly becomes unavailable, they may be excused from performing the contract due to frustration of purpose.
Examples of supervening events that may lead to the frustration of a contract include acts of God (natural events such as death, earthquakes, or severe epidemics), war, acts of terror, and the exercise of governmental power. In 2015, Kenya enacted the Scrap Metal Act, which prohibited the export of scrap metal. This may have frustrated pending contracts by shippers and exporters who had previously entered into contracts to export scrap metal. However, reliance on frustration in such cases is typically limited to sudden changes in the law.
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Breach of contract
A contract can be discharged in Kenya through several means, including performance, agreement, breach, or frustration. This answer will focus on breach of contract as a means of discharge.
A breach of contract may occur through non-performance, repudiation, or interference by a party. For instance, in Civil Appeal E040 of 2020, the appellant breached the Sale of Goods Act by selling a good without proper title, interfering with the respondent's quiet possession. This constituted a breach of contract, and the respondent was entitled to damages.
Additionally, a breach can occur when a party makes a false statement or fails to disclose critical information. In the same case, the appellant's non-disclosure of claims by third parties amounted to fraudulent misrepresentation and a breach of contract.
To successfully claim damages for breach of contract, a plaintiff must show that a valid contract existed and that the contract was breached by the defendant. The courts will then grant remedies to place the claimant in the same position as if the contract had been performed. These remedies may include monetary compensation or specific performance, depending on the circumstances of the case.
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Oral contracts
In the case of Bid Insurance Brokers Limited v British United Provident Fund [2016] eKLR, oral contracts were discussed. The case involved a foreigner who was unable to obtain a work permit from the Kenyan government, which resulted in a frustrating event that discharged the parties from their contractual obligations. This case highlights that oral contracts can be valid and enforceable under Kenyan law, but they may also be subject to discharge by frustration or mutual agreement.
For instance, in the case of Civil Appeal 57 of 2017, the enforceability of an oral agreement was recognised when the appellant offered to surrender the logbook of a tractor to the respondent. The court considered this offer as an admission of the oral agreement's validity. This case demonstrates that oral contracts can be enforceable in Kenya, and partial performance or willingness to fulfil obligations may strengthen their enforceability.
It is important to note that while oral contracts are valid, variations to the contract should be made by mutual agreement to maintain validity. A significant variation without mutual consent renders the contract voidable at the option of the counterparty whose agreement was not obtained. In such cases, the counterparty may choose to ratify the variation even without their prior agreement.
To summarise, oral contracts are generally valid and enforceable in Kenya, except for specific types of contracts that are required by law to be in writing. These include contracts related to the disposition of land. Oral contracts can be discharged by frustration due to supervening events beyond the control of the parties or by mutual agreement, where both parties consent to terminate the contract even if their obligations have not been fully performed.
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Contract variations
In Kenya, a contract is an agreement entered into by two or more parties with the serious intention of creating a legal obligation. The function of contract law is to provide a legal framework within which parties can transact business and exchange resources, secure in the knowledge that the law will uphold their agreements and, if necessary, enforce them.
A contract can be discharged or terminated in Kenya through the common law mechanism of frustration. This occurs when an event beyond the control of the parties makes it impossible to perform the contract. Examples include the death of a party, natural disasters, war, acts of government, and new legislation.
Now, onto contract variations.
In Kenya, a variation of a contract should be made by mutual agreement to be valid. A major variation without mutual agreement may render the contract voidable at the option of the counterparty whose agreement was not sought. However, a variation without mutual agreement may be ratified by the said counterparty.
Any variation of a material term of the contract must be in writing to be effective. An extension of time, a cancellation of a contract, and the revival of a cancelled contract do not amount to variations.
It is important to note that while oral contracts are valid in Kenya, certain types of contracts, such as those related to the disposition of land or an interest in land, must be in writing. When enforcing oral contracts in court, adhere to the requirements on writing as stipulated in the specific statutory law.
In summary, contract variations in Kenya require mutual agreement between the parties and may need to be in writing, depending on the nature of the variation and the type of contract.
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Commercial contracts
In Kenya, contracts are generally governed by the Law of Contract Act, CAP 23 Laws of Kenya, which provides for the application of English law. Contracts can be written or verbal, but written contracts are generally preferred as they provide more certainty and can be used as evidence in court.
Performance of a contract means the necessary acts done by contractual parties to fulfil their obligations. A breach of contract occurs when a party fails to perform these obligations or offers less than satisfactory performance. In the case of a breach, the aggrieved party is entitled to remedies, including the right to rescind or terminate the contract, claim compensation, or sue for specific performance.
Contracts can also be discharged by frustration, which is a common law mechanism. This occurs when an event beyond the control of the parties makes it impossible to perform the contract, such as the death of a key party or new government legislation.
It is important to note that careful wording of the contract is essential, as it can determine whether the contract is ongoing or expired. Additionally, while oral contracts are valid, certain types of contracts, such as those related to land, must be in writing as provided by the Law of Contract Act.
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Frequently asked questions
Frustration of contract is a common law mechanism by which a contract may be discharged or terminated.
Frustration of contract occurs when a supervening event (an event beyond the control of the parties) makes it impossible to perform the contract. Examples of supervening events include death, war, natural disasters, acts of terror, and governmental power.
Yes, if one party materially breaches the contract by failing to perform their obligations without a good reason, the innocent party may be discharged from their contractual obligations and may seek compensation.
Yes, oral contracts are valid in Kenya, except for those related to the disposition of land or an interest in land, which must be in writing.
Yes, a contract can be discharged if a third party induces a breach of contract. For example, if a new employer induces an employee to break their employment contract, the contract may be discharged, taking into account the knowledge and intention of the third party.
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