A well-drafted commercial contract records what the parties agreed, allocates risk between them, and provides a clear framework for resolving disputes if something goes wrong. Most poorly drafted contracts fail at the second and third tasks while purporting to accomplish the first.

Scope of Work and Deliverables

Deliverables should be defined with enough specificity to allow objective assessment of whether performance obligations have been met. Vague descriptions are among the most common sources of commercial disputes. If the contract is for services, specify what the service provider will do, what they will not do, and how completion will be measured.

Payment Terms

Payment terms should specify the amount, currency, payment schedule, invoicing procedure, and consequences of late payment. Kenya has no statutory interest rate for commercial debt, so the rate must be agreed and stated. Late payment fees must be expressed as liquidated damages rather than penalties to be enforceable.

Intellectual Property Ownership

IP ownership is frequently overlooked in service contracts. The default position under the Copyright Act (Cap 130) is that IP created by an independent contractor belongs to the contractor unless the contract provides otherwise. If you are commissioning software, designs, or written content, the contract must contain an IP assignment clause.

Liability Limitation

Liability limitation clauses restrict the amount one party can claim from the other in the event of breach. The courts enforce liability caps as long as they are not unconscionable and the parties had equal bargaining power. Exclude consequential loss, indirect loss, and loss of profit explicitly.

Force Majeure

Force majeure clauses excuse a party from performance when prevented by events beyond their reasonable control. The clause must define the triggering events specifically, specify the notification requirements, the duration of excuse, and the rights of termination if the event continues beyond a specified period.

Termination

Distinguish between termination for convenience and termination for cause. Specify notice periods, the consequences of termination, and whether a right to cure exists before termination for cause triggers.

Governing Law and Dispute Resolution

Choose Kenyan law if you intend to enforce in Kenya. Specify mediation before arbitration or litigation. Include the seat of arbitration and applicable institutional rules if using arbitration, or specify the jurisdiction of the Kenyan courts.

Common Mistakes

Oral variations create evidentiary uncertainty. Include an entire agreement clause and a no oral variation clause. Failing to specify a remedy for breach is a missed opportunity: consider liquidated damages, step-in rights, and specific performance obligations in addition to the general law right to claim damages.

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