Remedies for Breach of Contract in Kenya: Legal Guide for Businesses
- Muhoro & Gitonga Associates
- 1 day ago
- 4 min read
Table of Contents
1. Introduction
In Kenya, contracts form the backbone of business transactions. When a party fails to meet obligations, it leads to a breach. Kenyan law provides remedies to address such issues, drawing from the Law of Contract Act (Cap 23) and common law principles.
This guide outlines general options for businesses facing contract breaches. Remedies aim to restore the injured party to the position they would have been in had the contract been fulfilled. Courts consider the breach nature and losses incurred.
2. What Constitutes a Breach of Contract in Kenya
A breach occurs when one party does not perform contractual duties without lawful excuse. Under the Law of Contract Act, contracts must be enforceable, with clear terms and mutual agreement.
Breaches can arise from non-performance, defective performance, or repudiation. The injured party must prove the existence of a valid contract, the breach, and resulting loss.
3. Types of Contract Breaches
Breaches vary in severity, affecting available remedies.
Minor Breach: Partial failure that does not undermine the contract's purpose. Remedy often limited to damages for the specific issue.
Material Breach: Substantial failure that goes to the contract's core, allowing the injured party to terminate and seek full remedies.
Anticipatory Breach: Indication before due date that a party will not perform, enabling early action.
Fundamental Breach: Severe enough to justify contract termination.
4. Remedies Available Under Kenyan Law
Kenyan courts offer common law and equitable remedies. The choice depends on the breach type and circumstances.
4.1 Damages
Damages provide monetary compensation. They are the most common remedy.
General Damages: For foreseeable losses, based on principles from Hadley v Baxendale.
Special Damages: For specific, proven losses like lost profits.
Nominal Damages: Symbolic award when no actual loss occurs.
Liquidated Damages: Pre-agreed amounts in the contract, enforceable if reasonable.
Courts award damages to compensate, not punish. Mitigation of loss is required.
4.2 Specific Performance
This equitable remedy compels the breaching party to fulfill obligations. It applies when damages are inadequate, such as for unique items like land.
Requirements:
Contract must be valid and certain.
No adequate monetary remedy.
Performance must be feasible.
Courts grant this under the Specific Relief Act and common law. It is discretionary.
4.3 Injunctions
An injunction restrains a party from breaching or continuing a breach.
Temporary Injunction: Interim order to maintain status quo.
Permanent Injunction: Final order post-trial.
Suitable for preventing irreparable harm, like in non-compete clauses.
4.4 Rescission
Rescission cancels the contract, restoring parties to pre-contract positions. It applies to fundamental breaches or misrepresentation.
Process:
Notice of rescission.
Return of benefits received.
Courts may order restitution alongside.
4.5 Restitution
Restitution requires return of benefits gained under the contract. It prevents unjust enrichment.
Often combined with rescission. For example, refunding payments for undelivered goods.
5. Steps to Pursue Remedies
When facing a breach, follow these general steps:
1. Review the contract for dispute resolution clauses, like arbitration.
2. Notify the breaching party in writing, demanding remedy within a reasonable time.
3. Gather evidence: Contract copies, correspondence, proof of loss.
4. Consider alternative dispute resolution (ADR) under the Arbitration Act (No. 4 of 1995).
5. If unresolved, file a claim in court. Timelines vary; limitation period is six years under the Limitation of Actions Act (Cap 22).
6. Seek interim relief if urgent.
Compliance with procedural rules under the Civil Procedure Act (Cap 21) is essential.
6. Frequently Asked Questions
Q1: What are the main remedies for breach of contract in Kenya?
Main remedies include damages, specific performance, injunctions, rescission, and restitution, as provided under the Law of Contract Act.
Q2: How do I prove a breach of contract in Kenyan courts?
Prove a valid contract, the breach, and resulting damage through documents and witnesses.
Q3: Can I get specific performance for any contract breach?
No, only when damages are insufficient, such as for unique property.
Q4: What is the limitation period for breach of contract claims in Kenya?
Generally six years from the breach date, per the Limitation of Actions Act.
Q5: Are liquidated damages enforceable in Kenya?
Yes, if they represent a genuine pre-estimate of loss and not a penalty.
Q6: What role does mitigation play in damage claims?
The injured party must take reasonable steps to minimize loss; failure reduces recoverable damages.
Q7: Can contracts be resolved through arbitration in Kenya?
Yes, if the contract includes an arbitration clause, governed by the Arbitration Act.
Q8: What happens if a contract is frustrated under Kenyan law?
Frustration discharges obligations without breach liability, but parties may seek restitution.
7. Conclusion
Understanding remedies for breach of contract in Kenya empowers businesses to protect their rights. While this provides general guidance, each case is unique. Consult a qualified lawyer for tailored advice.
