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Breach of Contract in Kenya

By 22 Jul 2021Sep 6th, 2021No Comments

COMMERCIAL LAW

Breach of Contract in Kenya

A breach of contract occurs when a party to a contract fails to perform their obligations under a contract or offers less than satisfactory performance of their contractual obligations.

Breach of an agreement may be singular if done by only one party to the contract or concurrent if both parties breach their contractual obligations. In all cases of breach of contract, a party may sue upon breach of the contract, however the court ultimately has the discretion to award compensation for a breach of contract on the basis of actual loss suffered by the innocent party, that is substantial or nominal damages.

Types of Breach of Contract

  • Fundamental Breach of Contract

A fundamental breach of contract is the breach of a major term of the contract otherwise known as a breach of a condition, that allows the aggrieved party to rescind or cancel the contract and at the same time seek damages for the breach of contract. Once the contract is rescinded, it is considered that the innocent party has been discharged of the duty to perform their obligations under the contract and therefore may seek compensation for the material breach of contract. For instance, if you enter into a contract with the shipper of cargo to ship goods to Kenya and the shipper fails to ship the goods without a good reason, this may be considered a fundamental breach entitling the innocent party to not pay the shipper and discharging the said obligations.

  • Breach of Warranty

This is a breach of a minor term of a contract that entitles the innocent party to seek compensation but does not discharge the obligations of the innocent party under the contract; such that the innocent party is still mandated to fulfil their obligations under the contract.

It is an immaterial breach of contract to the extent that the contractual term breached is a warranty and not a condition; for instance in a contract for the purchase of a second hand car described as having leather seat covers, the buyer notices that the leather car seat covers which have been removed and the seller tells the buyer that the seats are being cleaned and will be returned and nevertheless the buyer takes possession of the car on the strength of the promise that the leather seat covers will be returned. If subsequently the leather seat covers are not returned by the seller, the buyer cannot subsequently rescind the contract and refuse to make payment for the car because by accepting the car without its leather seat covers, the leather seat covers were rendered a minor term of the contract and the buyer upon suing for breach of contract will simply be entitled to compensation for the cost of obtaining the leather seat covers. This is a case of substantial performance in that the buyer receives the car minus only the seat covers and the failure to include the seat covers is a minor breach of contract.

  • Anticipatory Breach of Contract

This is an intimation or communication from one party to the contract indicating that they will breach the contract when their time for performance comes. It is also called repudiation of the contract meaning that the breaching party expressly or impliedly shows the innocent party that they will not perform their contractual obligations at the due time. Where anticipatory repudiation takes place therefore breaching the contract, the innocent party may act in one of two ways as follows:

  1. Either treat the contract as having ended at the time of repudiation and seek remedies such as compensation;
  2. Or wait until the time for performance of the contract by the breaching party and then seek compensation at that time for the repudiatory breach; and in this case the innocent party should take care not to breach their own contractual obligations as they wait for the repudiating party to perform their repudiated obligations
  • Actual Breach of Contract

An actual breach of contract may be distinguished from an anticipatory breach in that an actual breach has already happened and is not a breach that will happen in the future when the time of performance comes up.  In an actual breach, the breaching party is under a contractual obligation that has already been incurred but there is non-performance or failed performance by the breaching party. Anticipatory breach on the other hand is a breach that a party indicates will occur at a future time when the breaching party is supposed to perform their contractual obligations.

  • Severable Breach of Contract

In a severable breach, a contract can be considered to be divisible and the contractual party has performed some but not all of the contractual obligations. In an action for damages for breach of such a contract, the court will consider that part of the contract is performed and will award damages for the part not performed on the basis that the contractual party made a severable breach (as opposed to a complete breach of contract).

Waiver of a Contractual Breach by Word or Conduct

Often times contracts contain specific language on waiver of breaches stating that failure by an innocent party to assert its rights with respect to a contractual default shall not constitute a waiver that has the effect of allowing the breach of contract. This is intended to avoid instances under law where the conduct of an innocent party is deemed as allowing or permitting a contractual breach such that the right of the innocent party to claim damages from the loss caused by the breach is disallowed by the court. Such contracts further go on to say that a waiver may only be deduced if both parties agree to the waiver of the breach in writing.

On the other hand, a contractual breach may be waived by conduct, for instance in a contract for sale if the buyer makes payment of a smaller sum than stated in the contract and subsequently at a delayed date, the buyer pays the remainder and the seller accepts both payments; the seller can be said to have waived the contractual breach (paying the price at delayed intervals not agreed). Waiver by conduct is a question of the factual circumstances of each case as may be advised by a breach of contract lawyer in Kenya.

Inducing a Breach of Contract

In certain cases, a party to a contract may breach the contract due to the instigation by a third party that is looking to gain an economic advantage over the counterparty. In such a case, the court may be tasked with determining whether the counterparty is entitled to damages and the quantum of such damages. Such matters are decided on a factual basis. For instance, an employment contract subject to restrictive covenants, where a new employer knowing of the restrictive covenants induces the employee to join the new employer, this may constitute inducing a breach of contract taking into account the knowledge and intention of the third party.

Consequences of Breach of Contract

Contracts often have a breach of contract clause that outlines the consequences of the breach of a contract. Breaking a contract through breach entitles the aggrieved party to remedies under the law of contract, namely: right of rescission or termination of the contract, right to compensation through damages or the right to sue for specific performance as the case may be.

 

The provision of general information herein does not constitute an advocate-client relationship with any reader. All information, content, and material in this article are for general informational purposes only. Readers of this article should get in touch with us/a qualified advocate to obtain legal advice with respect to any particular legal matter.

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