Commercial Contracts

Commercial contracts are the lifeblood of every business — the agreements that define the relationships with suppliers, customers, distributors, agents, licensors, and partners. A well-drafted commercial contract allocates risk fairly, provides clear mechanisms for performance and payment, and contains the dispute resolution and termination provisions that will govern if the relationship breaks down. A poorly-drafted contract, by contrast, is a source of ambiguity, dispute, and financial loss. In Kenya, commercial contracts are governed by the Law of Contract Act, the Sale of Goods Act (Cap 31), and the common law principles of contract — supplemented by sector-specific legislation where applicable.

This area covers the full range of business agreements. Advocates draft and negotiate supply agreements, which govern the purchase and sale of goods between businesses — covering specifications, delivery terms, price and payment, warranty, product liability, and limitation of liability. Advocates prepare distribution agreements, which govern the relationship between a manufacturer or supplier and a distributor — covering territory, exclusivity, minimum purchase obligations, pricing, marketing obligations, and termination.

Advocates draft agency agreements, under which one party (the agent) acts on behalf of another (the principal) to bring the principal into a legal relationship with a third party. Advocates address the scope of the agent's authority, the commission structure, the exclusivity and non-competition provisions, and the termination and post-termination restrictions. Advocates are mindful of the implications of the Competition Act for agency and distribution arrangements, particularly the prohibitions on resale price maintenance and exclusive dealing.

Advocates prepare service agreements, which govern the provision of services — covering the scope of services, service levels, performance metrics, pricing, change management, liability, and intellectual property. The work also covers the negotiation of outsourcing agreements, facilities management agreements, and managed services agreements, where the service provider takes on responsibility for a significant business function.

Advocates also handle licensing and technology contracts — software licensing, technology transfer, franchise agreements, and joint venture agreements. Advocates address the ownership and licensing of intellectual property, the grant of rights, the territory and exclusivity, the royalty or fee structure, the quality control provisions, and the termination and exit arrangements.

For every contract they draft, they pay particular attention to the provisions that determine what happens when things go wrong: the force majeure clause, which excuses performance when extraordinary events occur; the limitation of liability clause, which caps the financial exposure of each party; the indemnity provisions, which allocate specific risks; the termination clause, which sets out the circumstances in which the contract can be ended; and the dispute resolution clause, which determines how disputes will be resolved. These provisions are often treated as boilerplate, but they are the provisions that matter most when a commercial relationship deteriorates.