International Business Law Project

Topic: Contract Laws in UK, Mexico and Kenya

(Similarities and Differences with Indian Laws)

GROUP 9,’A’ SECTION

AMRITPAL SINGH-06
ANIMESH SINGH – 07
HARSHAD SARDESHMUKH - 19
KULDIP SONOWAL – 22
PREYOSHI GANGULY – 35
VIGNESH KUMAR P – 51

Contract Law in UK
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The UK Legal System

Background and Constitution

The United Kingdom of Great Britain and Northern Ireland consists of four countries forming
three distinct jurisdictions each having its own court system and legal profession: England &
Wales, Scotland, and Northern Ireland. The United Kingdom was established in 1801 with the
union of Great Britain and Ireland, but only achieved its present form in 1922 with the partition
of Ireland and the establishment of the independent Irish Free State.

The UK joined the European Economic Community (now the European Union) in 1973, since
when it has been a requirement to incorporate European legislation into UK law, and to
recognise the jurisdiction of the European Court of Justice in matters of EU law. The UK is a
signatory of the European Convention of Human Rights, and this has recently been incorporated
into UK law with the passing of the Human Rights Act 1988. This allows for the provisions of
the Convention to be applied directly by the UK courts.

There is no written constitution. The Queen is the Head of State, although in practice the
supreme authority of the Crown is carried by the government of the day. The legislature is a
bicameral Parliament. The constitutional law of the UK is regarded as consisting of statute law
on the one hand and case law on the other, whereby judicial precedent is applied in the courts by
judges interpreting statute law. A third element consists of constitutional conventions which do
not have statutory authority but nevertheless have binding force. Much of the relationship
between the Sovereign and Parliament is conventional rather than statutory.

The Court System

The lowest criminal courts are the Magistrates Courts, which deal with minor offences. More
serious cases, and ones appealed from the Magistrates Courts, are heard in the Crown Court
(Queen’s Bench Division). Cases are appealed to the Court of Appeal (Criminal Division).

Civil cases at first instance are heard in the County Courts (for minor claims) or the High Court,
which is divided into three divisions: Queen’s Bench, Family and Chancery. Cases may be

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 appealed to the Court of Appeal (Civil Division). Cases may be appealed from the County Court
to the High Court.

The House of Lords is the supreme court of appeal. Its judicial functions are quite separate from
its legislative work, and cases are heard by up to 13 senior judges known as Law Lords. The
judicial work of the House of Lords is described on its web pages. The Court Service web pages
provide information on the other courts.

In addition to the courts there are specialised Tribunals, which hear appeals on decisions made
by various public bodies and Government departments, in areas such as employment,
immigration, social security, tax and land. The Court Service also contains information on these.

Major features of Contract Law in UK

Contract law is a complex but well defined area of law in Britain. Areas for consideration under
contract law include formation of contract (offer, acceptance, consideration, intention, etc.),
capacity to form contract, contents (terms, exclusions, privity), vitiating factors
(misrepresentation, mistake, duress, illegality, etc.), discharge (performance agreement, breach,
frustration), and remedies (damages, performance, injunction, etc.).

Major features:

1. Consideration: is one of the three main building blocks of a contract in English contract law.
Consideration can be anything of value (such as an item or service), which each party to a
legally-binding contract must agree to exchange if the contract is to be valid. If only one party
offers consideration, the agreement is not legally a binding contract
2. Agreement: The most important feature of a contract is that one party makes an offer for a
bargain that another accepts. This can be called a 'concurrence of wills' or a 'meeting of the
minds' of two or more parties. There must be evidence that the parties had each from an objective
perspective engaged in conduct manifesting their assent, and a contract will be formed when the
parties have met such a requirement. An objective perspective means that it is only necessary
that somebody gives the impression of offering or accepting contractual terms in the eyes of a
reasonable person, not that they actually did want to contract.

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3. Privity in English law: is an element of English contract law that covers the relationship
between parties to a contract and other parties or agents. At its most basic level, the rule is that a
contract can neither give rights nor impose obligations on parties not involved in the original
agreement, known as third parties. The doctrine was widely seen as unfair, for various reasons -
it made no exception for cases where the parties to a contract obviously intended for it to be
enforced by a third party, and it was so inconsistently applied that it provided no solid rule and
was therefore "bad" law.
4. Contractual terms in English law: is a topic which deals with four main issues.
i. which terms are incorporated into the contract
ii. how are the terms of the contract to be interpreted
iii. whether terms are implied into the contract
iv. what controls are placed on unfair terms
The terms of a contract are the essence of a contract, and tell you what the contract will do. For
instance, the price of a good, the time of its promised delivery and the description of the good
will all be terms of the contract.
5. Interpreting contracts in English law: concerns how the courts decide what an agreement
means. It is settled law that the process is based on the objective view of a reasonable person,
given the context in which the contracting parties made their agreement.
6. Breach of contract: is a legal cause of action in which a binding agreement or bargained-for
exchange is not honoured by one or more of the parties to the contract by non-performance or
interference with the other party's performance.
7. Damages: There are four different types of damages.
i. Compensatory damages which are given to the party which was detrimented by the
breach of contract. With compensatory damages, there are two kinds of branches,
consequential damages and direct damages.
ii. Nominal damages which include minimal dollar amounts (often sought to obtain a legal
record of who was at fault).
iii. Punitive damages which are used to punish the party at fault. These are not usually given
regarding contracts but possible in a fraudulent situation.

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 iv. Exemplary damages which are used to make an example of the party at fault to
discourage similar crimes. Fines can be multiplied by factors of up to 50 for such
damages.

8. Specific performance: There may be circumstances in which it would be unjust to permit the
defaulting party simply to buy out the injured party with damages. For example where an art
collector purchases a rare painting and the vendor refuses to deliver, the collector's damages
would be equal to the sum paid. The court may make an order of what is called "specific
performance", requiring that the contract be performed.
9. Setting aside the contract: There can be three different ways in which contracts can be set
aside. A contract may be deemed 'void’, 'voidable’ or 'unenforceable'. Voidness implies that a
contract never came into existence. Voidability implies that one or both parties may declare a
contract ineffective at their wish. Unenforceability implies that neither party may have recourse
to a court for a remedy. Recission is a term which means to take a contract back.

Comparisons with Indian Contact Law

1. Limitations on Liability - Indirect Loss

A limitation of liability clause is generally valid and enforceable under Indian law, except that
limitations on liability arising by reason of death or personal injury, fraud or gross negligence are
not enforceable. Additionally the limitation of liability provision must be reasonable and not
amount to a penalty to be enforceable. The position is therefore similar to English law.
The ability of a party to claim damages for breach of contract is limited to the actual
damages or losses suffered by that party arising from the breach. Section 73 of the Indian
Contract Act (ICA) provides that, in order to recover for breach of contract, the aggrieved party,
must show that such damage naturally arose in the usual course of things from the breach, or was
damage which the parties knew would be likely to result when they made the contract. However,
Section 73 also provides that compensation for loss or damage caused by breach of contract is
not to be given for any remote and indirect loss or damage sustained by reason of the breach.
This is different from English law where, although we have the same two types of loss that can
be recovered we do not have any statutory prohibition on the ability of a party to recover for
indirect loss. English law simply relies on the application of the rules of remoteness. Under

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English law we are used to describing the second limb of Hadley -v- Baxendale - loss which
does not arise naturally from the breach but which must still have been within the reasonable
contemplation of the parties when the contract was made - as 'indirect loss', but under Indian law
it is better not to use that expression in order to avoid classifying the loss as an irrecoverable loss
under Section 73, unless that is positively what is intended.
It is worthwhile also reminding ourselves that, under English law, per the British Sugar
case, Consequential loss does not mean loss flowing naturally as a consequence of a breach,
which might seem the obvious meaning, but loss 'over and above that which arises as a direct
result of the breach'(in other words a form of indirect loss) and Indian law views consequential
loss in the same way.

2. Liquidated damages:

Section 74 of the ICA provides that "when a contract has been broken, if a sum is named in the
contract as the amount to be paid in case of such breach, or if the contract contains any other
stipulation. by way of penalty, the party complaining of the breach is entitled, whether or not
actual damage or loss is proved to have been caused thereby, to receive from the party who has
broken the contract 'reasonable compensation' not exceeding the amount so named or, as the case
may be, the penalty stipulated for."
As under English law, if the parties have agreed that the sum is a genuine pre-estimate of the
loss or damage likely to be suffered then that sum is generally awarded, and the Act is clear that
the plaintiff does not have to lead with evidence to prove his actual loss. However, the plaintiff
does have to show some legal injury and it is open to the defendant to contend that the
reasonable compensation to which the claimant is entitled should be less than the stated amount,
which is most likely to be considered by the Courts when it is difficult to show the actual damage
suffered by the claimant. This means that there are circumstances where a liquidated damages
provision may be treated as valid, but where the plaintiff still might not recover the specified
amount but may instead receive a level of reasonable compensation as determined by the Courts
not exceeding the stated liquidated damages.
The Indian law does not draw the same distinction as English law between a valid
liquidated damages provision and an invalid penalty clause. Indeed, Section 74 refers to both "a
sum named in the contract as the amount to be paid in case of such breach", and "any other

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stipulation by way of penalty" and says that they are both to be treated in the same way, the
exercise in each case being to determine the reasonable compensation entitlement. Under English
law, of course, we would avoid any use of the expression 'penalty clause' in our drafting for fear
of invalidity.
The leading cases on the principles of liquidated damages are Maula Bux -v - Union of India
(1969) and Oil & Natural Gas Corporation -v- Saw Pipes (2003), and from those cases it at least
seems clear that liquidated damages provisions must be clearly drafted, any calculation of the
liquidated damages should be easy to follow, and the claimant ought to be prepared to
demonstrate that the amount was a genuine pre-estimate of the loss or damage likely to be
suffered if he is not to be at risk of the Court determining a level of reasonable compensation
below the stated liquidated damages.

3. Restrictive Covenants:

The ICA provides that a contract will not be enforceable to the extent that it restrains a person
from exercising a lawful profession, trade or business. Non-compete and non-solicitation
provisions can both fall into this category. There is an exception under the Act, however, for
non-compete provisions that reasonably protect a party's proprietary or commercial interests in
relation to its acquisition of the goodwill of a business. In addition cases have shown that, in
certain circumstances, Indian courts will enforce a restrictive covenant which does not constitute
an unlawful restraint of trade, in other words, a covenant which does place some restraints on a
person but meets a "reasonableness" test.
For example, a restrictive covenant which applies during the period of employment is more
likely to be upheld then a covenant which operates after the termination of the employment. In
Niranjan Shankar Golikari v Centre for Spinning and Manufacturing Company Limited, the
Supreme Court of India upheld a restrictive covenant in an employment contract under which the
employee was not to reveal or misuse any trade secrets that the employee had learned during the
period of his employment; but in Krishna Murgai -v- Superintendence Company of India (1979)
it was held that a restraint imposed on the employee to operate after the expiry of his period of
service was prima facie void. Note that this means that non-compete provisions in contracts for
the sale of a business or franchise benefit from the statutory exception, but non-compete
provisions in contracts for the provision of services are subject to the "reasonableness" test

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applied by the Indian courts, so that the drafting of those provisions in long term service
contracts, such as outsourcing contracts, will be an important task.

4. Agents and Distributors:

The ICA does define the status of "agent", and contracts of agency are based on two principles:

i. Whatever a person can do personally is allowed to be done by an agent except in the case
of contracts involving personal services (the talents of a person which are unusual,
special or unique and cannot be performed exactly the same by another)
ii. A person who does an act through a duly authorised agent does it by himself and so the
acts of the agent are considered the acts of the principal.

These principles will be familiar to English lawyers, and the commentary in relation to
agents and distributors is simply that at a commercial level, the expressions 'agent',
'representative' and 'distributor' tend to be used more interchangeably in India. Whilst it is
generally understood that an agent will only procure business and will be paid through a
commission, business people generally are less focussed on the legal distinction between agent
and distributor than we are in the UK because of, for example, the different consequences of
termination of agencies and distributorships under our Commercial Agents Regulations. So care
is needed when appointing an agent or a distributor, or when including provisions in a contract
that refer to agencies or distributorships, to make sure that the Indian counterparty has the same
understanding as to what this entails.

5. Data Protection

Currently, there is no data protection legislation in India. This means that from an Indian legal
perspective there is no requirement for a contract under which personal data will be processed in
any manner to address that processing, and equally means that if the contract does not include
any such provisions then there will be no obligations on the parties akin to the EU's data
protection principles. This is a 'hot topic', particularly for businesses in Europe subject to the
Data Protection Directive, and even for companies from countries such as the US - which lack a
statutory framework for data protection but nevertheless expect standards of data security to be
met.

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Whilst the Government of India is presently considering enacting data protection legislation, or
amending the Information Technology Act, based on industry feedback and a draft data
protection law drawn up by a Government taskforce, until that legislation is in place it is
necessary to protect personal data by imposing contractual obligations on the contracting parties
- and at least the good news is that Indian law does not prohibit the imposition of such
obligations.

Contract Law in Mexico

Introduction

Mexico is a Federal Republic composed of thirty-one states and one Federal District that follow
a civil law tradition. Its contract law is codified in the Federal and States’ Civil Codes and the
Commercial Code. The Federal Civil Code has been incorporated, nearly verbatim, in each of the
thirty-one local Civil Codes of the Mexican States. Since all thirty-one of Mexico’s States’ Civil
Codes closely mirror the Federal Civil Code, this article will limit its analysis to the Federal
Civil Code only. Such analysis will suffice in highlighting important provisions of Mexican
contract law; nevertheless, the individual State’s Civil Codes should always be consulted.

In addition to the Civil Code, contract law is also codified in the Commercial Code, which
governs all contracts that are deemed to be commercial. In Mexico, commercial matters fall
under federal jurisdiction; thus, the Mexican Commercial Code is Federal law. It is essential to
note that the Commercial and Civil Codes are not mutually exclusive. For instance, the
Commercial Code provides that the Civil Code shall be the controlling authority for issues not
covered in the Commercial Code. Therefore, the Federal and States’ Civil Code should always
be referenced and used as gap fillers for areas of contract law that the Commercial Code does not
address, such as contract validity.

Historical Origins

Mexico's civil law system is derived primarily from Roman law as set forth in the compilation of
codes and statutes of the Emperor Justinian, called Corpus Juris Civilis, and later refined in the

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French or Napoleonic Code of 1804. Interestingly, the development of Mexican commercial law
drew heavily on Italian law. Mexico's legal system is also influenced by colonial law (the
Spanish and "Indian" law of Spain's colonization in the areas that became Mexico and other
present day Latin American countries), which was a highly formal body of law, including
specific collections of not only laws but customs or accepted legal practices. The basic rules and
regulations governing contracts in Mexico are found in the Civil Codes of the several states of
Mexico and the Federal Commercial Code of Mexico.

The Fundamentals of Contract Law in Mexico

The fundamentals of Contract Law are similar to that in U.S. and Canada. The contract must be
in writing, have an offer and acceptance, and establish liquidated damages or other penalty
provisions, and conditions of default and termination of contractual obligations.

1. Creation of Rights and Obligations

Contracts are a fundamental means of creating rights and obligations between parties. In
order for a contract to exist in Mexico, it must contain consent and subject matter that is
legally possible to be the object (goal) of the contract.
2. Causes for Invalidation
Contracts may be invalidated because of:
i. The legal incapacity of the either or any of the contractees (example of the preceding:
a 3 year old contracts on his own to purchase an automobile, committing to four years
of monthly payments);
ii. Vices in the consent of any of the parties;
iii. The object (goal) ("object"), motive ("motive") or purpose ("fin") of the contract is
illicit.
iv. The consent was not given (manifested) in the form established by law of Mexico.
3. Contract Perfectioning
Unless the law of Mexico otherwise so establishes for a particular contract, contracts in
general are perfected by the mere consent of the parties.
4. Determination of Validity

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 Unless the law determines to the contrary regarding a specific contract or scenario, the
determination of validity and compliance of the contracts can not be left at the sole discretion
of one of the contracting parties.
5. Object of the Contract
The object ("object") of a contract is the thing obligated to be given and/or the act that the
obligated party is to perform or not to perform.
6. Modalities
Unless determined by law for particular cases, contracts may be unilateral or bilateral, verbal
or written, present or future, and contingent upon events occurring or not occurring (within
the realm of reality). As one can rapidly see, the area of contracts is very broad in its
regulation.
7. Interpretation
When the terms of contracts are clear and do not leave doubt as to the intention of the
contracting parties, then the literal sense of the clauses will be used. When the words appear
contrary to the evident intention of the contracting parties, the latter will prevail over the
former.
Where any of the clauses of the contract will admit diverse understandings, the parties are to
understand them in the manner most appropriate in order that they produce effects. The
clauses are to be interpreted the ones with the others, attributing to the unclear ones the sense
(understanding) that results from the wholeness (joint content) of the others. The words in a
contract that will admit diverse understandings (meanings) will be understood in that
meaning more in accordance with the nature and object of the contract.
The uses and customs of the country are to be taken into account when interpreting the
ambiguities of contracts.
8. Boiler-Plate Clauses
There are some boiler-plate (pre-made) clauses that should be considered when
contemplating signing a contract relative to an activity in Mexico, which may have some
cross border implications either due to the parties, the purpose or other cause. The clauses
include coverage of matter such as: dual language, dual domicile, dual jurisdiction, waiver of
immunities, dual courts, dual laws, and appointment of service of process agent.

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Types of Contracts

The Civil Code of Sonora identifies the following as contracts:

1. Preparatory Contracts
2. Purchase/Sale Contracts
3. Barter/Exchange (Permuta)
4 . Donations (Donaciones)
5 . Mutuum/Loan (Mutuo)
6 . Lease/Rental (Arrendamiento)
7 . Commodatum (Comodato)
8 . Deposit (Deposito)
9 . Sequestration (Secuestro)
10.Agency (Mandato)
11. Rendering of Services (Prestación de Servicios)
12. Associations (Asociaciones)
13.Civil Companies (Sociedades Civiles)
14.Aleatory (Aleatorios)
15. Bond (Fianza)
16. Chattel Mortgage (Prenda)
17. Mortgage (Hipoteca)
18. Antichresis (Anticresis)
19. Emphyteusis (Enfiteusis)
20. Transactions (Transacciones)

Comparison with Indian Contract Law

1. Elements of a Valid Contract
Article 1794 of the Federal Civil Code sets forth the only two required elements for creating an
enforceable contract: consent and object. This is a major point of difference between the Indian
Contract Law and the Mexican Contract Law. The principle of consideration is not a requirement
in Mexican law in order for the contract to be valid. The validity of a contract depends only on
the existence of the agreement between the parties. This is however not the case with the Indian
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Contract Law where consideration or price forms an important part of the contract between two
parties.
2. Reliance on Case Law Precedents
Another traditional distinction between the two systems which has not declined in significance
over the years is the importance of and reliance on case law precedent compared with the sparse
use of the case law in Mexico. Notwithstanding this distinction, case law in Mexico should not
be ignored, Certain judgments, called educators, of the federal courts including the Mexican
Supreme Court and the circuit courts, and, at the state level, judgments issued at the appellate
level (Tribunal Superior de Justicia), have persuasive value and are published although they are
not widely circulated.
3. Binding Laws
Compilations of administrative rules and regulations can combine to create a binding effect
within the different categories of administrative law. There are certain limitations on establishing
such binding precedents and regulations, because under Mexican law, judgments, regulations
ruling and administrative orders must be issued in accordance with the underlying statue.
However, as a practical matter, the volume of these extra legislative decisions and rules is
growing so rapidly that statutory law in Mexico now covers only the most basic and predictable
cases and in most situations, one must look beyond the statute for guidance.
Whereas in India when law is declared unconstitutional its unconstitutionality is usually applied
universally, in Mexico, for the reasons stated above, the law is unconstitutional only for the party
which filed the case. Others who wish to challenge the law must file their own cases.
4. Formalities
A cursory glance seems to suggest that the Commercial and the Federal Civil Code appear to
favour the general rule of freedom to contract, which seems to disregard form and formality.
However, Article 1833 of the Federal Civil Code “provides that when the law requires a specific
form or formality for an agreement, and this formality is not given to it, the agreement will not
be valid.” Therefore, despite an apparent freedom to contract, Mexican law does require that
specific formalities be fulfilled in various circumstances.
Mexican law provides for two different types of formalities, the contract may be required to be in
writing, and it may also be required to be in the form of a public deed issued before a notary
public or a public commercial broker.

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 Contract Law in Kenya
Introduction

Kenya is a country on the coast of East Africa. Before 1895, when Kenya was declared a British
Protectorate, the country had no structured legal system to speak of. The territory had been
administered via the Imperial British East Africa Company, which 'had to carry out all the
obligations undertaken by the British Government under any treaty or agreement made with
another state. In 1896, the territory became known as the East African Protectorate.  It was
renamed Kenya Colony and Protectorate in 1920 and it remained so until 1963, when Kenya
became an independent state. As a result of British administration for over six decades, the
Kenyan legal system borrows heavily from the English legal system. 

Historical Background

With the settlement of the British in the East African Protectorate, there arose a need for a
legislative and administrative system to govern the inhabitants. It should be noted that British
settlement was in two instances, direct and indirect.  Direct in the sense that the settlers came
into the area straight from Britain and indirect in that there were those settlers who came from
India, which had already been a British colony. Thus there existed three sets of people, the
British, the Indians who were considered British citizens and the natives.  For ease of
administration, the British settlers imported laws and their system of governance from Britain,
and British laws which had been codified in India, to apply to the East African Protectorate. The
natives were considered to be too primitive to understand the intricacies of the law, and were
thus left to practice African Customary law.

The Hindus who had emigrated from India were also allowed to practice Hindu Customary law
in area of personal law, while the Muslims and Arabs, who were centralized at the coast,
practiced Muslim Law. Thus, there now existed several parallel systems of law.  Though the
British tried to phase out by enacting laws to govern the whole country, the effect of the
multiplicity can still be felt and seen in the current Kenyan legal system.

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The Kenyan Legal System

The Constitution

The Kenyan Constitution is the supreme law of the land, and any other law that is inconsistent
with the Constitution, shall, to the extent of the inconsistency, be void.The independence
Constitution was enacted on the 12th of December 1963. There have been several amendments to
the Constitution since then, and currently, Kenya is undergoing the Constitution Review Process.

The Judiciary

The judiciary consists of the Courts and all officers of the Courts including, the Chief Justice, the
Attorney General, Judges and Magistrates. The judiciary determines disputes which arise
between individuals, and those arising between individuals and the State. 

The Structure and Jurisdiction of the Courts

The Court of Appeal

It is the highest Court in Kenya. It has only appellate jurisdiction, in both civil and criminal
cases, it has no inherent jurisdiction. It is presided over by the Judges of Appeal, who are
appointed by the President. The decisions of the Court of Appeal are binding on all other
subordinate courts, including the High Court. The Court of appeal sits mainly in Nairobi, the
capital of Kenya, but travels on circuit to other principal towns in Kenya to hear appeals.
The High Court
It is presided over by puisne judges, judges of the High Court, who are appointed by the
president. It has unlimited original jurisdiction in civil matters. In Criminal matters, it only hears
cases of murder and treason. It also has appellate jurisdiction in both civil and criminal matters,
in that appeals from the subordinate courts are preferred to the High Court.
Subordinate Courts
The jurisdiction of these courts is determined on a territorial and pecuniary basis. They are
presided over by magistrates. The magistrate's courts are in order of hierarchy, with the Chief
Magistrate's court being the highest, followed by the Senior Principal Magistrate's Court,
Principal Magistrate's Courts, Senior Resident Magistrate's Courts, Resident Magistrate's Courts
and the District Magistrate's courts.  

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Sources of Kenyan Law

The primary sources are enumerated in Section 3 of the Judicature Act (Chapter 8 Laws of
Kenya), and they include:

1. The Constitution
It is the supreme law of the land, taking precedence over all other forms of law, written and
unwritten. If any other law is inconsistent with it, the constitution prevails, and the other law,
to the extent of its inconsistency, is void. Many Acts of Parliament are made pursuant to
particular provisions in the Constitution.
2. Acts of Parliament
These are passed by parliament and also include subsidiary legislation, that is, laws made
under the authority of an Act of Parliament.
3. Specific Acts of Parliament of the United Kingdom
These are cited in the schedule to the Judicature Act and include, for instance: the Admiralty
Offences (Colonial) Act, 1849,the Evidence Act, 1851, sections 7 and 11 etc.
4. Certain Acts of Parliament of India
The Transfer of Property Act, 1882 of India contains the procedural law applicable where the
Registration of Titles Act, the Land Titles Act and the Government Lands Act are applied.
5. African Customary Law
This is applicable only on civil cases where one or more of the parties is subject to or
affected by it, in so far as it is applicable and is not repugnant to justice and morality or
inconsistent with any other law. African Customary law differs from tribe to tribe.
6. Islamic Law
This is a very limited source of law in Kenya. It is applied in Kadhi's Courts when all the
parties profess the Muslim religion, but only as to questions of Muslim law relating to
personal status, marriage, divorce and inheritance issues.
7. International Instruments
Though not listed in the Judicature Act, international law is a source of Kenyan law. The
government is party to a number of international legal instruments and Kenyans can use these
as an additional tool for the advancement of their rights. However, it only becomes

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 enforceable in Kenya after they have been incorporated into our domestic legal system by
implementing legislation.

The Fundamentals of Contract law in Kenya

1. Preamble

An Act of Parliament to apply the English common law of contract to Kenya, with certain
modifications.

2.1 The common law of England relating to contract, as modified by the doctrines of equity, by
the Acts of Parliament of the United Kingdom shall extend and apply to Kenya. Provided that no
contract in writing shall be void or unenforceable by reason only that it is not under seal.

2.2 After the commencement, and subject to section 4, of this Act, the provisions of section 74 of
the Kenya (Constitution) Order in Council, 1958, shall have effect, in relation to paragraph (2) of
Article 4 of the Kenya Colony Order in Council, 1921, as if the contract act 1872, of India had
never been applied to Kenya.
3.1 No suit can be brought to charge the defendant to answer for the debt, default or miscarriages
of another person unless the agreement or the memorandum is in writing and signed by the
charged party or some other lawfully authorised person.
3.2 No suit shall be brought whereby to charge any person upon or by reason of any
representation or assurance made or given concerning or relating to the character, conduct,
credit, ability, trade or dealings of any other person, to the intent or purpose that such other
person may obtain credit, money or goods, unless such representation or assurance is made in
writing, signed by the party to be charged therewith.
3.3 No suit shall be brought upon a contract for the disposition of an interest in land unless the
contract upon which the suit is founded is in writing, is signed by all the parties thereto, and the
signature of each party signing has been attested by a witness who is present when the contract
was signed by such party:

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Provided that this subsection shall not apply to a contract made in the course of a public auction
by an auctioneer within the meaning of the Auctioneers Act, nor shall anything in it affect the
creation of a resulting, implied or constructive trust.
3.4 sub-section 3.3 shall not apply to a contract made in the course of a public auction nor shall
anything in that subsection affect the creation or operation of a resulting, implied or a
constructive trust.
3.5 the terms of a contract may be incorporated in a document either by being set out in it or by
reference to some other document.
3.6 For the purposes of subsection 3.3-
i. "disposition" includes a transfer and a devise, bequest or appointment of property
contained in a will;
ii. "transfer" includes a mortgage, charge, lease, conveyance, assignment, assent, vesting
declaration, vesting instrument disclaimer, release and every other assurance of property
or any interest therein by any instrument other than a will or a codicil;
iii. "party" includes any agent, auctioneer or advocate duly authorized in writing to act in
the absence of the party who has given such authority;
iv. "interest in land" means any estate in or charge over land, or any estate in or charge
over the proceeds of sale of land;
v. "sign", in relation to a contract, includes making one's mark or writing one's name or
initial on the instrument as an indication that one intends to bind himself to the contents
of the instrument and in relation to a body corporate includes signature by an attorney of
the body corporate duly appointed by a power of attorney registered under the
Registration of Documents Act.
3.7 The provisions of subsection 3.3 shall not apply to any agreement or contract made or
entered into before the commencement of that subsection.

4. The Contract Act, 1872, of India (now repealed in its application to Kenya) shall,
notwithstanding such repeal, continue to apply to any agreement made or contract entered into
before the commencement of this Act.

Differences with Indian Contract Law:

IBL Project_Group 9_A Section Page 18

The differences are similar to those existing between Indian and UK contract law since Kenya
has adopted the UK contract law.

References:

1. Kenyalaw.org

2. freelibrary.com

3. Mexican Contract Formalities and Interpretations by Christopher Klein

IBL Project_Group 9_A Section Page 19