Many commercial disputes begin with a contract that was silent on the question the parties later argued about. By the time the argument starts, the drafting options have narrowed and the file has to be reconstructed from emails. Prevention is usually cheaper than cure, and most of it is done at signature. This article describes the clauses that prevent disputes and the review routine that catches the gaps before a contract is signed.
Quick answer
Disputes are prevented by specificity and process. The contract should define what is being delivered, when payment falls due, how changes are authorised, how notices are given, what happens on default, and where a dispute is heard. A clause copied from another transaction without adaptation is often worse than no clause, because it creates an expectation that the contract does not support.
The law that applies to dispute clauses
Commercial contracts are governed by the Law of Contract Act (Cap 23) and the general law of contract. A clause agreeing to arbitrate is given effect under the Arbitration Act, 1995, which applies where the parties have agreed in writing to refer disputes to arbitration. A clause agreeing to mediate before litigation works with the court process, including court-annexed mediation under the Civil Procedure (Court-Annexed Mediation) Rules, 2022. The point is that these clauses have legal consequences, so they should be drafted as terms, not as recitals.
Why copied clauses cause disputes
A clause written for a different deal often imports assumptions that do not fit. It may refer to an institution that is not available, use a defined term that appears nowhere else, or require a notice that one party never sends. Another common problem is internal inconsistency: the dispute clause says arbitration while the governing law clause names the courts, or the order of precedence leaves the answer unclear. A short review before signature is more useful than a long argument afterwards.
Clauses that prevent disputes
| Clause | Dispute it prevents | Drafting point |
|---|---|---|
| Scope and deliverables | Argument about what was included | Describe deliverables, standards and exclusions, and attach specifications |
| Acceptance and testing | Disagreement about whether work was completed | Set acceptance criteria and a process for testing and sign-off |
| Payment and invoices | Late payment and set-off claims | State when invoices fall due, what they must contain and whether set-off is permitted |
| Variations | Unpriced additional work | Require a written change order signed by named representatives before work proceeds |
| Notice, default and cure | Termination without a clear trigger | Define default, the notice required and the period to cure |
| Dispute route | Parallel filings and jurisdictional objections | Agree escalation steps, then mediation, arbitration or court, with a clear forum |
The dispute resolution clause and the forum
A tiered clause usually starts with negotiation between senior representatives, then mediation, then arbitration or litigation. Tiered clauses only work if the steps are clear and the parties follow them. The clause should say who must be notified, what triggers each step, how long each step lasts and what happens if a step is skipped. Where arbitration is chosen, the clause should identify the seat, the rules, the number of arbitrators and the appointment method.
The article on the commercial arbitration process in Kenya explains how an arbitration proceeds, and the article on commercial contract mediation in Kenya explains the mediation stage. The firm’s contract practice reviews and drafts these clauses for Kenyan and cross-border agreements.
Governing law and forum are part of the same choice. The governing law clause decides which law interprets the contract. The forum clause decides where disputes are heard. They are different questions, and a contract can choose Kenyan law with a foreign seat, or foreign law with a Kenyan seat. Each choice affects cost and enforceability. Where the parties choose Kenya, the clause should be consistent with the dispute route and with any arbitration agreement. Where the parties choose a foreign forum, the practical question is whether a judgment or award will be enforceable against the other party’s assets.
Review points: when to revisit the clauses
A contract should be reviewed at renewal, after a material change in the relationship, when a new entity joins as a party, when the scope or pricing changes substantially, and as soon as a dispute begins to form. Notice clauses and dispute clauses are typically the first places where a poorly maintained contract shows its gaps. A short review at those moments is more effective than a rewrite after a falling out.
What poor drafting costs
The cost of good drafting is visible and modest: drafting time, a review meeting and a signed document. The cost of poor drafting is contingent but can be large. It includes preliminary objections, applications to stay proceedings, arguments about which forum applies, the cost of running two processes at once, delay while the parties argue about the argument, and management time diverted from the business. Where a jurisdictional fight succeeds, the claimant may have to start again in another forum within whatever time remains.
When to take advice
- The contract is high value, long term or difficult to exit.
- The transaction is cross-border or the counterparty is outside Kenya.
- The contract is with a government body or a regulated entity.
- The parties are considering arbitration or a foreign forum.
- A relationship is deteriorating and a dispute is forming.
Pre-signature checklist
- Confirm which documents form the contract and the order of precedence.
- Check that scope, deliverables, standards and exclusions are described in the contract or an attached schedule.
- Confirm acceptance criteria, testing and sign-off.
- Check payment dates, invoice content, currency and set-off.
- Confirm that variations require a written change order signed by named representatives.
- Read the notice clause and check that the addresses, recipients and delivery methods are current.
- Read the dispute clause as a sequence and confirm each step is workable.
- Check that governing law, forum and dispute route are consistent with each other.
Primary sources
- Law of Contract Act (Cap 23), Kenya Law, for the framework of contract in Kenya.
- Arbitration Act, 1995, Kenya Law, for the effect of a written arbitration agreement.
- Civil Procedure (Court-Annexed Mediation) Rules, 2022, Kenya Law, for the court-annexed mediation process.
This article is general information, not legal advice.