By the end of this chapter, you will be able to:
Mastering these skills will help you confidently handle contracts in your trade, ensuring fair and clear agreements that protect your work and business relationships.
Compiled by: David Owino
The law of contract requires certain core elements to be present for an agreement to be valid and enforceable. These essentials safeguard the interests of parties engaging in procurement activities by ensuring clarity, fairness, and legal compliance. In Kenyan procurement practice, adherence to these essentials helps organizations avoid costly litigation and maintain ethical standards.
An offer is the initial step in contract formation, where one party proposes terms to another with the intention to be bound upon acceptance. Offers in procurement are often seen in tender invitations, quotations, or proposals submitted by suppliers.
An offer is a clear, definite, and unequivocal proposal made by one party (the offeror) to another (the offeree), indicating a willingness to enter into a contract on specified terms. It must express the intention to create legal relations once accepted, distinguishing it from preliminary negotiations or invitations to treat.
For an offer to be effective, it must be communicated to the offeree. In procurement, communication channels include written tenders, emails, or verbal proposals during negotiations. The offer remains open until it is accepted, rejected, countered, or withdrawn within a reasonable timeframe.
An offer can be revoked anytime before acceptance, provided the revocation is communicated to the offeree. For instance, a supplier who submits a bid to a county government can withdraw the offer before the contract award.
Acceptance is the unequivocal agreement to the terms of the offer, forming the contract. In procurement, acceptance often occurs when a buyer formally awards a contract or issues a purchase order.
Acceptance is the final and unqualified expression of assent to the terms of the offer. It creates mutual consent, which is essential for contract validity. Any deviation from the original terms constitutes a counter-offer, not acceptance.
Acceptance can be communicated verbally, in writing, or implied by conduct. For example, a supplier commencing work after receiving a purchase order signals acceptance by performance.
Acceptance is effective when communicated to the offeror, following the postal rule or instantaneous communication rules depending on the mode. In procurement, electronic acceptance via email is common and legally recognized.
Partial or conditional acceptance is treated as a counter-offer, which restarts the offer-acceptance process. Procurement managers must ensure acceptance matches the offer terms precisely to avoid misunderstandings.
Capacity refers to the legal ability of parties to enter into a contract. In procurement, it ensures that parties have the authority and mental competence to bind their organizations.
Capacity means that parties must be of sound mind, legal age, and authorized to contract. Contracts entered into by persons lacking capacity may be void or voidable.
In Kenya, the age of majority is 18 years. Minors generally lack capacity to contract, except for contracts for necessities. Procurement officers must verify signatories have reached legal age.
Procurement contracts require that signatories have delegated authority, such as a procurement manager or authorized representative. Contracts signed without authority may be unenforceable.
Parties must understand the nature and consequences of the contract. Contracts signed under duress, intoxication, or mental incapacity may be invalidated.
The parties must intend to create legal relations for a contract to be valid. This element distinguishes social agreements from enforceable contracts.
Intention refers to the mutual understanding that the agreement will be legally binding. In procurement, commercial transactions generally presume this intention.
Kenyan courts presume that parties in business dealings intend to create legal obligations unless explicitly stated otherwise. This presumption supports enforcement of procurement contracts.
Written contracts, signed documents, and conduct of parties provide evidence of intention. For example, a signed tender award letter confirms intention to contract.
Social or domestic agreements, such as informal arrangements between colleagues, generally lack intention and are not legally binding.
Consideration is the value exchanged between parties, forming the price for the promise made. It is fundamental in distinguishing contracts from gratuitous promises.
Consideration involves a benefit to the promisor or a detriment to the promisee. In procurement, payment for goods or services constitutes consideration.
Consideration must be sufficient but need not be adequate. This means it must have some value recognized by law, but need not reflect market value exactly.
Certain contracts, such as contracts under seal or promissory estoppel, may not require consideration. However, these are rare in procurement practice.
The contract’s purpose and terms must be lawful for it to be enforceable. Illegality voids contracts and protects public interest.
Legality requires that the contract’s objective, terms, and performance comply with Kenyan law and public policy.
Contracts involving bribery, corruption, or procurement fraud are illegal and void. The Public Procurement and Asset Disposal Act enforces strict compliance.
Contracts that violate specific statutes, such as environmental regulations enforced by NEMA, are unenforceable.
Contracts against public morals or harmful to the community are void. Procurement contracts must align with ethical standards and government policies.
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Create a free accountThis chapter explored the foundational elements required for a valid contract, including the necessity of a clear offer, unambiguous acceptance, legal capacity of the parties involved, mutual intention to create legal relations, valid consideration, and the requirement that the contract’s purpose be lawful. It then examined various types of contracts such as specialty or written contracts, simple contracts, contracts under seal, and those requiring written evidence to establish their terms. The chapter also analyzed the different ways contracts can be discharged, covering express agreement between parties, full performance of contractual obligations, breach of contract, the doctrine of frustration due to impossibility, and discharge through operation of law. Remedies available for breach of contract were discussed, highlighting the equitable doctrine of part performance as a means to enforce agreements where formalities may be lacking. Finally, the chapter distinguished between express terms explicitly stated in the contract and implied terms that are assumed by law or custom, completing a comprehensive overview of contract law principles.
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