The Kenyan Parliament passed Law of Contract (Amendment) Act,
2019 September 18th, 2019 and awaiting Presidential
assent. The Amendment provides that the creditors need to realize
the principal debtor’s assets before filing a suit against a
surety including that of guarantor. Further, the amendment shall
not be applicable retrospectively.
The amendment passed by the Parliament of Kenya may affect the
enforceability of:
- security agreements of third
parties;
- financial instruments and guarantees
issued by banks eg. letters of credit; and
- legal instruments that are packaged
eg. put options.
As per the practice of English Courts, the Courts of Kenya shall
interpret transactions on basis of substance rather than their
form.
