What Kenya's Law of Contract Amendment Bill 2025 Means for Commercial Contracts

The Kenya Law of Contract Amendment Bill 2025 represents the most significant proposed overhaul of Kenyan contract law in decades, introducing substantive limits on freedom of contract that will reshape how businesses draft, negotiate and enforce commercial agreements. Published on the Parliament of Kenya website on 2 December 2025 and gazetted by the National Assembly in February 2026, the Bill proposes prohibitions on contractual terms that exclude liability for death or negligence, introduces a statutory test for unfair and unconscionable contract terms, and codifies a reasonableness standard for limitation of liability clauses.

For in-house counsel, contract managers and SMEs operating in Kenya, the practical effect is clear: standard commercial contracts, supplier agreements, customer terms and conditions, and service-level agreements all require immediate review and, in many cases, material redrafting before the Bill’s anticipated commencement.

Executive Summary, Five Immediate Actions

If you read nothing else, take these five steps now:

1. Audit all exclusion and limitation of liability clauses in active contracts, any clause purporting to exclude liability for death or personal injury caused by negligence will be void under the Bill.
2. Identify contracts with consumer or SME counterparties, these face the highest risk under the new unfair contract terms Kenya provisions and should be prioritised for repapering.
3. Issue an internal alert to procurement, sales and legal teams explaining the contract changes Kenya 2026 will bring and imposing a temporary hold on executing new agreements using legacy templates.
4. Commission a clause-by-clause redline review of your standard-form contracts, focusing on limitation of liability Kenya caps, indemnities, force majeure and penalty clauses.
5. Engage experienced Kenyan commercial counsel to advise on transitional risk and repapering strategy, the legislative timeline is compressed and early movers will secure better negotiated outcomes with counterparties.

Key Changes Introduced by the Kenya Law of Contract Amendment Bill 2025, Legal Summary

The Bill proposes far-reaching reforms to the Law of Contract Act (Cap 23), significantly restricting the use of exclusion and limitation of liability clauses, particularly in consumer contracts and in cases involving negligence. The reforms go beyond classic sale contracts and capture a wider range of commercial arrangements. Below is a structured summary of the principal changes.

Negligence and Exclusion Clauses

The single most consequential provision in the Bill is the absolute prohibition on contractual terms that seek to exclude or restrict liability for death or personal injury resulting from negligence. Under the current Law of Contract Act (Cap 23), Kenyan law has largely followed English common law principles emphasising freedom of contract, allowing parties with ostensibly equal bargaining power to agree broad exclusion clauses. The Bill dismantles this approach for negligence-related harm.

Industry observers expect this change to have immediate impact in sectors where service providers routinely include blanket negligence exclusions, including construction, healthcare, transport, logistics, professional services and hospitality. Any clause that currently states “the service provider shall not be liable for any loss, damage or injury howsoever caused, including by negligence” will be rendered void upon commencement.

For other types of loss beyond death or personal injury, the Bill does not impose an absolute bar but instead subjects exclusion and limitation clauses to a statutory reasonableness test. A clause will only be enforceable to the extent that it satisfies this reasonableness standard, a significant departure from the current position where courts have generally enforced freely negotiated commercial exclusions between sophisticated parties.

Unfair and Unconscionable Terms Test

The Bill introduces a structured legal framework for assessing whether contractual terms are unfair or unconscionable. This codifies protections that previously existed only in fragmented form across consumer protection regulations and judicial precedent. The likely practical effect will be that courts apply a multi-factor test considering:

• Relative bargaining power of the parties at the time of contracting
• Whether the affected party received a genuine opportunity to understand and negotiate the term
• Whether the term is reasonably necessary to protect the legitimate interests of the party relying on it
• The extent to which the term departs from what would ordinarily be expected in transactions of that type
• Transparency and notice, whether the term was clearly drawn to the other party’s attention before the contract was formed

This unfair contract terms Kenya framework applies to both consumer and commercial contracts, though early indications suggest that courts will apply a higher threshold of scrutiny to standard-form contracts imposed on consumers or smaller businesses with limited negotiating leverage.

Remedies and Damages Changes

The Bill also proposes amendments affecting contractual remedies. Key changes include strengthened provisions on damages for negligence within contractual relationships and greater judicial discretion to strike down or modify terms deemed unconscionable rather than simply voiding the entire contract. Industry observers expect Kenyan courts to adopt an approach similar to the UK’s Unfair Contract Terms Act 1977, where courts may sever the offending clause while preserving the remainder of the agreement, a commercially pragmatic outcome that reduces uncertainty for both parties.

Businesses cannot avoid responsibility for fundamental obligations through boilerplate exclusions. The reform signals a clear legislative intent to prioritise contractual fairness alongside commercial certainty.

Does the Bill Affect Existing Contracts or Only New Agreements?

Short answer: the Bill’s provisions will apply to contracts entered into after its commencement date, but contracts with renewal, variation or extension mechanisms may also be caught, meaning many existing commercial relationships will require review.

Transitional Rules

The Bill, as published on 2 December 2025, provides that it may be cited as the Law of Contract (Amendment) Act and will come into operation on a date to be appointed by the Cabinet Secretary by notice in the Kenya Gazette. The absence of detailed transitional provisions means that, as a general principle of Kenyan statutory interpretation, the new restrictions will apply prospectively, to contracts formed after commencement.

However, commercial practice makes the distinction less clean than it appears. Any contract that is renewed, materially varied, novated or extended after the commencement date will likely be treated as a new contract for purposes of the Bill. Similarly, rolling contracts with automatic renewal clauses, framework agreements that generate individual purchase orders, and master service agreements with periodic statements of work will each present a point at which the new requirements attach.

Triage Matrix for Existing Contracts

The prudent approach is to begin updating commercial contracts in Kenya now rather than waiting for a gazetted commencement date. Businesses that delay risk being forced into reactive, time-pressured renegotiations with counterparties who understand their strengthened bargaining position under the new law.

Clauses Most at Risk, Clause-by-Clause Practical Guidance

Not every clause in your contracts is equally exposed. The following assessment identifies the highest-risk provisions and provides practical mitigation steps aligned with the Kenya Law of Contract Amendment Bill 2025.

Limitation of Liability

Risk level: High. Blanket caps that limit aggregate liability to nominal amounts (e.g., “liability shall not exceed the fees paid in the preceding 12 months”) will be tested against the statutory reasonableness standard. Clauses that are disproportionately low relative to the contract value, the nature of the obligations or the foreseeable loss may be struck down.

Mitigation: Replace blanket caps with tiered limitation structures that distinguish between categories of loss. Carve out liability for death, personal injury, fraud, wilful default, data breaches and intellectual property infringement from any cap. Ensure the cap bears a reasonable relationship to the contract value or the insurance coverage maintained.

Indemnities

Risk level: High. One-sided indemnity clauses, particularly those requiring a smaller party to indemnify a larger party for the larger party’s own negligence, face challenge under both the negligence prohibition and the unconscionability test.

Mitigation: Restructure indemnities to be mutual or proportionate. Limit indemnity obligations to losses arising from the indemnifying party’s own breach, negligence or wilful misconduct. Include procedural safeguards (notice requirements, right to control defence, duty to mitigate).

Unfair T&Cs and Small-Print Clauses

Risk level: High (consumer and SME contracts); Medium (large corporate B2B). Website terms of service, click-wrap agreements, booking conditions and general terms of trade that contain onerous provisions buried in dense text will attract heightened scrutiny. The Bill’s emphasis on transparency and genuine opportunity to understand terms means that presentation matters as much as substance.

Mitigation: Revise T&Cs for plain language, logical structure and prominence of key risk-allocation terms. Ensure onerous clauses are specifically drawn to the counterparty’s attention, consider requiring separate acknowledgement or signature for critical exclusions. This is central to revising T&Cs Kenya 2026 compliance.

Insurance and Notice Clauses

Risk level: Medium. Clauses that require a party to maintain insurance but simultaneously exclude the other party’s liability for the insured risk may be viewed as an attempt to circumvent the prohibition on excluding negligence liability. Similarly, unreasonably short notice periods for claims may be challenged as unconscionable.

Mitigation: Align contractual insurance obligations with the parties’ respective liability exposure. Ensure notice periods are commercially reasonable and do not operate as de facto exclusions of legitimate claims.

How to Update Standard Commercial Contracts, Step-by-Step Playbook

Businesses that act decisively now will be best positioned when the contract changes Kenya 2026 introduces take effect. The following ten-step plan provides a structured approach to update commercial contracts Kenya-wide.

Immediate 30-Day Actions

1. Appoint a project owner. Designate a senior in-house lawyer or external counsel to lead the contract review programme. This person should have authority to pause template usage and approve redlines.
2. Conduct a contract inventory. Compile a register of all active contracts, grouped by type (consumer, B2B standard-form, bespoke), counterparty size, renewal dates and the presence of exclusion, limitation or indemnity clauses.
3. Apply the triage matrix. Use the risk table above to categorise each contract as High, Medium or Low priority. Focus initial resources on consumer contracts and standard-form B2B agreements with SME counterparties.
4. Impose a template freeze. Instruct all teams to stop using existing standard-form templates for new agreements until updated versions have been reviewed and approved. Use interim “bridge” language that avoids clauses likely to be void under the Bill.

90-Day Repapering Plan

5. Commission clause-level redlines. Engage commercial counsel to prepare clause-by-clause redlines for each template contract, referencing the specific provisions of the Kenya Law of Contract Amendment Bill 2025 that each change addresses. (See the Redline Examples section below.)
6. Draft counterparty communications. Prepare a standard letter or email explaining the legislative changes and your proposed contractual amendments. Frame the communication positively, emphasising compliance and mutual benefit rather than increased liability.
7. Negotiate proactively. Begin outreach to key counterparties on high-priority contracts. Where possible, agree amendments by consent through a simple variation agreement rather than a full novation, which is faster and cheaper.
8. Update insurance and indemnity structures. Review professional indemnity, public liability and product liability insurance policies. Ensure coverage limits align with revised liability exposure. Consider whether additional coverage is needed for previously excluded risks.

Negotiation Playbook for Counterparties

9. Build an internal decision matrix. For each contract, decide in advance whether to (a) amend by consent (preferred for ongoing relationships), (b) novate (necessary where the changes are structural), or (c) accept the statutory default and rely on the reasonableness test. Option (c) carries litigation risk and should only be adopted where the clause is likely to satisfy the test.
10. Train commercial teams. Deliver a business contract checklist Kenya briefing to sales, procurement and project management teams. Staff who negotiate or sign contracts must understand what clauses they can and cannot agree to under the new framework. Document all training for compliance records.

The estimated time commitment for a medium-sized Kenyan business with 50–200 active contracts is approximately 4–6 weeks for the audit phase and 8–12 weeks for repapering, depending on counterparty responsiveness and the complexity of the contract portfolio.

Redline Examples and Clause Bank for the Kenya Law of Contract Amendment Bill 2025

The following redline snippets illustrate how common contract clauses should be revised. Each example shows the original (at-risk) language alongside the proposed (compliant) alternative and a brief rationale.

1. Limitation of Liability, Tiered Cap with Carve-Outs

Original (at-risk): “The Supplier’s total aggregate liability under this Agreement shall not exceed KES 100,000 regardless of the cause of action.”

Proposed (compliant): “The Supplier’s total aggregate liability under this Agreement shall not exceed [the greater of KES [amount] or [X]% of the total fees paid or payable under this Agreement in the [12]-month period preceding the claim], provided that this cap shall not apply to liability for: (a) death or personal injury caused by negligence; (b) fraud or wilful misconduct; (c) breach of confidentiality obligations; or (d) infringement of intellectual property rights.”

Rationale: The tiered structure with proportionate cap and express carve-outs for prohibited exclusions is designed to satisfy the statutory reasonableness test while maintaining commercially meaningful protection.

2. Indemnity with Reasonableness Safeguards

Original (at-risk): “The Client shall indemnify the Service Provider against all claims, losses, damages and expenses howsoever arising, including those arising from the Service Provider’s own negligence.”

Proposed (compliant): “Each party shall indemnify the other against losses arising directly from the indemnifying party’s material breach of this Agreement or its negligence, subject to the injured party’s duty to mitigate and the indemnifying party’s right to receive prompt written notice and to control the defence of any third-party claim.”

Rationale: Mutual structure and exclusion of indemnity for the other party’s own negligence addresses both the prohibition and the unconscionability test.

3. Exclusion of Negligence, Removed and Replaced

Original (at-risk): “The Company shall not be liable for any loss, damage or injury to any person or property howsoever caused, including by the Company’s negligence.”

Proposed (compliant): “The Company’s liability for negligence shall be determined in accordance with applicable law. Nothing in this Agreement shall exclude or limit the Company’s liability for death or personal injury caused by its negligence.”

Rationale: Blanket negligence exclusions are void under the Bill. The replacement clause expressly preserves statutory liability while leaving scope for limitation (subject to reasonableness) for other types of negligence-related loss.

4. Force Majeure, Preserving Relief Without Unlawful Exclusion

Original (at-risk): “Neither party shall be liable for any failure or delay in performance caused by circumstances beyond its reasonable control, including but not limited to negligence of third parties.”

Proposed (compliant): “Neither party shall be liable for failure or delay in performance to the extent caused by circumstances genuinely beyond its reasonable control, excluding any event arising from the affected party’s own negligence or wilful default. The affected party shall give prompt written notice and use reasonable endeavours to mitigate the impact.”

Rationale: Expressly carving out the party’s own negligence from force majeure relief prevents the clause from being characterised as an indirect negligence exclusion.

5. Consumer T&Cs Fairness Clause

Original (at-risk): “By placing an order, the Customer agrees to all terms and conditions set out on the Company’s website, as amended from time to time at the Company’s sole discretion.”

Proposed (compliant): “By placing an order, the Customer agrees to the terms and conditions set out at [specific URL], which the Customer is encouraged to read in full before ordering. Material changes to these terms will be communicated to the Customer at least [30] days before taking effect, and the Customer may terminate this agreement without penalty if they do not accept the revised terms.”

Rationale: Transparency, notice and the right to exit address the Bill’s emphasis on genuine opportunity to understand terms and protection against unilateral variation.

6. Notice and Transparency Clause

Original (at-risk): “All claims must be notified within 7 days of the event giving rise to the claim, failing which the claim shall be deemed waived.”

Proposed (compliant): “Claims should be notified as soon as reasonably practicable and in any event within [60] days of the date on which the claimant became aware (or ought reasonably to have become aware) of the circumstances giving rise to the claim. Late notification shall not bar a claim but may be taken into account in assessing the reasonableness of the claim and any contributory failure to mitigate.”

Rationale: Unreasonably short notice periods that operate as de facto exclusion clauses are vulnerable under the unconscionability test. The replacement balances the legitimate interest in prompt notification against fairness.

Litigation, Risk Allocation and Insurance Considerations

Insurance and Indemnity Alignment

With the removal of blanket exclusion clauses, businesses’ contractual liability exposure will increase. Industry observers expect a corresponding rise in professional indemnity and public liability insurance claims. Businesses should review policy limits, ensure they reflect the revised liability landscape, and confirm that their insurers are aware of any material changes to standard contract terms. Where limitation of liability Kenya caps are reduced or removed, insurance becomes the primary risk-transfer mechanism.

Evidence and Record Keeping

The unconscionability test will require courts to examine the circumstances at the time of contracting. Businesses that maintain clear records of the negotiation process, including evidence that terms were drawn to the counterparty’s attention, that the counterparty had an opportunity to take independent legal advice, and that the terms were freely agreed rather than imposed, will be better positioned to defend challenged clauses. Retain all pre-contractual correspondence, marked-up drafts, and records of any oral negotiations or explanations.

Early indications suggest that Kenyan courts will follow a pragmatic, commercially aware approach to enforcement, focusing on genuine unfairness rather than technical deficiencies. However, businesses should not rely on judicial discretion as a substitute for proactive contract management.

Practical Checklist and Timeline for Contract Changes Kenya 2026

The following table summarises the key legislative dates and corresponding business actions:

Business contract checklist Kenya, 12-month compliance plan:

• Month 1: Appoint project owner; complete contract inventory; apply triage matrix; impose template freeze
• Month 2: Commission clause-level redlines; begin counterparty communications on high-priority contracts
• Month 3: Complete redlines for all template contracts; commence negotiations on high-risk agreements
• Months 4–6: Execute amendment agreements; update insurance policies; deliver training to commercial teams
• Months 7–9: Address medium-priority bespoke contracts at scheduled renewal dates
• Months 10–12: Conduct compliance audit; document lessons learned; establish ongoing monitoring process for legislative developments

Conclusion, Preparing for the Kenya Law of Contract Amendment Bill 2025

The Kenya Law of Contract Amendment Bill 2025 marks a decisive shift from unrestricted freedom of contract toward a fairness-based framework that will affect every business operating in Kenya. The time to act is now, before commencement creates urgent pressure and counterparties gain tactical leverage. Businesses that invest in proactive contract review, structured repapering and team training will manage the transition smoothly. Those seeking experienced commercial law guidance should engage qualified Kenyan counsel without delay to protect their contractual positions and ensure full compliance with the 2026 changes.

Sources

1. Parliament of Kenya, Law of Contract (Amendment) Bill, 2025 (PDF)
2. Parliament of Kenya, Bill Node Page
3. Bowmans, Kenya: National Assembly Gazettes the Law of Contract (Amendment) Bill 2025
4. LEX Africa, Kenya Tables Law of Contract Amendment Bill 2025
5. RSM Global, Analysis of the Law of Contract (Amendment) Bill, 2025
6. Kenya Law, Law of Contract Act (Cap 23)
7. Wamae & Allen, Summary of the Draft Proposals to Amend the Law of Contract Act
8. Kaplan & Stratton, Kenya: National Assembly Gazettes the Law of Contract (Amendment) Bill, 2025
9. MMS Advocates, From Freedom of Contract to Fairness