Five Contract Clauses Every Kenyan SME Forgets

April 2026 · Business & SME Advisory · 7-minute read

The deal felt solid. You shook hands. You started work. And then, six weeks later, the client decided the scope was different from what you ‘agreed’ — and they have the WhatsApp messages to prove it. Except you have different WhatsApp messages. Welcome to the most common legal crisis facing Kenyan SMEs.

Under the Law of Contract Act (Cap. 23), a valid contract requires offer, acceptance, consideration, and intention to create legal relations. Here is the thing that surprises most business owners: those elements can exist in a WhatsApp exchange. A message saying ‘I’ll deliver 500 units by Friday for KES 120,000’ and a reply saying ‘Perfect, confirmed’ is, technically, a contract.

But technically enforceable and practically enforceable are two very different things. When that contract is disputed in the Small Claims Court or the Magistrates’ Court, you will spend more time fighting over what was agreed than on the actual dispute — because nothing was written down with enough precision to settle the question.

The five clauses below are not legal theory. They are the five specific provisions that our SME clients are most often missing when they walk through our doors with a contract crisis. Each one is a gap. Each gap is a risk. Here is how to close them.

Clause 1 — Scope of Work: The Clause That Prevents the Invisible Goalposts

‘We agreed on a website.’ Did you agree on five pages or fifteen? With a contact form or without? Including hosting for how long? Mobile-responsive? With an admin panel? Revisions — how many rounds?

Without a written, specific scope of work, every one of those questions becomes a dispute. The client will always remember the maximum version of what was promised. You will remember the minimum. Neither of you is necessarily lying — you just genuinely understood different things, because the contract did not specify.

"Without a written scope, the client will always remember the maximum version of what was promised. You will remember the minimum."

Clause 2 — Payment Terms: The Clause That Funds Your Business

‘Payment on completion’ is not a payment term. It is a trigger for a dispute. What is completion? Who decides it has been reached? What if the client says it hasn’t?

A proper payment clause specifies the total amount, the payment schedule (deposit, milestone payments, final payment), the specific trigger for each payment, what happens if payment is late — including a clearly stated interest rate, which is enforceable under Kenyan law — and the consequence of non-payment (suspension of work, termination, referral to debt recovery).

Clause 3 — Termination: The Exit You Need Before You Need It

What happens when a client disappears mid-project? Or you discover the client is acting in bad faith? Or the client simply decides they no longer want the service — three months in, with your resources already committed?

Without a termination clause, Kenyan courts will apply common law principles — which are neither predictable nor client-friendly for service providers. With a termination clause, you control the narrative.

Clause 4 — Intellectual Property: The Clause That Decides Who Owns What You Build

You build a software product for a client. You write the code, design the interface, and deliver a working system. Who owns the intellectual property? If your contract is silent, the answer is not obvious — and the legal default under the Copyright Act (Cap. 130) is not necessarily what you expect.

In Kenya, copyright in a commissioned work vests in the author (you, the creator) unless there is a written assignment. That means a client who paid you to build something does not automatically own it — unless your contract says they do.

Clause 5 — Dispute Resolution: The Clause That Keeps You Out of Court

When something goes wrong — and in business, something always eventually goes wrong — where do you go? If your contract is silent, the default path is litigation. The Magistrates’ Court or the High Court. Public proceedings. Months or years. Legal fees that dwarf the original dispute.

A dispute resolution clause lets you choose a different path. Under the Arbitration Act, 1995, an arbitration clause in a contract is binding and enforceable. Arbitration is private. The arbitrator can be someone with expertise in your industry.