Following our Newsflash issued on 4th October 2019, the President of the Republic of Kenya, H.E. Uhuru Muigai Kenyatta, refused to assent to the Law of Contract (Amendment) Bill, 2019 (the Bill).
The Bill had sought to amend the Law of Contract Act by requiring creditors to realise the assets of a principal debtor before bringing a suit against a surety (including a guarantor). A surety is a person who has given a special promise to answer for the debts, defaults or miscarriages of another person.
The President stated that the Bill would, among other things, negate a long-standing principle of contract law and affect Kenya's 'ease of doing business' profile as well as make the debt-recovery process longer and more expensive. Moreover, the Bill would affect macro and small and medium enterprises' access to credit and interfere with operations of capital markets.
Parliament will now proceed to consider the President's reservations. Under the Constitution of Kenya, Parliament may:
- by a 2/3 majority vote, pass the Bill a second time without accommodating the President's reservations (either fully or partly); or
- amend the Bill to fully accommodate the President's reservations by a simple majority and resubmit it to the President for assent.
If Parliament passes the Bill without accommodating the President's reservations, the Speaker will, within seven days, re-submit it to the President and the President shall, within seven days, assent to the Bill. If within seven days the President does not assent to the Bill, the Bill shall be taken to have been assented to on the expiry of the seven days from its presentation to the President.
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