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Supreme CourtPartially AllowedPetition E001 of 2024

Kwanza Estates Limited v Jomo Kenyatta University of Agriculture and Technology

Supreme Court of Kenya
6 December 2024
Mohammed Khadhar IbrahimM.K. IbrahimSmokin Charles WanjalaS.C. WanjalaNjoki Susanna NdunguNjoki NdunguIsaac LenaolaI. LenaolaWilliam OukoW. Ouko
14,661 words in judgment
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AI-assisted case brief
·~59 min to read original · ~4 min brief

The bottom line

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Tenant cannot unilaterally end fixed-term lease; landlord's remedy is damages, not full rent.

What this practically means

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The Supreme Court ruled that a tenant who signed a fixed-term lease without a termination clause cannot simply walk away. However, the court will not force the tenant to stay or pay rent for the entire remaining period. Instead, the landlord can claim damages for breach of contract, including rent up to the date of vacating and a reasonable period to find a new tenant. The court also said that the Covid-19 pandemic did not automatically excuse a tenant from paying rent, as financial hardship alone does not frustrate a contract.

Executive summary

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The Supreme Court partially allowed an appeal by Kwanza Estates Limited against a Court of Appeal decision that had discharged JKUAT from a fixed-term commercial lease due to the Covid-19 pandemic. The Court of Appeal had held that the lease contained a break clause (based on the phrase 'or sooner determination') and that the pandemic was a force majeure/frustrating event. The Supreme Court reversed these findings. It held that the phrase 'or sooner determination' did not create a valid break clause in the absence of a specific termination mechanism, and that the respondent's notice was therefore a unilateral breach. The Court further held that the Covid-19 pandemic did not frustrate the lease; while it caused financial hardship, it did not render performance impossible or radically different, especially since the respondent continued operations after restrictions eased and relocated. The Court clarified that frustration operates to discharge a contract entirely, not partially, and that financial hardship alone is insufficient. On remedies, the Court set aside both the ELC decision (which had awarded full rent for the unexpired term) and the Court of Appeal decision. It crafted a new remedy: the tenant must pay rent up to the date of vacating plus damages for breach, but the landlord must mitigate losses. The Court awarded three months' rent (Kshs 13,839,449.75) as a reasonable period for re-letting, minus the security deposit of Kshs 11,385,750, resulting in a net award of Kshs 2,453,699.75, plus the agreed Kshs 40 million for restoration. Each party was ordered to bear its own costs. The judgment establishes binding propositions on the interpretation of break clauses, the non-applicability of frustration for temporary financial hardship, and the remedy for unilateral termination of a fixed-term lease without a termination clause.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the respondent pleaded force majeure or frustration in order to be discharged from its agreement with the appellant?
  2. 2.Depending on the answer to (i), whether the Covid-19 pandemic constituted grounds for discharging the respondent from its contractual obligations under the lease agreement?
  3. 3.Whether the appellant is entitled to the reliefs sought?

Key legal issues

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01

Whether the respondent pleaded force majeure or frustration.

Holding

The respondent pleaded frustration, not force majeure. The lease contained no force majeure clause, and the Court of Appeal erred in treating the pandemic as a force majeure event.

Reasoning

The Supreme Court examined the pleadings and found that the respondent's amended plaint explicitly pleaded frustration, citing changes in law, reduced enrolment, and the Covid-19 pandemic. The lease agreement had no force majeure clause, and both counsel agreed on this. The Court of Appeal's reference to force majeure was therefore an error, as the proper doctrine was frustration.

p. 22
02

Whether the Covid-19 pandemic constituted a frustrating event discharging the respondent from its contractual obligations.

Holding

The Covid-19 pandemic did not frustrate the lease. The temporary closure of institutions caused financial hardship but did not render performance impossible or radically different.

Reasoning

The court applied the narrow common law doctrine of frustration, noting that the pandemic caused temporary disruption, not permanent impossibility. The respondent continued operations after restrictions eased and moved to another location, demonstrating that performance was not impossible. Financial hardship alone, even from an extraordinary event, does not discharge contractual obligations. The court distinguished between temporary difficulty and fundamental alteration of the contract's purpose.

p. 4
03

Whether the lease contained a break clause allowing early termination.

Holding

The phrase 'or sooner determination' in various clauses did not create a valid break clause in the absence of a specific termination clause with clear notice requirements.

Reasoning

The Supreme Court disagreed with the Court of Appeal's interpretation. While the phrase hinted at possible early termination, it did not crystallize into a workable break clause because no mechanism for notice or conditions was provided. The trial court correctly found no termination clause. The lease was a fixed-term lease designed to avoid the Landlord and Tenant Act, and the respondent's notice was therefore a unilateral breach.

p. 26
04

What remedy is available to a landlord when a tenant unilaterally vacates a fixed-term lease with no termination clause?

Holding

The remedy is damages for breach of contract, not full rent for the unexpired term. The landlord must mitigate losses, and the court may limit the award to a reasonable period for re-letting.

Reasoning

The court held it would be unconscionable to compel a tenant to remain or to claim full future rent. Applying mitigation principles, the court found three months a reasonable period for the landlord to find a new tenant. The award was calculated as three months' rent minus the security deposit, plus the agreed restoration costs. This balances the interests of both parties and avoids unjust enrichment.

p. 29

Legal principles established

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  • A fixed-term lease with no termination clause cannot be unilaterally terminated; remedy is damages, not specific performance or full future rent.
  • The doctrine of frustration discharges a contract entirely, not partially; temporary disruption does not automatically frustrate a lease.
  • Financial hardship alone, even from an extraordinary event like a pandemic, does not discharge a tenant's rental obligations.
  • Both landlord and tenant have a mutual duty to mitigate losses when a lease ends prematurely.
  • A phrase like 'or sooner determination' does not create a valid break clause without clear notice and conditions.
  • The proper remedy for early vacating is rent due up to vacating plus damages limited to a reasonable re-letting period.

Court orders

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  1. 1.The petition of appeal dated January 12, 2024 and filed on January 15, 2024 is hereby allowed only to the following extent: (a) We hereby set aside the decision of the Court of Appeal. (b) We decline to reinstate the decision of the Environment and Land Court. (c) We uphold the award to the petitioner of Kshs 40,000,000/- for restoring the suit premises as per the consent recorded on June 2, 2021 before the Environment and Land Court stands. (d) We therefore award the petitioner three months’ rent, totalling Kshs.13,839,449.75, minus the security deposit of Kshs.11,385,750/-, with the final amount awarded being Kshs.2,453,699.75.
  2. 2.We hereby direct that the sum of Kshs.6,000/= deposited as security for costs in the appeal be refunded to the petitioner.
  3. 3.Each party to bear their own costs of the appeal.

The bench

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One judgment of the whole court — no separate or dissenting opinions.

Mohammed Khadhar Ibrahim
majority
Smokin Charles Wanjala
S.C. WanjalaSCJ
Currently serving
majority
Njoki Susanna Ndungu
Njoki NdunguSCJ
Currently serving
majority
Isaac Lenaola
I. LenaolaSCJ
Currently serving
majority
William Ouko
W. OukoSCJ
Currently serving
majority
On appeal from
Court of Appeal at Nairobi
Civil Appeal No 64 of 2022
Jurisdiction invoked
Article 163(4)(b) of the Constitution

Relief refused

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Reinstatement of the Environment and Land Court decision in full

The Supreme Court declined to reinstate the ELC decision, instead crafting its own remedy.

p. 31

Award of Kshs 162,469,481/- as claimed by the petitioner

The court found the claim excessive and applied mitigation principles.

p. 31

Award of VAT on the rent

The issue of VAT was not pleaded in the statement of defence and counterclaim, and the award was for damages, not rent arrears.

p. 31

Costs

Each party to bear their own costs of the appeal.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

the Covid-19 pandemic did not constitute a frustrating event, that would allow the respondent to be discharged from further performance under the lease.
p. 4 Doctrine of frustration - Covid-19 pandemic
notwithstanding the absence of a termination clause, it would be unconscionable to compel a tenant to remain in premises they no longer wish to occupy. Equally, it would be unreasonable to claim rent for the unexpired lease term after the tenant has vacated. Therefore, the remedy for such termination is rent due up to the date of vacating and damages for breach of contract.
p. 29 Remedy for breach of fixed-term lease without termination clause
financial hardship alone, even one stemming from an extraordinary event like the Covid-19 pandemic, does not automatically discharge a tenant’s rental obligations.
p. 25 Frustration - financial hardship insufficient
the doctrine of frustration operates to discharge a contract, bringing it to an immediate and definitive end. Once the doctrine is applied, the contract cannot be deemed suspended or temporarily inoperative; it is terminated entirely
p. 23 Doctrine of frustration - no partial discharge
We therefore award the petitioner three months’ rent, totalling Kshs.13,839,449.75, minus the security deposit of Kshs.11,385,750/-, with the final amount awarded being Kshs.2,453,699.75.
p. 31 Final orders - quantum of damages
Each party to bear their own costs of the appeal.
p. 6 Costs order

Key timeline

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2021-06-02
Consent recorded before Environment and Land Court awarding Kshs 40,000,000 for restoring suit premises.
2024-01-15
Petition of appeal filed by Kwanza Estates Limited.
2024
Supreme Court delivers judgment partially allowing appeal, setting aside Court of Appeal decision.

Practical implications

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For lawyers

Draft clear termination clauses

When drafting fixed-term leases, ensure a specific termination clause with notice periods and conditions. Vague phrases like 'or sooner determination' will not create a break clause. Also, plead the correct doctrine—frustration or force majeure—as the court strictly examines pleadings.

For businesses

Mitigate losses after tenant vacates

If a tenant leaves early, actively seek a new tenant to mitigate damages. The court may limit your claim to a reasonable re-letting period (here three months). Keep records of marketing efforts and any new lease negotiations to support your mitigation efforts.

For individuals

Understand your lease obligations

Signing a fixed-term lease means you are bound for the term unless there is a termination clause. Financial hardship, even from a pandemic, does not let you walk away without consequences. You may be liable for damages, including rent for a reasonable period while the landlord finds a new tenant.

Frequently asked questions

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Can a tenant break a fixed-term lease in Kenya without a termination clause?+

No, unless the lease has a specific termination clause. The Supreme Court in Kwanza Estates v JKUAT held that a tenant cannot unilaterally end a fixed-term lease. However, the court will not force the tenant to stay; instead, the landlord can claim damages for breach.

Did Covid-19 excuse tenants from paying rent in Kenya?+

Not automatically. The Supreme Court ruled that financial hardship from Covid-19 does not frustrate a lease. Tenants are still liable for rent unless the contract has a force majeure clause or the pandemic made performance impossible, not just difficult.

What is the difference between frustration and force majeure in Kenyan contract law?+

Frustration ends a contract entirely when performance becomes impossible or radically different. Force majeure is a contractual clause that suspends or excuses performance for specified events. The court in Kwanza Estates clarified that parties must plead the correct doctrine.

How much can a landlord claim if a tenant vacates early in Kenya?+

The landlord can claim rent due up to vacating plus damages for breach, but must mitigate losses. In Kwanza Estates, the court awarded three months' rent as a reasonable period to find a new tenant, minus the security deposit.

Later judgments citing this (17)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Kwanza Estates Limited v Jomo Kenyatta University of Agriculture and Technology", Case Analysis (2024). Petition E001 of 2024. Source: https://new.kenyalaw.orghttps://new.kenyalaw.org/akn/ke/judgment/kesc/2024/74/eng@2024-12-06

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.