Eruc Afric Ltd v Tai (Commercial Case E1819 of 2026) [2026] SCC 53 (KLR)
The bottom line
#A Nairobi court enforced a 2% monthly interest clause on an unpaid excavation debt, ruling the rate fair unless proven oppressive.
What this practically means
#Executive summary
#Key legal issues
#Enforceability of the contractual interest rate of 2% per month
The rate is valid and enforceable.
The debt acknowledgement agreement dated 19/11/2025, clause 6.2, provided for interest at 2% per month on default. Courts cannot rewrite contracts (National Bank of Kenya Ltd v Pipeplastic Samkolit). Interference is warranted only where the rate is oppressive, punitive or unconscionable (Margaret Njeri Muiruri). At approximately 24% per annum, with no evidence of unequal bargaining power, exploitation or statutory prohibition, and the transaction being commercial, the court found no basis to decline enforcement.
Duration for which interest is payable
Contractual interest runs from the date of default until the date of judgment, after which Section 26(1) CPA discretion applies.
Although the agreement provided interest until payment in full, the court invoked its discretion under Section 26(1) of the Civil Procedure Act to award interest before and after judgment at a reasonable rate, and confined the contractual rate to the period from default to the date of judgment, adding the total to the Kshs. 140,000/= award.
Whether the instalment order of 20/5/2026 should be reviewed
Yes; the order of Kshs. 12,000/= monthly was an error on the face of the record inconsistent with the parties' position, and was set aside.
On 20/5/2026 the claimant's advocate recorded that the respondent was willing to pay Kshs. 40,000/= monthly, but the court inadvertently ordered Kshs. 12,000/= monthly. Under Order 45 Rule 1 CPR and Section 80 CPA, and per National Bank of Kenya Ltd v Ndungu Njau, a clear and self-evident error justifies review. The court revised the instalments to Kshs. 50,000/= monthly.
Legal principles established
#- Parties are bound by the terms of their contract unless vitiated by illegality, fraud, coercion, or unconscionability.
- Courts retain power to interfere with oppressive contractual interest terms but do so sparingly.
- A contractual interest rate of 2% per month (approx. 24% p.a.) in a commercial transaction is not unconscionable absent evidence of unequal bargaining power or statutory prohibition.
- A court may review its own order where there is an error on the face of the record under Section 80 CPA and Order 45 Rule 1 CPR.
Court orders
#- 1.The respondent shall pay the sum of Kshs. 140,000/=.
- 2.The said sum shall attract interest at the contractual rate of 2% per month from 11/12/2025 until the date of this judgment.
- 3.The claimant is awarded costs of the claim assessed at Kshs. 15,000/=.
- 4.The respondent shall pay the decretal sum (inclusive of interest and costs) by monthly instalments of Kshs. 50,000/= commencing on 10/7/2026 and on the 10th day of each subsequent month until payment in full.
- 5.Any sums already paid pursuant to earlier orders shall be taken into account.
- 6.In default of any instalment, the claimant shall be at liberty to execute.
- Jurisdiction invoked
- Original jurisdiction over a debt claim (statement of claim dated 26/1/2026); Section 26(1) of the Civil Procedure Act and Order 45 Rule 1 CPR invoked for interest and review
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Eruc Afric Ltd v Tai (Commercial Case E1819 of 2026) [2026] SCC 53 (KLR)", Case Analysis (2026). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/scc/2026/53/eng@2026-06-26
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.