Barring any last minutes changes, loan guarantors in Kenya may soon be hard to be dragged to court. This is because Kenyan National Assembly’s Committee on Justice and Legal Affairs has approved, for passage into law, the Kenyan Law of Contract (Amendment) Bill, 2019. The Bill proposes that in case of a default to repay loan by the principal borrower, the creditor should first auction the assets of the principal borrower before making for the property of guarantors.
A Breakdown of The Bill:
- The law will only apply to cases that take place after the Bill becomes law, while the status quo shall remain for current cases.
- The Bill seeks to amend Law of Contract Act, Cap 23 of Kenya.
- The new position also provides that no suit shall be brought against a guarantor of any debt or promise unless the agreement is in writing and signed by the guarantor.
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- The move may not be unconnected with the decision of the Kenyan high court last year which allowed banks and other financial service providers to blacklist guarantors with Credit Reference Bureaus (CRB) in case of bad loans.
- The ruling was made in a case where one Obadiah Gitonga had sued Cooperative Bank for blacklisting him over a defaulted loan where he was the guarantor. Mr Gitonga demanded to be delisted from CRB, a request the court denied saying that the bank acted within the precincts of the law.
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.
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