Building Contract (Kenya)
BUILDING CONTRACT
National Construction Authority Act No. 41 of 2011 | Law of Contract Act Cap. 23
THIS BUILDING CONTRACT is made on [Contract Date]
BETWEEN:
(1) [Employer Name], having its address at [Employer Address] (the "Employer"); and
(2) [Contractor Name] (NCA Registration No: [Contractor NCA Number]), having its address at [Contractor Address] (the "Contractor").
1. DESCRIPTION OF WORKS
1.1 The Contractor shall execute the following works (the "Works"): [Works Description].
1.2 The Works shall be carried out at [Site Address] (the "Site").
1.3 Development Permit Number: [Development Permit Number], issued under the Physical and Land Use Planning Act No. 13 of 2019. The Contractor shall comply with all conditions of the development permit throughout the Works.
1.4 The Employer's Architect / Agent is [Architect Name], who shall administer this Contract, issue instructions, and certify interim and final payments.
1.5 The Contractor confirms that it holds a valid NCA Registration Certificate and that its NCA category is appropriate for the value and nature of these Works. The Contractor's NCA registration must remain valid throughout the execution of the Works.
2. CONTRACT SUM AND PAYMENT
2.1 The Employer shall pay the Contractor the Contract Sum of [Contract Sum] (inclusive of VAT at 16% under the Value Added Tax Act No. 35 of 2013, unless stated otherwise) for the full execution and completion of the Works.
2.2 Mobilisation Advance: [Mobilisation Advance], recoverable pro-rata from each interim payment certificate.
2.3 Retention: [Retention Rate]. The full retention fund shall be released to the Contractor upon expiry of the Defects Liability Period and issuance of the Certificate of Making Good Defects by the Architect.
2.4 Payment: The Employer shall pay each interim certificate within [Payment Period] of the Architect issuing the certificate. Late payment shall attract interest at the Kenya Central Bank Rate plus 3% per annum under the Law of Contract Act (Cap. 23).
2.5 Stamp duty on any land transfer instruments arising from this Contract shall be paid by the Employer under the Stamp Duty Act (Cap. 480).
3. PROGRAMME AND COMPLETION
3.1 The Contractor shall commence the Works on [Commencement Date] and shall achieve practical completion by [Completion Date].
3.2 Liquidated Damages: If the Contractor fails to complete the Works by the completion date (or any extended date), the Contractor shall pay the Employer liquidated damages of [Liquidated Damages Rate], deductible from amounts due to the Contractor. The parties confirm this rate is a genuine pre-estimate of the Employer's loss.
3.3 The Contractor may apply to the Architect for an extension of time if completion is delayed by: (a) employer risk events (late drawings, variations, employer interference); (b) force majeure events; or (c) any other cause beyond the Contractor's reasonable control. Extensions of time suspend liquidated damages for the period granted.
3.4 Defects Liability Period: [Defects Liability Period] from the date of the Certificate of Practical Completion. During this period, the Contractor shall remedy all defects notified by the Architect at no additional cost to the Employer.
4. INSURANCE
4.1 The Contractor shall maintain throughout the Works: (a) Contractors All Risk (CAR) insurance with [CAR Insurer] (IRA-licensed), naming the Employer as joint insured; (b) Public liability insurance of not less than KES 20,000,000 per occurrence; (c) Employer's liability insurance under the Work Injury Benefits Act No. 13 of 2007 (WIBA) covering all workers engaged on the Site.
4.2 Certified copies of all current insurance policies shall be provided to the Employer before works commence. If the Contractor fails to maintain required insurance, the Employer may purchase insurance at the Contractor's expense.
5. SITE SAFETY
5.1 The Contractor shall comply with all requirements of the Occupational Safety and Health Act No. 15 of 2007 (OSHA) and shall appoint a competent site safety officer for the Works.
5.2 The Contractor is responsible for the health and safety of all workers, subcontractors, and visitors on Site throughout the duration of the Works.
6. GOVERNING LAW AND DISPUTES
6.1 This Contract shall be governed by the laws of Kenya. Any dispute arising from this Contract shall be resolved: first, by reference to the Architect for a decision; second, by expert determination by a quantity surveyor nominated by the Institute of Quantity Surveyors of Kenya (IQSK); and third, by arbitration at the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995 in [Governing County].
IN WITNESS WHEREOF, the Parties have signed this Contract on the date first written above.
Authorised Signatory (Employer)
________________
Signature
Authorised Signatory (Contractor)
________________
Signature
Witness
________________
Signature
What Is a Building Contract (Kenya)?
A Building Contract in Kenya governs the relationship between the parties by fixing what each must do.
The National Construction Authority (NCA), established under the National Construction Authority Act No. 41 of 2011, regulates the construction industry in Kenya. Section 17 of the NCA Act requires all construction contractors to register with the NCA before undertaking any building works. Contractors are classified into eight NCA registration categories (NCA1 to NCA8) based on their financial capacity, technical competence, and track record. Only NCA-registered contractors may lawfully execute construction contracts in Kenya — engaging an unregistered contractor voids the contractor's legal standing and may expose the employer to liability under the Occupational Safety and Health Act No. 15 of 2007 (OSHA).
Building plans in Kenya must be approved by the relevant county government planning authority before construction commences. Under the Physical and Land Use Planning Act No. 13 of 2019 and the Building Code, county governments — such as the Nairobi City County Government under the Nairobi City County Building Regulations — have authority to approve development permits, inspect works in progress, and issue certificates of occupation. Construction without a valid development permit is an offence and may result in demolition orders issued by the county.
The standard form contracts most commonly used in Kenya are the Joint Building Council (JBC) Conditions of Contract, administered jointly by the Kenya Institute of Architects (KIA), the Architectural Association of Kenya (AAK), the Institution of Engineers of Kenya (IEK), and the Institute of Quantity Surveyors of Kenya (IQSK). JBC contracts provide a thorough framework covering the employer's agent (typically a registered architect or quantity surveyor), extensions of time, liquidated damages, interim payment certificates, and the defects liability period. International contractors may also use FIDIC (Fédération Internationale des Ingénieurs-Conseils) Red Book or Yellow Book conditions for major infrastructure works.
A Kenya Building Contract differs from a simple Works Agreement in scope and formality. A Works Agreement is a short-form document suitable for minor repairs and small renovations below KES 500,000. A Building Contract is appropriate for new construction, major extensions, and structural renovation projects, and should involve a registered quantity surveyor from the Institute of Quantity Surveyors of Kenya (IQSK) to prepare the bills of quantities on which the contract sum is based. The Environment and Land Court (ELC), established under Article 162 of the Constitution of Kenya 2010, has jurisdiction over disputes involving land and structures, while contractual disputes are handled by the High Court Commercial Division or submitted to arbitration at the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995.
When Do You Need a Building Contract (Kenya)?
A Kenya Building Contract is required before any construction works of significant value or complexity commence, and several specific circumstances make a written contract legally and practically essential.
A Building Contract is required when a landowner in Kenya commissions a contractor to construct a new residential building, commercial premises, or industrial facility on their land. The National Construction Authority Act No. 41 of 2011 requires the contractor to be NCA-registered, and a written contract evidences the agreed scope of works, contract sum, and completion date — protecting the employer if the contractor abandons the works or delivers defective construction.
A Building Contract is needed when a development permit has been granted by the county government under the Physical and Land Use Planning Act No. 13 of 2019 and construction must commence within the permit period (typically 12 to 24 months). The written contract locks in the contractor's obligation to complete works within the approved permit timeline, and records the approved plans and specifications that govern construction.
A Building Contract is required when works are financed by a bank loan — such as a construction loan from Kenya Commercial Bank (KCB), Equity Bank, or a mortgage from the Housing Finance Company of Kenya (HFCK). Lenders require a copy of the building contract as part of their security documentation before releasing construction funds in tranches.
A Building Contract is needed when the employer engages separate professional consultants — an architect registered with the Board of Registration of Architects and Quantity Surveyors (BORAQS), a structural engineer registered with the Engineers Board of Kenya (EBK), and a quantity surveyor from IQSK — alongside the main contractor. The building contract defines the relationship between the contractor and the employer's professional team, including the authority of the architect to issue instructions and certify payments.
A Building Contract is required for any works involving alterations to a listed building or works within a heritage conservation area regulated by the National Museums and Heritage Act No. 6 of 2006, where special conditions of contract are required to protect the structure's historical integrity.
A Building Contract is also essential when the works will involve employees of the contractor who are entitled to protection under the Occupational Safety and Health Act No. 15 of 2007 (OSHA) and the Work Injury Benefits Act No. 13 of 2007 (WIBA). The contract should allocate responsibility for OSHA compliance, workers' insurance, and site safety between the employer and the contractor.
What to Include in Your Building Contract (Kenya)
A Kenya Building Contract covering construction works under the National Construction Authority Act No. 41 of 2011 must include the following essential provisions to be legally effective and practically enforceable.
Parties and Contractor Registration: Full legal names, addresses, and identification details of the employer and the contractor. The contractor's NCA registration number and category (NCA1 to NCA8) must be stated. Under Section 17 of the National Construction Authority Act No. 41 of 2011, only NCA-registered contractors may lawfully undertake building works — the contract should be void if the contractor's NCA registration lapses during the works.
Scope of Works and Specifications: A clear description of the building works to be executed, referencing the approved architectural drawings (prepared by an architect registered with BORAQS), structural drawings (by an EBK-registered engineer), and bills of quantities (by an IQSK-registered quantity surveyor). Approved drawings should be listed by drawing number and revision date.
Contract Sum and Payment Schedule: The agreed contract sum in Kenya Shillings (KES), the basis of the sum (lump sum or remeasurement), and the payment schedule — typically a mobilisation advance (commonly 10% to 15%) followed by interim payments against architect's certificates for work completed. The contract should specify the valuation period (monthly or milestone-based) and the period for payment after the architect's certificate is issued.
Commencement and Completion Dates: The date on which the contractor shall commence works (not later than 14 days after the possession of site) and the agreed completion date. Liquidated damages for delay — expressed as a daily or weekly rate in KES — should be specified as a genuine pre-estimate of the employer's loss rather than a penalty, as Kenya courts apply the common law penalty doctrine.
Variations Clause: The procedure by which the employer (through the architect) may instruct variations to the scope of works, the method of valuing variations (using rates in the bills of quantities or agreed daywork rates), and the maximum permissible variation as a percentage of the contract sum without triggering a contract re-negotiation.
Defects Liability Period: The period after practical completion (typically 12 months under JBC standard conditions) during which the contractor is obliged to return to site and remedy defects identified by the architect at no additional cost to the employer. The retention fund (typically 5% of each interim certificate, reduced to 2.5% after practical completion) is held by the employer as security against the contractor's defects liability obligations.
Insurance Requirements: The contractor must maintain Contractors All Risk (CAR) insurance, public liability insurance, and employer's liability insurance under the Work Injury Benefits Act No. 13 of 2007 (WIBA). Copies of valid insurance certificates must be provided to the employer before works commence.
Dispute Resolution: A tiered dispute resolution clause — first escalation to the architect or employer's agent; second to expert determination by a registered quantity surveyor nominated by IQSK; third to arbitration at the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995 — is standard in Kenyan construction contracts.
Governing Law: This agreement shall be governed by the laws of Kenya. The forms-legal.com Building Contract template includes twelve standard clauses covering the mandatory elements under the National Construction Authority Act No. 41 of 2011, and the county government development permit conditions applicable at the time of execution. Employers engaging contractors for works exceeding KES 5 million should also consider a Performance Bond secured from an IRA-licensed insurance company as additional protection against contractor default. A Residential Lease Agreement for Kenya may also be relevant if the constructed property is to be let upon completion.
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Reference this free template in an article, syllabus, or research note:
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Frequently Asked Questions
Yes. Section 17 of the National Construction Authority Act No. 41 of 2011 requires all contractors undertaking construction works in Kenya to be registered with the National Construction Authority (NCA). Contractors are classified into eight categories — NCA1 (highest capacity) to NCA8 (smallest) — based on their financial standing, technical capacity, and professional personnel. The NCA maintains a public register of registered contractors accessible through the NCA online portal. Engaging an unregistered contractor is an offence under the NCA Act and exposes the employer to significant risk: the contractor cannot legally enforce payment claims before Kenyan courts in respect of unregistered works, and the employer may bear personal liability under the Occupational Safety and Health Act No. 15 of 2007 (OSHA) for workplace injuries sustained on a site supervised by an unregistered contractor. Before signing a Building Contract, the employer should verify the contractor's current NCA registration status and confirm that the registration category is appropriate for the value and complexity of the works.
Yes. Under the Physical and Land Use Planning Act No. 13 of 2019 and the county government building regulations applicable to the land's location, a development permit must be obtained from the relevant county government planning authority before construction commences. In Nairobi, the Nairobi City County Government's Department of Urban Planning and Development Control processes development permit applications. Plans must be prepared by an architect registered with the Board of Registration of Architects and Quantity Surveyors (BORAQS) and structural calculations certified by an engineer registered with the Engineers Board of Kenya (EBK). Constructing without a valid development permit is an offence that can result in a stop-work order, demolition notice, and prosecution under the county's physical planning by-laws. A development permit is typically valid for 24 months and may be renewed. The Building Contract should state the permit number and require the contractor to comply with all permit conditions.
The defects liability period (DLP) is the period after the architect issues a Certificate of Practical Completion during which the contractor remains responsible for remedying any defects, shrinkages, or other faults that appear in the works. Under the Joint Building Council (JBC) standard conditions of contract — the most widely used standard form in Kenya — the DLP is typically 12 months from the date of practical completion. During the DLP, the employer withholds the second half of the retention fund (typically 2.5% of the final contract sum) as security. The employer notifies the contractor in writing of any defects, and the contractor must remedy them within a reasonable time specified in the notice. At the expiry of the DLP, the architect issues a Certificate of Making Good Defects, and the balance of the retention fund is then released to the contractor. If the contractor fails to remedy defects during the DLP, the employer may engage another contractor to do so and recover the cost from the retention fund or by deduction from the final account. The Law of Contract Act (Cap. 23) governs the contractual obligations, and the High Court Commercial Division or the Nairobi Centre for International Arbitration (NCIA) provides the dispute forum.
Yes. A Kenya Building Contract may include a liquidated damages clause specifying the daily or weekly rate deductible from the contractor's payments for each day of delay beyond the contractual completion date. Kenya courts apply the common law rule established in Dunlop Pneumatic Tyre Co v New Garage and Motor Co [1915] AC 79 (as received under the Law of Contract Act Cap. 23): the liquidated damages rate must represent a genuine pre-estimate of the employer's anticipated loss from delay, not a penalty. If the rate is found to be a penalty clause, a Kenyan court or arbitrator at the Nairobi Centre for International Arbitration (NCIA) may decline to enforce it and will instead award actual proven damages. To protect enforceability, the employer should document the commercial basis for the liquidated damages rate — for example, loss of rental income from a commercial property, or additional financing costs on a construction loan from Kenya Commercial Bank (KCB). The contractor is entitled to claim an extension of time if delay is caused by an employer's risk event (e.g., late delivery of employer's drawings, changes in county permit conditions), which suspends the contractor's liability for liquidated damages for the period of the extension.
A Kenya Building Contract should require the contractor to maintain at least three categories of insurance throughout the works. First, Contractors All Risk (CAR) insurance covers the value of the works, materials on site, and temporary structures against fire, theft, storm, and accidental damage — the policy should name the employer as a joint insured and be placed with an Insurance Regulatory Authority (IRA)-licensed insurer. Second, public liability insurance (typically a minimum indemnity of KES 20 million to KES 50 million per occurrence) covers claims by third parties — including neighbours and members of the public — for injury or property damage caused by the contractor's operations. Third, employer's liability insurance under the Work Injury Benefits Act No. 13 of 2007 (WIBA) covers the contractor's obligations to compensate workers injured on site. WIBA requires all employers to insure their employees against occupational injury and disease. The contractor must provide certified copies of current insurance policies before mobilisation. If the contractor fails to maintain required insurance, the employer may purchase the insurance at the contractor's expense and deduct the premium from payments due.
Kenya Building Contracts typically incorporate a tiered dispute resolution mechanism. The first tier requires the parties to refer the dispute to the architect (or project manager where no architect is appointed) for a decision — the architect's decision is binding on an interim basis but may be challenged in subsequent proceedings. The second tier provides for expert determination by a quantity surveyor nominated by the Institute of Quantity Surveyors of Kenya (IQSK), particularly for disputes about valuations, measurements, and variation costs. The third tier is arbitration — most Kenyan construction contracts designate the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995 (as amended 2022) as the arbitration institution, with a sole arbitrator or three-person panel depending on the value of the dispute. Kenya is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, meaning NCIA awards are enforceable in over 160 countries. The Environment and Land Court (ELC), established under Article 162 of the Constitution of Kenya 2010, has jurisdiction over disputes where ownership or rights in land form part of the construction dispute.
A performance bond is a guarantee issued by an IRA-licensed insurance company or commercial bank — such as KCB, Equity Bank, or Co-operative Bank of Kenya — on behalf of the contractor, securing the contractor's performance obligations under the Building Contract. If the contractor defaults — by abandoning the works, becoming insolvent, or failing to complete to the required standard — the employer may call on the performance bond to recover financial losses up to the bond value. Performance bonds in Kenya are typically set at 10% of the contract sum, although public procurement contracts under the Public Procurement and Asset Disposal Act No. 33 of 2015 require a bond of 10% as a standard condition for contracts above KES 50 million. For private construction contracts, the decision to require a performance bond depends on the contractor's track record, the project value, and the employer's risk appetite. Performance bonds provide significant protection for employers financing construction with bank loans, particularly where the lender requires evidence of risk mitigation. The bond must be issued before the employer releases the mobilisation advance, and should remain valid until the architect issues the Certificate of Making Good Defects at the end of the defects liability period.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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