KSL ATP 107-CONVEYANCING LAW

WEEK 6: CONTRACTUAL STAGE IN CONVEYANCING (Part II)

PROFESSIONAL UNDERTAKINGS

PUs-Common practice in conveyancing transactions.

What is a PU?

Clause 131 of the Law Society of Kenya Code of Standards of Practice and Ethical
Conduct, states, “An undertaking is a formal promise whose effect is to make the person giving
it responsible for the fulfillment of the obligations in respect to which it is given. An Advocate’s
undertaking is a personal promise as well as a professional and legal obligation. It is based on the
concept of the legal professional as an honourable profession and the expectation that an honourable
person will honour his/her word. In legal practice professional undertakings are a standard method
of mediating transactions. Without such undertakings there would be much difficulty and
inconvenience suffered by clients.”

Encyclopaedia of Forms and Precedents “any unequivocal declaration of intention

addressed to someone who reasonably places reliance on it and made by...a solicitor in
the course of his practice, either personally or by a member of his staff under which the
solicitor becomes personally bound”

Ingredients of a PU

• Unequivocal declaration of intention by an advocate

• Addressed to someone, usually another advocate
• Who (or whose client) places reliance on it
• Made personally by an advocate in the course of practice or as an advocate or by
a member of staff

It is simply a promise made by an Advocate or on his behalf by a member of his staff to

do or refrain from doing something. It is one of the ways of completing a sale transaction.

Why?

As per Issue 6 of clause 21 of the LSK Code of Conduct, undertakings facilitate legal
transactions and without them transactions would be severely hampered. The pillar for
the same is in the understanding that the legal profession is an honourable profession.
That “the lawyer’s word is his [her] honour” must be strictly adhered to and given effect
by the legal professional in all his/her dealings. The effectiveness of the undertakings

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depends on the integrity of the legal profession. Therefore, an undertaking – whether
given in writing or orally - is sacrosanct and must be honoured.

So, it is given by lawyers to smoothen and hasten the process of transactions. They create
bridges without which a transaction may never be completed.

Banks would not release funds without registration of transfer or charge. The Vendor on
the other hand faces the risk of losing his property to a purchaser who may fail to release
the purchase price after registration.

Instances

· Vendor’s Advocates undertaking not to release the purchase price to Vendor

pending actual registration of the Transfer.

· Purchaser’s Advocate undertaking to hold completion documents to Vendor’s

order pending payment of the purchase price.

· Chargee’s Advocate undertaking to pay the loan proceeds upon registration of the
Charge and/or transfer simultaneously. In practice, where the Advocate does not hold
funds, the Chargee ( eg bank) directly issues an undertaking.

· Chargor’s Advocate undertaking to pay the redemption amounts upon registration

of the discharge.

Is it a Contract?

It places both a legal and ethical obligation on the giver. In Peter Ng’ang’a Muiruri vs.
Credit Bank & Charles Nyachae t/a Nyachae & Co. Advocates (Civil Appeal No. 263 of
1998-Court of Appeal Nairobi)- the Court held that an undertaking is a solemn thing, in
enforcing it the Court is not guided by considerations of contract but the Court aims at
securing the honesty of its officers.

An undertaking must be clear, unambiguous and certain.

• see Kenya Re V MugukuMuriu t/a MugukuMuriu& Co. Advocates (Civil Appeal No.
48 of 1994)

• See Kimaru J’s ruling in Pyrethrum Processing Co. Ltd vs. Rogers Shako Adv. HCC
148 of 2004- an undertaking is a form of trusteeship.

• See Onyancha J’s ruling in David Muema vs. Victor Mulee (eKLR 2007) -
undertakings should be looked at from an ethical point of view

• See DK Thou & Co. Advs vs. NjagiWaweru& Co. Adv. HCC No. 209 of 2008- Justice
Njagi refused the Advocates’ arguments that he was entitled to a lien over the funds.
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Enforcement of PUs

Once it is determined that an undertaking exists and the same has been breached the
recipient has the following options jointly and severally;

• Co-operation with the undertaking party e.g. extending time

• Seeking enforceability through Court action –O 52 of CPR through an Originating

Summons. Undertakings can be enforced even if one is not the recipient, but a beneficiary,
say the client (where the Advocate is unable to enforce)-KCB V Mohammed Muigai
Advocates (HCC757 of 2003)

• Disciplinary action on account of professional misconduct.

Principles

1. An undertaking is any unequivocal declaration of intention addressed to someone

who reasonably places reliance on it and made by an Advocate in the course of his
practice, either personally or by a member of the Advocate’s staff whereby the
Advocate (or in the case a member of his staff, his employer) becomes personally
bound.

1.1. There is no obligation on an Advocate either to give or accept an undertaking, nor

can an Advocate be required to stand guarantor for a client by way of an undertaking.

1.2. It is not recommend to give or accept undertakings. Oral undertakings can lead to
uncertainty as to the nature and extent of the undertaking. Evidential problems may arise.
When oral undertakings are given, the lack of formality detracts from the gravity which
should be attendant on the giving of any undertaking. The Society recognizes that an
oral undertaking given by one person to another may be enforceable at law, but the
Society will not render assistance to a party seeking to enforce that undertaking as a
matter of conduct.

1.3. Undertakings can be given even to lay persons. (See KCB Limited vs. Adala 1983 KLR
467)

2. Failure by an Advocate to honour the terms of a professional undertaking is a prima

facie evidence of professional misconduct. Consequently, the Society will require its
implementation as a matter of conduct.

2.1The Society has no power to order payment of compensation or to procure the

specified performance of an undertaking if an Advocate declines to implement it. The
Society will proceed by way of disciplinary action for failure to honour the undertaking.

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 2.2.The Society will require an undertaking to be honoured by Advocates for so long
as their names remain on the roll and regardless of whether they hold current practicing
certificates or not.

2.3. The Society has no power to order the release of an Advocate from the terms of
an undertaking. This is a matter for the court, or the person entitled to the benefit of the
undertaking.

3. An undertaking will normally be required to be honoured only as between the giver

and the recipient.

3.1The Society will normally require compliance with an undertaking only at the instance
of a recipient.

3.2. An Advocate cannot assign the burden of an undertaking (and thus claim to be
released from its terms) without the express approval of the recipient. ROA Otieno Vs
AGN Kamau & Co 134/03

3.3. The court will however not hesitate to enforce an undertaking on an application by
the recipient’s client. See: NaphtallyRadier vs. David Njogu t/a D. Njogu & Co.
Advocates HCCC No. 582 of 2003 (Nrb), Kenya Commercial Bank Limited vs. Mohammed
Muigai Advocates HCCC No. 757 of 2003 where the court held that undertakings are not
just given at the behest of clients but the recipient’s client takes the benefit of the same
and can enforce the same.

4. An ambiguous undertaking is generally construed in favour of the recipient.

4.1. Wording of the undertaking is very important. It has to be clear.

4.2. In interpreting an undertaking the court will not invite extraneous evidence or terms
implied.

5. An undertaking does not have to constitute a legal contract to be enforceable in

conduct.

5.1. No consideration is necessary for an undertaking to be enforceable in conduct.

6. An undertaking is still binding even if it is to do something outside the Advocate’s

control.

6.1. Before giving an undertaking an Advocate must carefully consider whether it will be
possible to implement it. It is no defence to a complaint of professional misconduct that
the undertaking was to do something outside the Advocate’s control

7. An Advocate is responsible for honouring an undertaking given by a member of the

Advocate’s staff, whether admitted to the Roll of Advocates or not.

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7.1. Where an assistant gives an undertaking, the conduct of the assistant may also be
called into question by the Society.

8. Where an Advocate in partnership gives an undertaking as an Advocate in the course

of practice, all partners are responsible for its performance.

8.1. A partner remains responsible for the firm’s undertakings even after that Advocate
leaves the firm or the partnership is dissolved.

9. An Advocate cannot avoid liability on an undertaking by pleading that to honour it

would be a breach of duty owed to the client.

9.1. Since an Advocate will be personally bound to honour his undertakings, it is essential
for the Advocate’s protection that the client’s authority to do so is given before the
undertaking is furnished. See the case of Kenya Reinsurance Corp. –vs- V. E. Muguku&
Co. Advocates (1995-98) 1 EA 107.

10. An Advocate who gives an undertaking which is expressed to be dependent upon

the happening of a future event must notify the recipient immediately if it becomes
clear that the event will not occur.

11. In addition to the Society’s power to enforce undertakings as a matter of conduct,

the court, by virtue of its inherent jurisdiction over its own officers, has power of
enforcement in respect of undertakings.

11.1Where undertakings are given by Advocates to court, the Society takes the view that
enforcement is a matter for the court; for this reason the Society will not normally
intervene.

12. An undertaking should not be given by an Advocate as an inducement to a client

to secure that client’s business.

13.The seeking by an Advocate of an undertaking from another Advocate which the

first Advocate knows, or ought to know, should not be given, may be deemed to be
professional misconduct.

13.01 Self-explanatory.

13.02 Illegal undertakings intended for example to perpetrate a fraud should not be
sought or given.

Tasks: Draw and explain sample Professional undertakings from a Vendor’s Advocate to the
Purchaser’s Advocates; from the Purchaser’s Advocates to the Vendor’s Advocates; from the
Financier’s Advocates to the Vendor’s Advocates; and from a Financier to a Financier.

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COMPLETION

Introduction

Completion is the process in a conveyancing transaction where necessary documents of

title are handed over in exchange for the price.

After investigation of titles and execution of the sale agreement, the next and final stage
is the completion and transfer.

The sale agreement is an executory document and interest in the land has to be formally
transferred by stamping and registering a transfer or conveyance.

Prior to registration, the vendor expects to be paid consideration, while the purchaser
expects to be given all the registrable and other contractual documents (i.e completion
documents).

The process of exchanging of some consideration is called ‘completion’. The vendor

completes by handing over the completion documents as well as possession while the
purchaser completes by giving the balance of the consideration.

This is the final chain of conveyancing. It is however bilateral, concessional and

concurrent. Key phrases on completion are:

1. The date of completion

2. The venue of completion
3. The deliverables (completion documents and balance of the purchase price)
4. The obligations of either party at completion

Prior to completion, the purchaser’s advocate will have prepared a transfer/conveyance

document. In order to do this it is important that he identifies the document to be drawn
(initially based on the statute in which the property is registered, but now the forms are found in
LR (General) Regulations 2017).

Transfer is drawn by the Purchaser’s advocate and forwarded to the Vendor for approval.
The Transfer causes the disposition once registered. The form taken by a transfer or
conveyance deed depends on:

O Statute under which the property is registered (now all under LRA)

O The interest being conveyed or transferred

Statute Transfer document (pre-2012 and post-2012)

GLA&LTA Conveyance, Re-conveyance (upon redemption of mortgage), Assent
(transfer upon death of proprietor), Assignment or Reassignment (for

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 leases). No prescribed forms, the practice has been to use
documents prescribed under the 1845 Real Property Act and the 1881
Conveyancing Act both applicable in Kenya as statutes of general
application before 1897
RTA Transfer in prescribed form. One may amend without substantive departure
from the prescribed form.
RLA Transfer of Lease/Transfer of Land or transmission in prescribed form or get
consent of the Chief Land Registrar

LRA Transfer Forms are prescribed under the Land Registration Regulations 2017, the
take the form under RLA since the LRA largely borrows from RLA. Usual one is
form LRA 33 Transfer of Interest in Land.

Date of Completion

The date may be agreed expressly by the parties and inserted in the contract. When it is
an open contract (one that only states parties, price and property) or the date is not stated
in the agreement the completion ought to have taken place within a reasonable period of
time.

The Law Society of Kenya Conditions of Sale 1989, Condition 2 however had gone further
to provide for a 42 days completion period where no date was provided. If it’s a
Controlled land then completion was 42 days after Vendor’s receipt of consent. If not
controlled then 42 days after date of contract.

However, the LSK Conditions of Sale 2015 provide in Condition 8.1.1 that the completion
date shall be the 90th day after the date of the agreement.

The period before the date of completion is important to both parties as it is during this
period that they satisfy their contractual obligations or prepare to satisfy the same. For
the Purchaser assemble the monies, for the Vendor obtain the consents and clear the
encumbrances, for example.

As an Advocate it is thus your duty to ensure that you get a proper time frame estimated
before you agree to or insert a completion date. Otherwise, you will always be held to
your bargain and the repercussions can be disastrous.

It must be noted that the completion date or period if there is any delay may be mutually
extended.

Where however the parties provide that the “time is of the essence” then the completion
date must be strictly adhered to. Failure to complete in such a case will be deemed a
fundamental breach of contract both at law and in equity. The party at fault will not
enforce the contract specifically but the other party is free to pursue his remedies for

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breach of contract including specific performance. He may elect to rescind the contract
the very next date if he chooses.

Ordinarily time is only regarded as of the essence if the parties make it as expressly as a
term in the contract. Occasionally however the courts, have not hesitated to make time
of the essence by necessary implication. Thus in:

Barclay –vs- Messenger [1989] 3 All E.R. 492

A Contract provided that if the Purchaser should fail to pay the balance of the purchase
price on a given date, the agreement would become null and void. Sir George Jesse M.
R. held that time was of the essence stating obiter that he did “not know how making time
of the essence could have been more strongly expressed.”

In the Kenyan case of Sagoo Vs Dourado 1983 KLR 365 the Court of Appeal however
held that time will not be considered to be of the essence in any contract unless

i) Parties expressly stipulate that conditions as to time must be strictly complied with

ii) Nature of the subject matter show that time should be of the essence

iii) A party subjected to unreasonable delay gives notice to the other making time of

the essence

It is a matter of construction of the contract and one may as well argue that S. 3(3) of Cap
23 would bar such interpretation which invites implications.

When time is not of the essence failure to complete on the agreed completion date does
not entitle the aggrieved party to decline to proceed with the contract.

But what of unreasonable delays despite requests to complete? See Madan J.A
in Njamunyu Vs Nyaga 1983 KLR 282 where together with the other Court of Appeal
judges, the late Madan seemed to suggest that the provision as to time being made of
the essence can actually be implied. This should really allow rescission.

However, it appears from the line of authorities that in the absence of undue or
unreasonable delay one would still be entitled to specific performance even if he is the
guilty party. In such instances the aggrieved party needs to give a Completion Notice
which must be proper and explicit.

Where the Notice is needed then one is entitled to rescind as the Notice itself now imposes
the “time is of the essence” condition. A proper Completion Notice will constitute reason
for the alleged breach and demand that it be made good within the notice period and
further that in default Agreement will be rescinded forthwith upon expiry of the Notice.

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To be effective too the Notice must limit a reasonable time for performance. The Notice
must also leave no room that the Server may still be willing to perform the contract if
there is still a failure to complete. Of course to be effective the Server must himself be
ready able and willing to complete in which event the time is also of the essence for him.
[Reflection: Will a notice given in anticipation of breach be good?]

Failure to Complete

• Either the vendor or purchaser may fail to complete (i.e. on the completion date).

Notice of Completion

The aggrieved party needs to give an unequivocal notice, the Notice should explain the alleged
breach and demand that it be made good within the notice period as per the agreement and that in
default; the agreement will be rescinded upon expiry of the notice.

• Once ready to complete, the parties sign the conveyance and deliver the completion
documents at the completion meeting

• As per Condition 8.4.1. of the LSK Conditions, the usual completion documents comprise of:

i. Original certificate of title.

ii. Duly executed Transfer (in triplicate) in favour of the Purchaser.
iii. Original valid Rates Clearance Certificate together with original rates payment receipts.
iv. Original valid land rent clearance certificate and receipts for the payment of the land rent
for the last 3 years.
v. Copies of the latest utility bills for water and electricity duly paid up.
vi. Copy of the Vendor’s identity card or other identification document.
vii. Copy of the Vendor’s PIN certificate.
viii. 3 coloured passport size photographs of the Vendor.
ix. If the Vendor is a company:
a. Copy of the Vendor’s Certificate of Registration.
b. Copies of the identity cards and PIN certificates of the Vendor’s Directors.
c. 3 coloured passport size photographs of each of the Vendor’s Director.
x. All documents relating to the property in the Vendor’s possession.
xi. All consents necessary to effect registration.
xii. Every other document, including any transfer by a third party; and every application,
declaration; and other document, necessary to register the transfer.
xiii. All other relevant documents, including discharge or withdrawal of any
encumbrance.

Interim Period

The interim period as already stated between the execution of the contract and
completion is important for two reasons:

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· The performance of the various contractual obligations in preparation for
completion

· The risk of the property

Performance of Obligations

The Contract will have various obligations imposed on the parties. We have witnessed
that one of them is the payment of deposit which the Purchaser must effect. The
Purchaser must also put together his finances, visit and inspect the property. The Vendor
on the other hand must obtain the requisite consents, discharge and encumbrances
(unless agreed it be discharged on completion). Any other obligation under it must then
be honoured.

Risk of the Property

In a Court of Equity once there is a valid Contract of Sale, the Vendor becomes a trustee
for the Purchaser of the estate sold and the Vendor himself becomes owner of the
purchase money. This is so long as the Contract is not subject to a condition precedent
e.g. the obtaining of a planning permission.

As a Vendor qua trustee, the Vendor has a personal and substantial interest in the
property which he has to protect and actively so. His interest includes obtaining the
purchase money which he can only do if he also delivers the property “held in trust”. He
is thus under an obligation to ensure that the property’s condition does not deteriorate
nor is the same wasted.

The Purchaser’s interest is however only in the property and not any income being
derived there from. As the Vendor is entitled to a lien on the property as security of the
purchase price, the Vendor will always retain possession. He must however honour his
duty to maintain the same. He must treat property as a prudent owner and not willfully
damage it. He has to use reasonable care to maintain it but he is not obliged to improve
it.

The Purchaser is entitled to lay claim in damages if he completes the contract even though
the property has been wasted. But if the property is completely wasted he is entitled to
rescind and claim his deposit. To avoid situations like the latter, the Vendor may take
insurance. It is different if risk and possession is passed at date of contract.

ACTUAL COMPLETION

The parties once ready to complete the Conveyance (the Vendor ready to execute the
Purchase Deed and deliver the other completion documents and the Purchaser ready
with the purchase money), completion can be effected.

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As a general rule and as per Condition 8.2.2 of the LSK Conditions of Sale 2015,
completion takes place at the Vendor’s or the Vendor’s Advocates offices, but the parties
can agree otherwise.

Completion will take place on the date agreed at 2.00 p.m. (Law Society of Kenya
Conditions of sale 1989), the LSK Conditions of Sale 2015, do not fix the time.

The Vendor will deliver the keys (possession) and the completion documents (stated
earlier)

The purchaser on the other hand will deliver evidence of payment for the balance of the
purchase price and apportioned outgoings as well as the authority to release the deposit.

Post Completion

What need you do?

- Stamp documents

- Register documents together

- Report to and account to client.

- Notify the world

Tasks: (i) Draw and explain a completion notice from the Vendor’s Advocates to the Purchaser’s
Advocates; and a completion notice from the Purchaser’s Advocates to the Vendor’s Advocates.

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