The legality of termination of alcohol supply contracts by KBL & UDV companies

KBL (Kenya Breweries Limited) and UDV (United Distillers and Vitners) are two major alcoholic beverage companies operating in Kenya. Both companies have their own unique distributor contracts and terms. 

In the recent past, the two companies have been sued by several distributors on allegations of termination of contracts. This article seeks to unravel and disclose the legality of the termination of contracts by KBL and UDV and whether or not the distributors have a legal cause of action.

It is important to note that specific terms and conditions of distributor contracts may vary depending on the company, the products and the location. The termination of contracts by KBL and UDV may be governed by the terms and conditions set out in the specific contracts between the parties. 

The Contract Act is the primary law governing contracts in Kenya. It outlines the rules that govern the formation and enforceability of contracts, as well as the rights and obligations of the parties to a contract.

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Generally, a contract can be terminated in the following instances:

1. Breach of contract: If one party breaches a term of the contract, the other party may terminate the contract. For example, if the distributor fails to meet the sales targets specified in the contract, the company may terminate the contract.
2. Insolvency: If either party becomes insolvent or bankrupt, the contract may be terminated.
3. Mutual agreement: The parties may mutually agree to terminate the contract for any reason they deem fit.
4. Expiration of the contract: If the contract has a specific duration, it will terminate at the end of that period.
5. Force Majeure: If circumstances beyond the control of either party, such as a natural disaster or war, make the performance of the contract impossible, the contract may be terminated.

According to the recent news, the two companies, KBL (Kenya Breweries Limited) and UDV (United Distillers and Vinters) have issued notices to several distributors such as Tony West Limited and Outlook Index Limited stating that their contracts will be terminated and their distribution routes would be granted to another company. The same was issued to another distribution company Bia Tosha Limited which took the matter to court and was issued orders to repossess their distribution routes.

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The Supreme Court in the matter ruled in favour of the distributors, Bia Tosha Limited, granting them rights to repossess their distribution routes and the company Bia Tosha Limited issued an advert stating their status as the official distributors of KBL products in those distribution routes.

In reference to the above matter which is recent and falls within the same context of this discussion, it is clear that in the instance that KBL and UDV companies lack the legal backing and reasons thereof to terminate the contracts with the various distributors, the suit against them will be successful. 

The termination of a contract has to fall within the terms indicated in the contract BETWEEN  the parties otherwise the termination would be termed as a breach of contract on the part of the companies; KBL and UDV.

Ultimately, the termination of a contract can have significant consequences for both parties, including financial loss such as the orders of 39 Billion being sought after by the Bia Tosha against EABL and Diageo and damage to business relationships. Therefore, it is essential for both parties to communicate openly and honestly throughout the duration of the contract to prevent misunderstandings and disputes that could lead to termination.