The High Court has upheld Kenya Power's decision to terminate a Sh410.6 million electricity poles supply contract after finding the supplier repeatedly failed to meet delivery deadlines.
The court dismissed Inter Tropical Timber Trading's Sh284.9 million breach-of-contract claim, ruling that an expired commercial contract cannot be revived through later emails, negotiations or continued engagement between the parties.
"The email of May 4, 2016 therefore affords the Plaintiff (Inter Tropical Timber Trading Ltd) no legal foundation upon which to anchor its claim," the court said in a decision that strengthens strict enforcement of contractual deadlines.
The dispute stemmed from a June 2012 contract under which Inter Tropical was to supply 29,500 treated poles to Kenya Power for Sh410.6 million. The poles were initially to be delivered to the utility's stores in Ukunda, Malindi and Voi over an 18-month period ending in February 2014.
Inter Tropical sued after Kenya Power terminated the contract in January 2017. It told the court it invested heavily to perform the contract by establishing wood treatment plants in Mwea and Eldoret, buying transport trucks, sourcing timber and hiring staff.
It said the investments were financed through bank loans secured by directors' personal guarantees and matrimonial property.
The company sued in July 2018 arguing that Kenya Power frustrated the contract by changing delivery locations, suspending deliveries and delaying purchase orders before eventually declaring the contract expired in January 2017.
It sought a declaration that Kenya Power had unlawfully breached the supply contract, alongside Sh284.9 million in special damages, general damages, interest and costs, arguing that the utility's actions caused it substantial financial losses after it invested heavily to perform the contract.
It maintained that the utility's conduct created a legitimate expectation that deliveries would resume and that Kenya Power was therefore barred from relying on the contractual deadlines.
Its witness in court was the company's director, Geoffrey Nganga Kariuki, who tabled documentary evidence to support the company's claim.
But Kenya Power denied breaching the agreement. It said the delivery point was moved to Nyeri in July 2013 after discussions with the supplier and with its written approval because the new location was closer to the supplier's operations.
The utility also argued that it granted numerous extensions after the supplier failed to meet agreed delivery schedules but the outstanding poles were never supplied.
The court held that Kenya Power lawfully terminated the contract after it expired. The court found Inter Tropical Timber Trading Ltd repeatedly failed to deliver treated wooden electricity distribution poles despite receiving several extensions of time.
The extensions of time granted by Kenya Power were each explicitly time-bound, the court said.
"I cannot therefore blame the defendant for choosing to terminate the contract due to the plaintiffs inability to perform its obligations under it," said the judge.
The court noted that by the time Kenya Power issued the termination/expiry notice in January 2017, the contract had long expired by effluxion of time due to the supplier's failure to deliver the 12,865 poles by November 1, 2015.
Further, the court agreed that the relocation of deliveries was a valid contractual variation because both parties accepted it in writing.
The court found that Inter Tropical remained in material breach because it failed to deliver the outstanding 12,865 poles despite repeated extensions.
"Having carefully considered the evidence on record, I do find that it was the Plaintiff who was in material breach of the Contract," the court said. "The termination of the contract was a direct consequence of the Plaintiff's own persistent failure to fulfil its contractual obligations."
The court also rejected the company's claim for payment for undelivered poles, holding that the contract required payment only after delivery.
It further dismissed claims for losses arising from idle machinery, storage costs, depreciation and staff expenses after finding they had not been strictly proved.
