Eruc Afric Ltd v Tai (Commercial Case E1819 of 2026) [2026] SCC 53 (KLR) (26 June 2026) (Judgment)

Eruc Afric Ltd v Tai (Commercial Case E1819 of 2026) [2026] SCC 53 (KLR) (26 June 2026) (Judgment) Neutral citation: [2026] SCC 53 (KLR) Republic of Kenya In the Milimani Small Claims Court Commercial Case E1819 of 2026 GW Kiamah, RM June 26, 2026 Between Eruc Afric Ltd Claimant and Elinah K Zablon Tai Respondent Judgment 1.The claimant instituted this suit via the statement of claim dated 26/1/2026 seeking judgment against the respondent for Kshs. 140,000.00/= on the basis that it had offered the respondent excavation services which the respondent failed to fully pay for. That the parties entered into the debt agreement dated 19/11/2025 wherein the respondent acknowledged the debt of Kshs. 240,000/=. That the respondent paid Kshs 100,000/= leaving a balance of Kshs. 140,000/= payable in three instalments. That the respondent failed to clear the debt as agreed thus the filing of this claim. 2.Vide the response dated 26/2/2026, the respondent acknowledged the debt of Kshs. 140,000/= but denied the claim for interest at 2% per month on the basis that the same was excessive and inordinate. 3.Judgment in admission was entered for the sum of Kshs. 140,000/= on 20/5/2026 when the matter came up for mention and the respondent was ordered to settle the sum in monthly installments of Kshs. 12,000/= till payment in full. The parties were directed to file submissions on the issue of interest alone, however, none of the parties complied. 4.The sole issue for determination is whether the claimant is entitled to interest at the contractual rate of 2% per month, and in extension, the duration for which such interest is payable. 5.I have seen the debt acknowledgement agreement dated 19/11/2025. Clause 6.2 thereof provided for interest at 2% per month in the event of default until payment in full. It is trite law that parties are bound by the terms of their contract unless vitiated by illegality, fraud, coercion, or unconscionability. In National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd [2001] KLR 112, the Court of Appeal held that a court of law cannot rewrite a contract between parties. 6.As such, I do find that interest rate was contractual and the respondent was bound to the terms of the contract. The respondent however pleaded that the interest rate was excessive and unconscious. It is settled that though courts retain the power to intervene where contractual terms are oppressive, such intervention is exercised sparingly. 7.In Margaret Njeri Muiruri v Bank of Baroda (Kenya) Ltd [2014] eKLR, the Court held that an interest rate may only be interfered with where it is shown to be oppressive, punitive, or unconscionable. I do find that a month rate of 2% amounts to approximately 24% annual interest. The same is not inordinately high or unconscionable. Noting that there was no evidence to demonstrate that there was inequality of bargaining power, exploitation, or any statutory prohibition, and further considering that the transaction was commercial in nature, this Court is not persuaded that there is any justifiable reason to decline enforcement of the agreed interest terms. 8.Accordingly, I do finds that the contractual interest rate is valid and enforceable. 9.I do note that the agreement provided that the balance would accrue interest until payment in full. However, Section 26(1) of the Civil Procedure Act, the Court has discretion to award interest before and after judgment at such rate as it deems reasonable. To that end, I do direct that the contractual interest at 2% per month shall apply from the date of default till the date of this judgment. The total amount shall then be added to the award of Kshs. 140,000/=. 10.I have also considered the record and note that on 20/5/2026, the claimant’s advocate Mr. Kariuki had submitted that the respondent was willing to pay Kshs. 10,000/= weekly thus Kshs. 40,000/= monthly. However, the court inadvertently ordered the respondent to make monthly installments of Kshs. 12000/=. Such orders were inconsistent with the position on record. This amounts to an error on the face of the record that justifies a review of those orders on the basis of Order 45 Rule 1 of the CPR as well as Section 80 of the CPA. In National Bank of Kenya Ltd v Ndungu Njau [1997] eKLR, the Court held that review is available where there is a clear and self-evident error. 11.Having considered the foregoing, I do find that in order to balance the interests of both parties, it is just to revise the instalment terms. 12.As such, the orders of 20/5/2026 are hereby reviewed and set aside and I hereby order as follows: -1.The respondent shall pay the sum of Kshs. 140,000/=.2.The said sum shall attract interest at the contractual rate of 2% per month from 11/12/2025 until the date of this judgment.3.The claimant is awarded costs of the claim assessed at Kshs. 15,000/=.4.The respondent shall pay the decretal sum (inclusive of interest and costs) by monthly instalments of Kshs. 50,000/= commencing on 10/7/2026 and on the 10th day of each subsequent month until payment in full.5.Any sums already paid pursuant to earlier orders shall be taken into account.6.In default of any instalment, the claimant shall be at liberty to execute.It is so decreed. DATED AND DELIVERED AT NAIROBI VIA CTS THIS 26TH DAY OF JUNE 2026HON. GLADYS W. KIAMAHRESIDENT MAGISTRATE/ADJUDICATOR