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Embrace arbitration in property deals

REAL ESTATE
By | May 19th 2011
By | May 19th 2011
REAL ESTATE

By Franco Odhiambo

An article by Harold Ayodo on Breach of contracts in sale agreements on his weekly column in this magazine disheartened many eligible property buyers.

He wrote about a group of 400 people in Uasin Gishu County who lost Sh112 million deposit for purchase of land to a South African farmer. This was after a High Court judge sitting in Eldoret ruled in favour of the South African, citing a forfeiture clause in the sale agreement for the 5,000-acre agricultural land.

It is a sad story among many of how potential buyers lose their savings and investment dreams due to ignorance or failure to understand the finer details of sale agreement clauses.

The standard sale agreement drafting currently favours sellers as they stand not to default after full payment. Buyers, on the other hand, after making the agreed down payment, stand high chances of defaulting for failure to raise the balance within the stipulated period. This happens when anticipated finances from a financier delay or fail to be advanced leading to forfeiture of down payment.

Courts of Law

Our judicial system borrows heavily from the English law, which is viewed as alien by many due to rigid court rules and legal jargons. Although it has its advantages, it also suffers from rigidity, lack of confidentiality, time consuming expensive hearings, delayed judgments and the adversarial system and mentality of a winner-take-all.

This is why Kenyans should embrace arbitration and Alternative Dispute Resolution (ADR), by inserting an arbitration clause in commercial contracts.

Such a clause may state that disputes arising from contracts should be referred to arbitration even though it is worthy to note that our courts have introduced plea-bargaining in criminal matters.

Arbitration

Arbitration is the settling of disputes by one person or more who have been chosen by both sides in a dispute to act judicially by considering arguments adduced.

The third party must be impartial and knowledgeable in the subject matter. His/her judgment is based on the merit of the case and is not influenced in any way by irrelevant matters and the decision made is binding.

The advantages of arbitration are many. A tribunal is selected on basis of integrity and experience; it is confidential, faster thus reducing costs, and flexible where parties can carry some amendments to their pleadings. It also has limited appeals, which will not unnecessarily delay commercial activities.

The awards here are binding and have the same effects as court judgments and where one party fails to honour the award, the High Court can enforce it.

Dispute resolution

ADR is a method in which disputing parties find solutions without intervention of third parties. They are voluntary processes and enforceable by agreements of both parties.

One of the ADR methods is negotiation where the disputing parties alone arrive at a mutually acceptable compromise. It is effective and often yields positive results where parties are honest.

Mediation/conciliation is another method where a third party is enlisted to facilitate disputing parties to resolve their problems by negotiation. The mediator is a go between and only assists the parties to come to an understanding and not directly resolve the dispute.

The writer is a Survey and Mapping professional.

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