High Court at Nairobi (Milimani Law Courts)
Provincial Construction Company & another v Attorney General
Provincial Construction Company & another v Attorney General KLR
REPUBLIC OF KENYA
Provincial Construction Company Ltd & another v Attorney General
High Court, at Nairobi
October 15, 1991
Civil Case No 165 of 1991
Contract – privity of contract - agency – third party cannot benefit from contract unless made by his agent – sub-contract – rights created by a sub-contract – whether such rights necessarily bind the principal.
Agency – principal and agent - how the relationship is created - one is deemed an agent if he acts for another or by operation of the law
The applicants contractors entered into a building contract with the government for the construction of certain facilities at Nyeri Provincial Hospital. Pursuant to the main contract the parties thereto were entitled to refer all disputes arising therefrom to arbitration. Acting in pursuance to the provisions of the main contract the contractors appointed a subcontractor and duly entered into a standard form contract with the same.
A dispute thereafter arose between the contractors and the sub-contractors and the respondent contended that the two were not entitled to bring that dispute to arbitration.
1. It is a cardinal principle of the applicable common law that a third party cannot benefit from a contract unless such a contract is for his benefit or was made on his behalf by his agent.
2. It is a cardinal principle of construction that in construing a document, it should be interpreted in accordance with the clear expression of the documents in question.
3. One is said to be an agent if he acts for another with the consent of that other. One can also be deemed to be an agent of another by operation of law or by an agreement.
4. The contractors (applicants) were entitled to appoint a sub-contractor who would definitely be deemed to be their agents and if a dispute arose as between the employer and the sub-contractor the contractors would be responsible for such actions, or would be entitled to make a claim arising from services performed on their behalf by such subcontractors.
5. The sub-contractor claim could therefore be referred to arbitration by the contractors one or jointly with the sub-contractors to avoid the necessity of third party proceedings.
6. Clause 20(f) of the main contract clarifies that a sub-contractor is an employee or agent of the contractor and not the employer. Consequently the government could not be responsible for actions of such nominated sub-contractor that the government could not pay for services rendered through such nominated sub-contractor.
7. Rights created by a sub-contract need not necessarily bind the employer unless the employer would have been bound if the act had been done by the contractor himself or if the employer can be said to have impliedly authorised or approved the specific actions upon which the claim under the sub-contract is founded more especially if the sub-contract was entered into at the instigation of the employer.
Northern Regional Health Authority v Derek Crouch Construction Co Ltd  QB 644;  2 All ER 175;  2 WLR 676
1. Arbitration Rules (cap 49 Sub Leg) rule 3
2. Arbitration Act (cap 49) section 22(a)
Mr Le Pelley for the Applicants.
Mrs Manyasi for the Respondent.