A Bill that would have compelled loan sharks to go after assets of defaulting borrowers before touching a guarantor’s property collapsed in Parliament due to a quorum hitch.
President Uhuru Kenyatta had refused to assent to the the Bill, sponsored by Juja MP Francis Waititu, which sought to amend Section 3 of the Law of Contract Act.
To overturn Mr Kenyatta’s rejection of the Bill, the House needed a two-thirds majority or 233 Members of Parliament (MPs) to be present during the voting on Tuesday, however, only 28 MPs were present in the House.
The Bill which the MPs had unanimously passed, proposed that in case of a default by the principal borrower, the creditor first auction the assets of the former before seizing the property of guarantors.
Mr Kenyatta rejected clause 2(1) of the Bill that states that before a suit is brought against a defendant, the plaintiff shall first realise the assets of the principal.
“The proposed new provisions to section 3 of the Law of Contract Act will negate a long-standing principle of contract law that is relied on by lenders, borrowers, guarantors, investors and other stakeholders in the Kenyan economy, especially in the capital markets,” Mr Kenyatta stated.
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