ADVISORY ON FSD TRUST KENYA/ BLUEKEY OBLIGATIONS

PREPARED BY:

HEAD OFFICE
TOP LAW CENTRE
31/33 MUTHITHI, MUTHITHI ROAD
P.O BOX 33223-00600, NAIROBI
www.sichangi.com
conveyance@sichangi.com

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To: FSD
Our Ref: TBA
Date: 5TH March, 2018
Re: ADVISORY ON FSD TRUST KENYA/ BLUEKEY OBLIGATIONS

1.0 INTRODUCTION

On 10th March, 2014 FSD KENYA (the “the Trust”) entered into a contract (the “Automation
Contract”) with Bluekey Solutions (K) Limited (the “Consultant”) for the provision of a robust
enterprise resource planning solution that supports integrated project and financial management
functions. The contract was initially for a term of nine months from 1st January, 2014 to 30th
September, 2014. The Consultant was required to have completed the set-up of the integrated
system within the afore-stated period. Further, in order to facilitate the use of the integrated
system, the parties hereto agreed to enter into an End User License Agreement that would grant
the Trust third party rights to use SAP, a software owned by SAP AG, a German corporation
located in Walldorf Germany.

However, inability to agree on specifications of the system and a number of other variables
occasioned significant delays in setting the integrated system thereby necessitating an
amendment of the contract on two occasions i.e. extension of the contract end date to 31st
December, 2015 and subsequently to 31st December, 2016.

The Consultant has served FSD with invoices for services to be delivered in 2017 despite the
contracts having determined on 31st December, 2016. FSD is of the opinion that these invoices
have not fallen due.

This being the issue in dispute between the parties, the trust has requested Sichangi Partners
Advocates (the “Firm”) to advise on the following:-

1. Whether the Trust is obligated to pay without having actively confirmed that third
party can pay for license on its behalf?
2. Does the Trusts lack of response obligate it to pay?
3. Does the Consultant’s invoice request in Sept 2016 for a license in 2017 obligate the
Trust to pay when the overriding contract ended by end Dec 2016?
4. How is the license agreement EULA binding in connection to the actual contractual
agreement between the Trust and the Consultant?

In response to these questions, we submit as follows:

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Applicable Rules
The primary reference for terms of a contract will usually be the agreement between the parties
and where such terms are disputed, courts will first look to the plain and unambiguous language
of the contract and if not clear, proceed to infer the intention of the parties to establish the terms
of the agreement (Gatobu M’ibuutu Karatho V Christopher Muriithi Kubai [2014] Eklr). In
essence, written contracts will usually be interpreted literally.

Having perused the Invoices provided by the Trust, it is clear that they pertain to maintenance
fees and remote support fees. Under the Recitals to the EULA, the agreement sets out that it is
meant to govern only the licensing of the software to be used by FSD. The Automation Contract
on the other hand covers the Services (as therein defined) and it is clear that it will be the reference
for all issues pertaining maintenance fees.

1. Is the Trust obligated to pay without having actively confirmed that third party can pay for
license on its behalf?

Under Clause 13 of the Automation Contract, the Trust appoints the Consultant as a Procurement
Agent implying that such payments may be made on its behalf by the Consultant. However, this
agency is subject to the following limitations:
a. The total value of Equipment procured should not exceed 50% of the Financial
Limit or £100,000; and
b. The prior written consent of FSD to such procurement must be obtained.

No prior written consent is given to the Consultant under the EULA.

In light of the foregoing, it is our considered opinion that the Trust has no obligation to reimburse
the Consultant for licence fees paid on its behalf unless written confirmation to procure such
equipment was issued.

2. Does the Trust’s lack of response obligate it to pay?

It is a well-established principle that silence cannot be construed as an acceptance of an obligation

to pay (Felthouse v. Bindley (1862) 142 ER 103 and Republic v Public Procurement
Administrative Review Board & 3 others Ex parte Adan Osman Godana t/a Eldoret Standard
Butchery [2017] eKLR)

It follows therefore, that the lack of a response from the Trust will not bind it to a contract for a
service it did not expressly solicit. Accordingly, the Consultant cannot sue for breach of Contract
on the basis of an obligation that did not exist.

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3. Does the Consultant’s invoice request in Sept 2016 for license in 2017 obligate the Trust to
pay when the overriding contract ended by end Dec 2016?

Clause 18 of the Automation Contract is clear that invoices should be “...submitted monthy in
arrears...”. further, under Clause 19 it is clear that FSD Trust Kenya shall make the payment subject
to “..being satsified that the Consultant is or has been carrying out their duties”.

From our reading of the contract, it is clear that invoices are raised only for work already
performed and that where the Trust is dissatisfied with the performance of the Consultant such
payment may be withheld (clause 19.3). In such a case, the contract also empowers the Trust to
suspend the contract (see clause 21.3).

4. How is the license agreement EULA binding in connection to the actual contractual
agreement between the Trust and the Consultant?

The EULA is supplemental to the terms of the Automation Contract. Its scope is limited to the
extent that it deals only with a fraction of the Automation Contract and is therefore subject to the
terms thereof.

In short, while the Automation Contract provides for the Consultant’s engagement in general,
the EULA will only deal with the licence to use the software necessary for the automation. Any
issues pertaining to FSD’s right to use the software are covered by the EULA. Any issue regarding
the services rendered by the Consultant fall under the Automation Contract.

Conclusion
The Trust’s obligations towards the Contracts were determined on 31st December, 2016 and it
cannot therefore be liable to incur liabilities beyond the contractual duration without a Contract
Extension.

As no obligation arises from the existing contract in the year 2017, it follows therefore that the
Trust cannot be liable for maintenance fees. Indeed, there is no provisions under the contract for
advance payment and since no services were rendered in 2017 no extension of the obligation to
pay can be inferred.

We trust that the above is helpful. Please contact Pauline Kanyike or Macduff Ronnie Omondi of
this office should you have any further queries.

Sichangi Partners Advocates

6th March, 2018