KENYA SCHOOL OF LAW

ADVOCATES TRAINING PROGRAMME

COURSE UNIT: COMMERCIAL TRANSACTIONS

NAME: MAKOKHA JOHN DAMASCENE

ADM. NO: 2010204
DATE HANDED IN: 3RD MAY 2010

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 (1) From the facts given in the question, some of the securities that the Grantors wish to rely on to secure
payment of the loan do not qualify as chattels under the said Act.

The Safaricom shares purchased on 1st march 2009 cannot be added on the chattel instrument. This is
because shares do not fall within the definition of chattels as given in the Chattels Transfer Act 1.

Section 2 of the Chattels Act cap 28 Laws of Kenya 2 defines chattels to mean any movable property that
can be completely transferred by delivery, and includes machinery, stock and the natural increase of stock
but does not include under clause c of section 2 of the act, shares and interests in the capital or property of
any company or other corporate body.
Thus from the above section of the law, it expressly excludes shares from their inclusion in the chattels
instrument.

The Toyota Premio Grey in colour cannot be added on the chattel instrument. This is because the
property does not qualify as an instrument under section 2 of the Act. An instrument does not include,
under clause (h), bills of lading among others which show transfer of the documents.

1
Chapter 28, Laws of Kenya.
2
Herein refered to as the act.

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 DATED 1ST DAY OF APRIL 2010.

J.T. JUMA AND S.M. MUTUA

t/a

JUMA MUTUA AND ASSOCIATES ENGINEERS

TO

TUUNGANE TUJENGE KENYA LIMITED

THE CHATTELS TRANSFER ACT

(CHAPTER 28)

INSTRUMENT

DRAWN BY
3DJDM ADVOCATES,
FIKA HOUSE, 5TH FLOOR,
KEITA STREET.
P.O. BOX 8409-OO100
NAIROBI

REF: JD/MT/4/2010

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 REPUBLIC OF KENYA
THE CHATTLES TRANSFER ACT
(CHAPTER 28)
INSTRUMENT

THIS CHATTEL MORTGAGE is made the 1ST Day of APRIL the year Two Thousand and Ten
BETWEEN J.T. JUMA and S.M. MUTUA t/a Juma Mutua and Associates Engineers of Post Office
Box Number 6785 0056 Adams Arcade in the Republic of Kenya (hereinafter called the Grantors
which expression where the context so admits shall include their personal representatives and assigns) of
the one part and Tuungane Tujenge Kenya Limited a limited liability company incorporated in Kenya
and of Post Office Box Number 56789 0600, Westlands Nairobi (hereinafter called the Company
which expression shall where the context so admits include its successors and assigns) of the second
part.

WHEREAS:

1) The Grantor is the absolute owner of the chattels specified in the Schedule hereto annexed
(hereinafter called the Chattels which expression shall where the context so admits include or
refer to it or any more of them).

2) The Company has agreed to grant to the Grantors a loan facility and or other financial
accommodation for the sum of Kenya Shillings One Million Two Hundred Thousand (Kshs.
1,200,000.00) upon having the repayment thereof with interest as hereinafter mentioned secured
in manner hereinafter appearing.

3) The Grantors have further agreed to execute a Chattels Mortgage in favour of the Company as
Security thereof the Company having agreed to grant to the Borrower the said loan facility.

NOW THESE PRESENTS WITNESS as follows:

1. In pursuance of the said agreement and in consideration of the said sum of Kenya Shillings One
Million Two Hundred Thousand (Kshs. 1,200,000.00) lent and / or advanced to the Grantors by
the Company, the Grantors HEREBY ASSIGNS AND TRANSFERS the chattels to the
Company by way of Mortgage to secure payment of the sum of Kenya Shillings One Million

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 Two Hundred Thousand (Kshs. 1,200,000.00) together with interest as provided for in the
schedule endorsed herein.

2. The Grantors HEREBY COVENANTS with the Company as follows:

a) The Grantors will repay the principal sum plus interest at the times and in the manner
hereinafter stated PROVIDED ALWAYS that if any installment shall not be paid by the
Grantors to the Company on its due date for payment the total amount of principal sum and
interest then remaining shall thereupon immediately become due and the Company shall be
entitled to exercise all or any of the rights hereby and by the Chattels Transfer Act (Cap. 28
Laws of Kenya) conferred on the Company.

b) The Grantors shall pay to the Company as well after as before any judgment interest at the
rate hereinafter provided for on the principal sum and on all installments in arrears and on
all other monies due until actual payment thereof. But this provision shall not in any way
affect or prejudice the exercise of any right or remedies of the Company provided herein.

3. The Grantors hereby further covenants with the Company as follows:

a) That the Grantors have got right and full power to assign the chattels to the Company and
that the chattels are free and clear from any encumbrances.

b) That the Grantors will at their own costs do and execute all such acts deeds matters and
things for the better assigning the chattels to the Company as the Company may from time
to time reasonably require;

c) The Grantors shall keep the Company notified of the Grantors address and the address of
the premises where the Chattels are kept and any change of the same as soon as possible;

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 d) All existing and future claims and rights to be set off by the Grantors against moneys
payable under this instrument are waived;

e) That all such other covenants and obligations as are implied under the Chattels Transfer Act
shall apply to this instrument.

4. The Grantors covenant with the Company that he will at all material times during the
continuance of this instrument:
a) Keep and maintain the chattels in good order and condition (fair wear and tear only
excepted) AND will be fully responsible for any loss thereof or damage thereto however
occasioned AND will give immediate notice in writing of any such loss or damage to the
Company which may in its absolute discretion require the Grantors to have at the Grantors
expense any necessary repairs by a person or company approved by it in writing.

b) Insure and keep insured Chattels in the joint names of the Grantor and the Company with
such insurance company as the Company may in writing require and unless the Company
otherwise agrees in writing such insurance shall be fully comprehensive to its full
replacement value without excess or restriction AND will not without prior consent in
writing of the Company make any change either in such insurance policy or from such
insurance company as aforesaid and deposit the same with the Company and will dully pay
all premiums and other sums of money payable in accordance therewith AND will
immediately after every such payment deposit with the Company the receipts of the same
PROVIDED ALWAYS THAT if default shall be made in keeping the Chattels so insured
the Company may keep insured the Chattels and all expenses thereby incurred together
with interest hereinafter provided for in the Schedule from the date of the same becoming
due until actual payment thereof and the same shall be considered included in this security.

c) Not use the Chattels nor permit the same to be used for any purpose not permitted by the
terms and conditions of the hereinbefore mentioned insurance policy nor permit to be done
any act or thing by reason of which the same may be invalidated.

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d) Keep the Chattels in the Grantors actual possession and control properly sheltered and
protected AND will not take the chattels or permit the same to be taken outside the
Republic of Kenya, without the written consent of the Company first had and obtained.

e) Not remove any parts of the Chattels without consent of the company in writing first had
and obtained except where such removal shall be in the opinion of the Grantors rendered
necessary by reason of the same having been worn out or damaged and in such case replace
the parts so worn out or damaged (unless no longer required) by others if similar nature and
of at least equal value and necessary renew and replace all such parts and effects of a like
nature now comprised in the Chattels as and when the same shall be worn out or destroyed.

f) Punctually pay all licenses, duties, fees and registration charges payable in respect of the
chattels as and when the same fall due provided always that if the Grantor shall fail to make
any such payments as aforesaid the Company may without being bound so to do pay the
same to the proper authorities and all expenses incurred by it in so doing shall be a debt due
from the Grantors to the Company and the same shall be considered included in this
security;

g) Not sell let assign or otherwise dispose of the Chattels or any of it or any component part
thereof and not remove, change or interfere with any identification number, trade
mark or other identification mark upon the Chattels or any of it or any part thereof
and will not create any lien on the Chattels or pledge the companys credit either for the
repairs thereto to otherwise whatsoever and will at all times keep the Chattels freed and
expected from any distress for rent execution or other legal process;

h) Permit the Company or its duly authorized agent at all reasonable times to enter upon the
premise where the chattels may for the time being be kept for the purpose of inspecting and
examining the condition thereof and shall forthwith execute all repairs and works required
to be done to the chattels or any of it or any component part thereof in accordance with
written notice given to the Grantors and if the Grantors shall not within fourteen (14) days

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 after service of such notice aforesaid commence the execution of repairs and the cost
thereof together with interest thereon at the Company sole discretion from the date of the
same becoming due until actual payment shall be a debt from the Grantors to the Company
and same shall be considered included in this security.

5. No relaxation forbearance delay or indulgence by the Company in enforcing any of the terms and
conditions of this instrument nor the granting of time by the Company to the Grantors shall
produce affect or restrict the rights of the powers of sale of the Company hereunder nor shall any
waiver of any breach thereof operate as a waiver of any subsequent breach thereof.

6. IT IS HEREBY AGREED AND DECLARED that the terms and conditions contained in this
instrument shall be in addition to and not substitution for terms and conditions implied herein by
virtue of Section 41 and 42 of the Chattels Transfer Act except so far as such implied terms and
conditions are inconsistent with the terms and conditions herein of which case the terms and
conditions herein shall prevail.

7. If and so often and so long as more than one chattel is the subject of this instrument either alone
or along with any other agreement between the Company and the Grantors for lease hire or hire
purchase:-
a) Any payment whatsoever made from time to time by the Grantors to the Company shall
notwithstanding any direction by the Grantors to the contrary (subject only to the
provisions of Section 28 of the Hire Purchase Act where applicable) be appropriated by
the Company in or towards satisfaction of any such liability of the Grantors then the
outstanding in respect of any of such chattels under this instrument or ay other
agreement or mortgage on any account as the Company may at its discretion elect; and
b) Clause 5 hereof shall apply also in the event of the Grantors defaulting in due and
punctual payment of any other of the obligations in respect of any other of such chattels
or in any other event which entitles the Company under the terms of the relevant
agreement or mortgage to take possession of any other such chattels.

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 c) This clause shall apply as between any assignee of this instrument by the Grantors and
the Grantors but shall not extend to al agreements and/or mortgages by the Grantors
which are at any time held by such assignee whether originally made with or given to
such assignee or acquired by way of assignment.

8. In these presents where the context do admits words importing the masculine gender only
include the feminine gender and the words importing singular number only include the plural
number and vice versa and under these presents Grantors shall be deemed to be liable
according to the ratio they use to share profits and liabilities in their partnership . For
avoidance of doubt, the liability of J.T. JUMA and S.M. MUTUA is 6: 4 respectively.

9. It is hereby agreed and declared that any notice, letter or other document from the Company to
the Grantors shall be deemed to have been received by the Grantors at the time when it should in
the ordinary course of post have been delivered to him at his known address and vise versa.

10. Upon the final balance of the said principal sum having been paid off by the Grantors together
with all interests due to the Company and upon payment by the Grantors of all costs and
expenses incurred by the Company in relation to this instrument the Company shall forthwith
deliver to the Grantors the Registration books and relating to the Chattels in the name of the
Grantors and shall, at the cost of the Grantors, execute a memorandum of satisfaction in respect
of this instrument and cause the same to be registered in accordance with the Chattels Transfer
Act.

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 SCHEDULE A
No. CHATTEL/ITEM SERIAL No. VALUEB (Kshs.)
1. Nashuatec Heavy Duty Printer MP C400/MP CF00 950,000
2. Motor Vehicle (Toyota Premio) KBK 099J 650,000

SCHEDULE B
PRINCIPAL SUM: Kenya Shillings One Million Two Hundred Thousand only (kshs.(figures))
1,200,000/=
INTEREST ON PRINCIPAL SUM: 10%
TERM: 72 Months
INSTALMENTS TO BE PAID FROM: 30TH OF APRIL 2010 AND ON EVERY
ANIVERSARY MONTH THEREAFTER UNTILL PAYMENT IN FULL.

IN WITNESS WHEREOF the Grantors have hereunto set their hands this 1ST day of APRIL
2010.
Signed by the Grantors:
J.T. JUMA-----------------------------------------------
S.M. MUTUA-------------------------------------------
In the presence of;
BITUL SHAH------------------------------------------
Who resides at NAIROBI.
Occupation: Motor- Bicycles repairer.

SCHEDULE C
Grantors names: J.T. JUMA and S.M. MUTUA.
Postal Address: 6785 0056 Adams Arcade.
Residential Area: Nairobi.
Business Address: Adams Arcade Plaza, 2nd floor, Room 2.
Occupation: Businessmen.
Chattels will be kept at :(1)motor vehicle-Parking bay No. 2 in the basement of Adams Plaza
(2)Printer-In the Office.
REPUBLIC OF KENYA

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 IN THE MATTER OF CHATTELS TRANSFER ACT

CHAPTER 28 LAWS OF KENYA

AFFIDAVIT ON REGISTRATION OF AN INSTRUMENT

I, BITUL SHAH of Post Office box 6892 0056 NAIROBI IN in the REPUBLIC OF KENYA make
Oath and say as follows:-

1. The paper writing hereto annexed A is a true copy of an instrument under the above-mentioned
Act, and of every schedule or inventory thereon endorsed or thereto annexed or therein referred
to, and of every attestation of the execution thereof, as made and given and executed by J.T.
JUMA and S.M. MUTUA.

2. The said instrument was made and given by the said J.T. JUMA and S.M. MUTUA on the 1ST
day of APRIL, 2010.

3. I was present, and saw J.T. JUMA and S.M. MUTUA duly execute the said instrument on the
1ST day of APRIL, 2010, at NAIROBI.

4. The said J.T. JUMA and S.M. MUTUA reside at NAIROBI, and they are businessmen trading
as Juma Mutua and Associates Engineers.

5. The name subscribed to the said instrument as that of the witness attesting the due execution
thereof by the said J.T. JUMA and S.M. MUTUA is in the proper handwriting of me, this
deponent.

6. I am a motor-bicycles repairer at Ground Floor of Adams Arcade Plaza and reside at NAIROBI
within the REPUBLIC OF KENY

Sworn by the said BITUL SHAH

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At NAIROBI this 1ST day of APRIL, 2010.

BEFORE ME JOHN MAKOKHA

ADVOCATE&COMMISSIONER (DEPONENT)
FOR OATHS
P.O. BOX8409-00200
NAIROBI.

COMMISSIONER FOR OATHS.

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 2. Steps and procedural requirements for registration of the Chattels Mortgage and any
necessary annextures under the Chattels Transfer Act.

The mode of registration of instruments is regulated by the Chattels Transfer Act. 3 Under Section
16 of the Act4 an instrument shall be deemed to be made on the day on which it is executed, and
shall take effect from the time of its registration.

It is important to note that an instrument can only be registered after it has complied with the
requirements of the Act. Consequently, an instrument must, under section 15, be attested by at
least one witness who must add to his signature his residence and occupation.

Lack of sealing does not, however, affect the validity of an instrument. In National and
Grindlays Bank Ltd V- Dharamshi Vallabhji and others 5 it was held that an unattested
instrument is valid between the parties but incapable of registration and ineffective against other
persons.

Upon registration, all persons are deemed to have notice of the instrument and its contents6.

An instrument is registered by filing in the department of the Registrar on payment of prescribed

fee7.

All schedules endorsed thereon, annexed thereto or referred therein, or a true copy of the
instrument and the schedules and an affidavit in Form 1 in the First Schedule or to the same
effect must be filed together with the instrument8.

Pursuant to Section 17 of the Act, an instrument must contain or have endorsed on it a schedule
of Chattels (inventory). Good to title is given only to the Chattels described in that schedule9.
3
Cap 28, laws of Kenya.
4
Ibid
5
(1966) EA 186 (Privy Council decision.)
6
Section 4 of the Act
7
Section 2 defines Registrar to mean Registrar General
8
Section 5
9
Section 17

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 An instrument must be stamped before it may be registered. This is provided for by Section 38 of
the Stamp Duty Act10.In the case of Nyali Chemicals Limited V-Thudi River Estate Limited
and 2 Others11, court held that no instrument shall be registered under the Chattels Transfer Act
unless the original duly stamped, is produced to the Registrar ( of Chattels Mortgage.)

Under Section 6(1) of Chapter 28, an instrument must be registered within twenty one (21) days
from the day of execution provided that when the time for Registrars office is closed the
registration shall be on the next following on which the office is open. This was reiterated in
Nyali Chemicals Limited V-Thudi River Estate Limited and 2 Others12

If there are more grantors than one, the date of execution of the instrument shall be deemed to be
the date of execution by the grantor who last executes the instrument13.

The day on which the instrument is executed shall not be included in the period for registration;
but the instrument may be registered on that day.

Upon registration, a Chattels Mortgagee has a life of five (5) years after which it expires unless
renewed.14This means that the parties to the chattels mortgage must renew it at the expiry of five
(5) years. This is because their agreement runs to six (6) years (72 months.)

10
Chapter 480, Laws of Kenya.
11
Milimani Commercial Courts HCCC CIVIL SUIT NO. 134 OF 1999 (Emukule J.) at p.4. See also Fidelity
12
Ibid at p.4
13
Section 6(2)
14
Per Ombija j. in John Patrick Macharia v- MDC Holdings Ltd and 2 Others,Milimani Commercial courts,HCCC No. 1549 of
2001.

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