KEY MANDATORY RULES OF UAE CONSTRUCTION LAW

Faisal Attia Senior Associate 24 S t b 201424 September 2014

Introduction

Mandatory law provisions v Non mandatory law provisions Mandatory law provisions -v- Non-mandatory law provisions

Mandatory provisions

Wording

Nature of provision

Non-mandatory provision (supplementary law provisions)

Only apply if the contract is silent

Scope of this paper

1

Legal Framework

Hierarchy of laws (Art 2 of Commercial Code) Hierarchy of laws (Art 2 of Commercial Code)

Contract (subject to mandatory law provisions Art 31 of Civil Code)

Commercial Code Commercial Code

Commercial custom

Civil Code (Muqawala Articles 872 896)Civil Code (Muqawala Articles 872 896)

Muqawala Articles are not enough?

S Some Muqawala Articles would not apply to large construction projects?

Art 885 of Civil Code? Art 885 of Civil Code?

2

Other Persuasive Authorities

No precedent systems No precedent systems

Supreme Courts judgments are still important

MOJs Official Commentary

Al-Majalla

Leading Middle Eastern Civil Law jurists

3

Contractual Liability

Breach LossBreach Loss

Causation

4

Contractual Liability and Possible Defences Defences

No causation due to (Art 287 of Civil Code): No causation due to (Art 287 of Civil Code):

Force majeure;

Injured partys fault; or Injured party s fault; or

Third partys fault

Non mandatory rules Non-mandatory rules

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Limitation of Liability

Limitation of liability clauses Limitation of liability clauses

Contractual liability is a creature of contract

Enforceable but subject to mandatory exceptions (Art 383.2 of Civil Code):

Fraud

Gross breach

Decennial liability

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Decennial Liability

Joint liability (Engineer Contractor) Art 880 of Civil Code Joint liability (Engineer Contractor) - Art 880 of Civil Code

Provision of design (without supervision by engineer)

Scope

Total or partial collapse of the works

Defects which threaten the stability or safety of the works

Strict / no fault liability (Burden of proof)

Possible defences

Duration of liability (10 years from the date of completion)Duration of liability (10 years from the date of completion)

Statute of limitations (3 years from the date of collapse / discovery)

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Liquidated Damages

Permissibility of liquidated damages (Art 390 1 of Civil Code) Permissibility of liquidated damages (Art 390.1 of Civil Code)

Adjustment of liquidated damages (Art 390.2 of Civil Code)

Actual loss

Reduction / increase of liquidated damages

Mandatory provision

Burden of proof Burden of proof

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Concurrent liability

Concurrent liability (Art 290 of Civil Code) Concurrent liability (Art 290 of Civil Code)

Injured partys fault

Determination of liability (Art 291 of Civil Code)

Dominant fault -v- mutual fault

Allocation of shares of liability

Presumption of equality

Concurrent liability provisions are contained in Ch 3 (tort-based liability)

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Contractual Time-Barring Clauses

FIDIC 20 1 notices FIDIC 20.1 notices

Two possible defenses by the employer

Jurisdictional defense

Statutory time bars are mandatory (Art 487 1 of Civil Code)Statutory time bars are mandatory (Art 487.1 of Civil Code)

Civil v- Commercial transactions

10 years time limit shall apply to (commercial) construction contracts

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Contractual Time-Barring Clauses

Substantive defense Substantive defense

Contractors breach

Employer s loss Employer s loss

Causation

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Suspension

Right of suspension at law (Art 247 of Civil Code) Right of suspension at law (Art 247 of Civil Code)

Contracts binding on both parties

Corresponding contractual obligations Corresponding contractual obligations

Suspended obligation must be due after the performance of the corresponding obligation (Article 482 of Al-Majalla)

Effect of suspension

Right of suspension is a form of right of retention (Art 414 of Civil Right of suspension is a form of right of retention (Art 414 of Civil Code)

Right of suspension and the abuse of rights doctrine (Art 106 of Civil Right of suspension and the abuse of rights doctrine (Art 106 of Civil Code) / good faith (Art 246.1 of Civil Code)

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Suspension under Contract

Contractors right to suspend (FIDIC 99 cl 16 1) Contractor s right to suspend (FIDIC 99 cl. 16.1)

Payment v- progress with work

Unilateral suspension by the employer (FIDIC 99 cl.8.8)

Not dealt with by law

Possible conflict?

Contractual right to suspend in tandem with the right to suspend at law?law?

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Termination

Types of termination under UAE law (Art 267 of Civil Code) Types of termination under UAE law (Art 267 of Civil Code)

By consent

By court order By court order

By operation of law

Is Art 267 mandatory? Consequences? Is Art 267 mandatory? Consequences?

Termination provisions within the Muqawala Section are in line with Art 267Art 267

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Termination

Termination by consent Termination by consent

Upon formation of contract (Art 271 of Civil Code)

Express provision that no need for a court order Express provision that no need for a court order

After formation of contract (Articles 268 270 of Civil Code)

Termination by court order (Art 272 of Civil Code) Termination by court order (Art 272 of Civil Code)

Contracts binding on both parties

Notice to cure Notice to cure

Material breach

Termination is effected from the date of judgmentTermination is effected from the date of judgment

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Termination

Termination by operation of law (Art 273 of Civil Code) Termination by operation of law (Art 273 of Civil Code)

When performance becomes impossible;

for reasons not attributable to the contracting parties for reasons not attributable to the contracting parties

Consequences of termination

Instant contracts v- Continuous contracts

Construction contracts are continuous contracts

Termination has no retrospective effect Termination has no retrospective effect

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Termination under Contract

FIDIC provisions regarding termination (FIDIC 99 cl 15 2 & 16 2) FIDIC provisions regarding termination (FIDIC 99 cl. 15.2 & 16.2)

These provisions do not constitute termination by consent for the purpose of UAE law?purpose of UAE law?

Possible conflict?

Practical difficulties

Termination for convenience by the employerTermination for convenience by the employer

FIDIC 99 cl. 15.5

Practice of UAE Courts (Art 663 of Egyptian Civil Code)Practice of UAE Courts (Art 663 of Egyptian Civil Code)

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