Indian Institute of Quantity Surveyors

Review of UAE Law in context of Construction law provisions 28th September 2013

Presented by: R. Venkat, FCIArb, FCMA LLM (Const Law), B.Eng, C.Eng
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Review of UAE Law in context of Construction law provisions

Question: What is Construction law?

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Construction law Construction Engineer Lawyer

Construction lawyer

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NO ONE LIKES TO LITIGATE

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UAE CIVIL CODE; WHY IT IS RELEVANT TO US?

Contracts in UAE are mostly administered by FIDIC 87 and FIDIC 99 with amendments. What do they say on local law? FIDIC 87 Clause 5.1 Language/s and Law (b) the country or state the law of which shall apply to the Contract and according to which the Contract shall be construed.
FIDIC 99 Clause 1.4 Law and Language The Contract shall be governed by the law of the country (or other jurisdiction) stated in the Appendix to the Tender
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Law of the Country is like a safety net.

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UAE CIVIL CODE; WHY IT IS RELEVANT TO US?

Civil code on the applicability of the local law The law of UAE will prevail if there is a conflict of laws (Art 10) Residency or where the Contract was concluded will decide the applicable law (Art 19(1)) The lex situs of the place in which real property is situated shall apply to contracts made over such property (Art 19(2). A mandatory provision [of law] shall take precedence over a duty created by a contractual stipulation (Art 31) Ignorance of the provisions of the law is no excuse (Art 29).
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PROPOSED WALK-THROUGH
Categories of Law Common law Versus Civil law Middle eastern law What is UAE Civil Code? Does it address all Construction related issues? Is it only based on Sharia Law? Law of Contract; Important provisions

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CATEGORIES OF LAW
Common law Contract law

Civil law

Tort law Construction law

Case law

Public law Private law Criminal law Venkat

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CATEGORIES OF LAW
Legal systems
Civil law Common law

Source of law
Case law
Statute

Regulation
Civil law Criminal law

Applicability
Private law Public law

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Civil Law legal system

Legal tradition which has its origin in Roman law
Codified in the Corpus Juris Civilis of Justinian (Eastern Roman emperor; 529 AD) Civil law is fully codified, highly systemized and structured Broad general principles without setting out the details

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Civil Law legal system

Roman law

Code Napoleon French Influence Circa 1800 Belgium, Luxembourg, Spain, Louisiana and Quebec

Germanic family (Enacted in 1900)

Austria, Switzerland, Turkey, Japan, Korea and Taiwan

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Common Law legal system

Refers to legal systems that adopted English legal system Evolved in England from the 11th Century onwards Established by William the Conqueror Principles appear in the reported judgments (most part!)

Scope for a discretionary approach

Rules seem to be more specific and detailed

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COMMON LAW SYSTEM COUNTRIES

Basis of private law for England, Wales, Ireland, All states of USA (except Louisiana) Canada (except Quebec) and Former colonies of British Empire (India, Pakistan, Malaysia etc.,) USA is the main receiver and considerable changer of English Common law

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Civil Law and Criminal law

Every legal system will have both Civil law and Criminal law Not to be confused with Civil law legal system Civil law is to settle dispute between two individuals. Claimant Sues the defendant. Its a private law Examples: dispute in a sale of land, debt recovery, contract

Criminal law is aspect of public law

Relates to conduct which the State considers inappropriate

Involves enforcement including sentence to prison Public Prosecutor prosecutes the defendant (accused)
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PROPOSED WALK-THROUGH
Categories of Law Common law Versus Civil law Middle eastern law What is UAE Civil Code? Does it address all Construction related issues? Is it only based on Sharia Law? Law of Contract; Important provisions

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WHY WE SHOULD KNOW THE DIFFERENCE

..because

of the presence of international law firms (in UAE) with common law roots, many contracts which have been drafted in the UAE appear to have been influenced by common law principles. This has created difficulties in the application of the law to these contracts by the courts of the UAE since judicial authority does not recognize some of the principles or the practices of the common law system

Leading UAE Lawyer Mr. Essam Al Tamimi

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Established Common law principles are not recognized in UAE

Time at large Prevention principle Fitness for purpose Pre estimated LDs

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Common Law Versus Civil Law

1. Source of law 2. Principle of precedents
3. Interpretation of Contracts 4. Judicial procedure

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COMMON LAW
1. Source of law
Mainly from case law from previous judgments. Statutes are also referred.

CIVIL LAW
Mostly based Codified legislation. Case law is mostly irrelevant (notable exception French Tort law which is fully based on case law) Codes are concise, state broad principles only

Statutes are detailed with definitions and contain lengthy enumerations of specific applications and exceptions
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COMMON LAW
2. Principle of precedents
Judges are subject to doctrine of stare decisis Decisions from Upper Courts must be respected and followed Hierarchical structure

CIVIL LAW
Judges are bound by Code and facts and not on precedents! Court of Cassation judgments are referred for understanding of law

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COMMON LAW
3. Interpretation of Contracts
Respects freedom of Contract
Primary focus on the written words in the contract. Parol evidence

CIVIL LAW
Interest of fairness (as against freedom of contract)
Primary focus on the wider context and intentions of the parties Not limited to literal meaning of the terms. Evidence of negotiation is admissible Mandatory provisions cant be excluded Tribunals have power to rewrite the parties agreement

prevents a party to a written contract from presenting extrinsic evidence that contradicts or adds to the written terms of the contract that appears to be whole.

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COMMON LAW
4. Judicial procedure
Parties collect evidence and present More reliance on evidence of fact, oral arguments Parties appoint experts Judges are appointed from senior lawyers in practice

CIVIL LAW
Judge plays main role in collecting evidence Trials are based on written evidence Court appoints the experts Judges are separately trained and appointed

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Resolution Chemicals Ltd v H Lundbeck A/S

Court of Appeal (Civil Division) Where Reported 29 July 2013 [2013] EWCA Civ 924; Official Transcript

Summary: The Court of Appeal re-stated the test to be applied when assessing whether there was privity of interest between a new party and a party to previous proceedings, so as to prevent the new party litigating the same matter.
Abstract: The appellant patent proprietor (L) appealed against a decision ([2013] EWHC 739 (Pat)) that the respondent company (R) was not precluded from bringing proceedings to challenge the validity of L's patent. Appeal dismissed. (1) A judgment that a patent was valid determined issues only between the parties to the revocation action. Judge: Longmore, L.J.; Moore-Bick, L.J.; Floyd, L.J. Significant Cases Cited Special Effects Ltd v L'Oreal SA [2007] EWCA Civ 1; [2007] Bus. L.R. 759; Legislation Cited Patents Act 1977 (c.37) s.65; Patents Act 1977 (c.37) s.72

S A M P L E U K C O U R T

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SAMPLE UAE COURT JUDGMENT(IN TRANSLATION)

Dubai Court of Cassation 240/2006 Subject: Muqawala; Contract; Proof; Judges : 23 January 2007

Keywords: 1.Muqawala; obligation - description of obligation - condition and term - condition; 2.Contract - interpretation of contract; trial court - jurisdiction over questions of fact contract - interpretation of contract; 3.Proof - burden of proof; contract - effects of contract; obligation - description of obligation condition and term - condition; 4.Contract - making of contract; trial court - jurisdiction over questions of fact - contract interpretation of contract; 5.Judges - competence; Legislation referred to: 3. Civil Code articles 243, 420, 423 and 425 4. Civil Code - articles 130, 131 and 132 5. Law of Civil Procedures - article 114 1. The appellant company made an offer in a letter to the respondent company, and that offer was met with an implied acceptance by the latter company by its carrying out the works as set out in the letter. Thus, there was a contract made between the parties, containing the condition in the contract made between the appellant company and the head contractor,

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PROPOSED WALK-THROUGH
Categories of Law Common law Versus Civil law Middle eastern law What is UAE Civil Code? Does it address all Construction related issues? Is it only based on Sharia Law? Law of Contract; Important provisions

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MIDDLE-EASTERN LAW
Neither common law nor purely based on civil code
No single uniform Middle East or Arab law Arab law is mixture of Islamic law and French civil code Egyptian Civil Code is the first Arab law enacted

Arab countries have followed the Egyptian Civil Code.

To understand Middle east law, we need to know bit of history Ottoman empire!
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OTTOMAN EMPIRE
Created by Turkish tribes in Anatolia. One of the most powerful states in the world during the 15th and 16th centuries. Spanned more than 600 years and came to an end in 1922.
Empire included modern Hungary, Serbia, Bosnia, Romania, Greece, and Ukraine; Iraq, Syria, Israel, and Egypt, North Africa as far west as Algeria; and most of the Arabian Peninsula.
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LEGAL SYSTEM IN MIDDLE-EAST

The Ottoman government compiled a uniform Civil Code called "Majella

After the fall of Ottoman Empire, France and Britain took over different Arab countries.
Influence of French Civil Code grew in the Arab countries. Attempt to reconcile between the Sharia and the Western laws has began. The Egyptian Civil Code of 1948 was the first successful product. Legal scholar and professor Abd al-Razzq al-Sanhr (1895-1971) is the author of Egyptian Civil code.

His twelve-volume commentary on Civil code is a magnum opus (Al-Was f shar al-qnn al-madan al-jadd)
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LEGAL SYSTEMS AROUND THE WORLD

Common law

Civil law

Middle eastern law

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Leaning (falling?) Tower of Pisa

Tourist View

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True leaning towers of the world

Leaning Tower of Wanaka Leaning Tower of Abu Dhabi

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Leaning (falling?) Tower of Pisa

Tourist View

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Leaning Tower of Pisa

Contractor s view

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Leaning Tower of Pisa

LAWYERS VIEW

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PROPOSED WALK-THROUGH
Categories of Law Common law Versus Civil law Middle eastern law What is UAE Civil Code? Does it address all Construction related issues? Is it only based on Sharia Law? Law of Contract; Important provisions

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LAW SYSTEMS- TIME LINE

Roman civil law English common law Code Napoleon Germanic laws Egyptian civil law 6th Century 11th Century 1800 AD 1900 AD 1948 AD

Formation of UAE 1971 Civil Code (Federal law 5) 1985 Civil Procedure Code, Federal Law No.(11) 1992 Commercial Transactions Act 1993 DIFC Law 2004

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GLANCE AT UAE CIVIL CODE

The Law of Civil Transactions of the State of UAE Decreed under Federal law 5 of 1985 Commonly known as Civil Code Covers all Civil transactions like Contract for work, Sale etc., The other complimentary law is the Commercial Transactions Act declared under Federal Law No. 18 of 1993 Civil Code remains the baseplate both of commercial and of civil law in the UAE.

Civil Code that is the most referred law in Court of Cassation judgments.
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WHAT DOES CIVIL CODE COVER?

Formation of Contract What constitutes offer and acceptance The capacity of the parties Effect of fraud and mistake Interpretation of agreements The liberty to withdraw Remedies for breach and Numerous general questions of contract law Important Any Clause that purport to exclude a partys right to apply to Court for excessive hardship is invalid under UAE Law.
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PROPOSED WALK-THROUGH
Categories of Law Common law Versus Civil law Middle eastern law What is UAE Civil Code? Does it address all Construction related issues? Is it only based on Sharia Law? Law of Contract; Important provisions

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DOES CIVIL CODE SUFFICIENT?

General complaint

Civil code contains just 25 articles on Construction Contract.

The Billions of dirhams being spent on buildings are worthy of greater attention than just 25 short articles in the Civil Code. Comment by a lawyer trained on Common law Is it true? Let us use an analogy. Columbus and Civil code!!
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COLUMBUS AND CIVIL CODE

Christopher Columbus Adventurous sailor, tough negotiator and shrewd businessman

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Wanted to reach India by sailing westward from Spain Landed in Bahamas instead

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Vasco da Gamas maiden voyage to India (1498)

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FIRST VOYAGE OF COLUMBUS (1492)

Landed in Bahamas which he thought was Japan. Then went to Cuba which he declared as China Venkat
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DISCOVERY OF AMERICA

He never saw the main land of America, until his Third Voyage! (1498)

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UAE CIVIL CODE COVERS THE FOLLOWING

Formation of Contract What constitutes offer and acceptance The capacity of the parties Effect of fraud and mistake Interpretation of agreements The liberty to withdraw Remedies for breach and Numerous general questions of contract law 1528 Articles 4 Volumes Contract of work, Contract of Sale, Lease, Mortgage etc.,
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COLUMBUS AND CIVIL CODE

Conclusion Declaring Civil code contains only 25 articles on Contracts and The Code does not address the complexities of Construction Contracts is akin to

Columbus discovery of America until the third voyage

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WHAT DOES CIVIL LAW EXPERTS SAY?

It doesnt mean that bulky construction law is required to justify the construction boom. The UAE Civil Code contains more or less as many provisions as it should without becoming over-intrusive in the way private parties wish to distribute their tasks. Civil Codes of most countries are generally minimalistic

Expanding civil codes into greater detail on the intricacies of specific aspects would be deemed as interventionist in most civil law-based jurisdictions.

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CONTRACT INTERPRETATION COMPARISON OF CIVIL CODES

French civil code
Art. 1156

Quebec (Canada)
1425.

Louisiana Civil Code (USA)

Art. 2045

One must in agreements seek what the common intention of the contracting parties was, rather than pay attention to the literal meaning of the terms.

The common intention of the parties rather than adherence to the literal meaning of the words shall be sought in interpreting a contract.

Interpretation of a contract is the determination of the common intent of the parties.

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CONTRACT INTERPRETATION UAE CIVIL CODE

Article 265 (1) If the wording of a contract is clear, it may not be departed from by way of interpretation to ascertain the intention of the parties.

(2) If there is scope for interpretation of the contract, an enquiry shall be made into the mutual intentions of the parties without stopping at the literal meaning of the words ..

Corresponding articles from the civil codes of other countries: Jordan 239 and 240; Egypt 150 and 151; Syria 151 and 152
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CONTRACT INTERPRETATION COMPARISON OF CIVIL CODES

French civil code
Art. 1162

Quebec (Canada)
1432.

Louisiana Civil Code (USA)

Art. 2057

In case of doubt, an agreement shall be interpreted against the one who has stipulated, and in favour of the one who has contracted the obligation

In case of doubt, a contract is interpreted in favour of the person who contracted the obligation and against the person who stipulated it.

Contract interpreted in favor of obligor In case of doubt that cannot be otherwise resolved, a contract must be interpreted against the obligee and in favor of the obligor of a particular obligation.

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CONTRACT INTERPRETATION WHAT DOES UAE CIVIL CODE SAY?

Article 266
(1) A doubt shall be interpreted in favour of the obligor.

This rule is adopted from Western jurisdictions. Common law doctrine Contra Proferentem

Latin term which means against the offeror.

If a clause in a contract appears to be ambiguous, it should be interpreted against the interests of the person who insisted that the clause be included.
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PROPOSED WALK-THROUGH
Categories of Law Common law Versus Civil law Middle eastern law What is UAE Civil Code? Does it address all Construction related issues? Is it only based on Sharia Law? Law of Contract; Important provisions

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SHARIA LAW AND UAE CIVIL CODE

Is Sharia is the only source of UAE law?

Two different interpretations

The starting point is the UAE Constitution,

Article 7 of the Constitution says: 'Islam is the official religion of the Federation and the Islamic Sharia is a main source of its legislation'.
One view is that since Federal laws shall be promulgated in accordance with the Constitution (Article 110), any law which is does not take Sharia as a source will be void because it violates the constitution. However this is a narrow interpretation. Note the construction of this Article: Sharia is a main source not the only source
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SHARIA LAW AND UAE CIVIL CODE

Article 1 of UAE Civil Code states that
The legislative provisions shall apply to all matters dealt with by those provisions in the letter and in the spirit. There shall be no scope for innovative reasoning in the case of provisions of definitive import.

If the judge finds no provision in this Law, he must pass judgment according to the Islamic sharia.
So the Civil code states that Sharia law will be applicable only when the Civil code has no provision.
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SHARIA LAW AND UAE CIVIL CODE

What is the Courts view on the applicability of Sharia law?

Case involving Margin trading ( Abu Dhabi supreme court Case No. 164/2006)
Lower courts declared Margin trading is forbidden under Sharia. Federal Supreme Court held that commercial transactions are permissible unless they are shown to be expressly repugnant to Sharia. Margin Trading Agreements are referred to in the UAE Banking Law and hence it is presumed to be in accordance with Sharia. Accordingly, the Court held that Margin Trading Agreements were valid and enforceable under UAE law.
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Sharia law and UAE civil code

In summary
Islamic Sharia is a source of UAE law, but it is not the only source. Where UAE law contains a specific provision, UAE courts will give effect to that provision. A UAE court will pass judgment according to Sharia in the absence of a provision of UAE law covering the issue to be determined.

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Sharia in Construction law

Riba
Unjust enrichment

Gharar

Uncertainty

Due Process

Good faith
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PROPOSED WALK-THROUGH
Categories of Law Common law Versus Civil law Middle eastern law What is UAE Civil Code? Does it address all Construction related issues? Is it only based on Sharia Law? Law of Contract; Important provisions

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MUQAWALA CONTRACTS
Means a Contract to make a thing or perform a task In simple words, Works contract or Construction Contract

Definition and Scope Obligations of the Contractor Obligations of the Employer Subcontractor Termination of Contract

Article 871 to 874 Article 875 to 883 Article 884 to 889 Article 890 and 891 Article 892 to 896

25 Articles covering all aspects of Construction contracts Compare Articles 646 to 676 of Egyptian Civil Code
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MUQAWALA CONTRACTS
Article 874 A Muqawala Contract must provide description of subject matter of the contract, the manner of performance, period over which the contract has to be performed and Consideration
description of subject matter Complete drawings and specification

manner of performance
period over which the contract.. consideration

Method statements
Construction period Contract Sum

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MUQAWALA CONTRACTS
Contractor obligations (briefly) (for) Quality of materials (to provide) tools For any loss/damage arising from his work* Permitted to retain the work until payment Article 875 Article 876 Article 878 Article 879

* Except when the loss arising from his work cant be prevented

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MUQAWALA CONTRACTS
Mandatory Contractor obligations
Article 880(1)

Joint liability with Architect against partial/total collapse of the structure for TEN years. Article 886
Obligation to notify if the quantities required to complete the work is substantially more than what is included in the Contract in a Unit priced measurable contract
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MUQAWALA CONTRACTS EMPLOYER OBLIGATIONS (BRIEFLY)

To take delivery upon completion Article 884 To pay agreed consideration Article 885 If any termination is sought, it should be done without delay and Contractors must be paid for the work done Article 886(2)

In a lump-sum contract, Contractor is entitled for additional payment only if the variation work is undertaken with the consent of Employer Article 887

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MUQAWALA CONTRACTS EMPLOYER OBLIGATIONS (CONTD)

Contractor is entitled fair remuneration for the work done by him even though there is no consideration specified in the Contract Article 888
Quantum merit in Common law Serck Controls Ltd v Drake & Scull Engineering Ltd [2000] (TCC)

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SUBCONTRACTING

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SUBCONTRACTING
Article 890 Subcontracting is permitted unless It is prevented by a condition in the contract Or The nature of work requires that it should be performed by the Contractor

The Main Contractor is still liable to the Employer (Article 890 (2))
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SUBCONTRACTING
The Subcontractor shall have no claim against the Employer for any outstanding monies from the first contractor unless, There is an assignment by the first contractor to the Employer
Article 891

Remember the Common law doctrine Privity of Contract

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd

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TERMINATION OF CONTRACTS
A Muqawala contract can be terminated in three ways Upon completion of work (actually it is completion!) Upon cancellation of the contract by mutual consent By order of the court Article 892

A party injured by the cancellation may make a claim for compensation from other party to the extent allowed by custom. Article 895

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Concepts that are distinctly different from Common law doctrines

Statutory obligation of good faith (Article 246(1)) Statutory imposition of joint and several liability (Art 291) No requirement for Fitness for purpose. Obligation only to use reasonable skill and care (Art 383) Un just enrichment (Article 106) Judge has the power to alter the Liquidated damages (390) Genuine pre-estimate is of less importance

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NOT THE END

The Journey has just began! Thank You! Questions?
A presentation by Venkat http://www.linkedin.com/in/venkat1964 Please take few minutes to fill a feedback form http://www.surveymonkey.com/s/TQP55KX
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COURTS VIEW ON CONTRACT ISSUES

Validity of Contract Privity of Contract Governing law Rules of interpretation Non-performance of Nominated subcontractors Comment on the back to back obligation Lump-sum subcontracts Breach of duty by subcontractor Conditional payment provisions Variation works Set off in payments Liquidated damages

Over 100s of Case law from Dubai Court of Cassation, Abu Dhabi Supreme Courts Venkat
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COURTS VIEW ON CONTRACT ISSUES

Concept of prevention principle Defects liability Time bars and condition precedent notice requirements Force majeure/Doctrine of unforeseen circumstances Duty of Good Faith Right to suspend work Burden of proof Liens to secure payments Termination rights Unjust enrichment Role of Engineer General concerns

Coming Soon!!
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