The A-Z of Construction Laws in The UAE

The A-Z of construction law in
the United Arab Emirates

THE A-Z OF CONSTRUCTION LAW IN THE UNITED ARAB EMIRATES
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Introduction
The A-Z of Construction Law in the UAE aims to provide a useful guide to
various key provisions of the UAE Civil Code which may be applicable in certain
circumstances to the interpretation and operation of UAE law governed
construction and engineering contracts.
Each letter of the alphabet is prepared as a self-contained explanation of

a different construction contract-related concept or topic. Though there is
necessarily some interaction between issues, the reader can approach the
letters in any order.
The guide draws from the statutory provisions of UAE law*, judgements of
the local courts where they are available, and years of experience practicing
construction and engineering law in the UAE, and is written for primarily for
lawyers with a common law background. However, whilst legal analysis is at its
core it adopts as practical a tone as possible in order to be equally accessible
to construction professionals involved in the day-to-day management and
administration of construction contracts.
The limitations of the guide will be apparent, not least that many topics remain
untouched: 26 barely scratches the surface. Answers and information often
give rise to further questions, especially when applied to a particular set of
facts, and the guide should never be considered a substitute for taking specific
legal advice. The law is ever evolving: this collection reflects a point in time.
Please also note that there are difficulties in opining with precision as to the
application of aspects of UAE law because the procedure for reporting court
decisions and the law itself is not as developed as in some other jurisdictions,
and there is no system of binding judicial precedent as is understood in
common law jurisdictions.
*Please note, all English extracts in this guide are taken from an unofficial English translation of the
UAE Civil Code, reference should always be made to the original Arabic text.
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Nevertheless we hope that readers will find this guide accessible and
informative, and that it will raise awareness and understanding of key UAE
law concepts which will affect the interpretation and operation of construction
contracts governed by UAE law.
AUTHOR
Hasan Rahman
Legal Director
T +971 438 6446
M +971 55 346 2358
[email protected]
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Contents
“A” is for Architect 06
“B” is for Boilerplate 08
“C” is for Concurrent Delay 10
“D” is for Delay Damages 12
“E” is for Engineer 14
“F” is for Force Majeure 16
“G” is for Good Faith 18
“H” is for Harm 20
“I” is for Impossible 22
“J” is for Joint Liability 24
“K” is for “Knock-For-Knock” 26
“L” is for Limitation 28
“M” is for Mandatory 30
“N” is for Nominated Subcontractor 32
“O” is for on-demand and on-default 34
“P” is for Payment 36
“Q” is for Quantum Meruit 38
“R” is for Retention of Title 40
“S” is for Set-Off 42
“T” is for Third Party Rights 44
“U” is for Unforeseen Ground Conditions 46
“V” is for Variation 48
“W” is for Writing 50
“X” is for Extension of Time 52
“Y” is for Yellow Book 54
“Z” is for Zoning 56
About DLA Piper 60
5
“A” is for Architect

All construction projects in the Under Article 880 of the Civil
UAE require the appointment of Code the risk of structural failure
a consultant who will assume the to the works (decennial liability)
role of ‘architect’. The architect (also is imposed on the architect and
referred to as the ‘architect of record’) contractor in the following terms:
will be named on the building permit
together with the building contractor. (1) “If the subject matter of the
A consultancy firm needs a special contract is the construction
licence in order to act as an architect of buildings or other fixed
of record, and all submissions for installations, the plans for which
permits relating to the construction are made by an architect, to
project are made in the name of be carried out by the Contractor
the architect of record (see ‘Z is for under his supervision, they
Zoning’), whether or not the architect shall both be jointly liable for
prepared the permit application. a period of ten years to make
compensation to the Employer for
An architect is liable under the any total or partial collapse of the
decennial liability provisions of the building they have constructed or
Civil Code for defects in the design of installation they have erected, and
the works (regardless of whether the for any defect which threatens
consultant identified as the architect the stability or safety of the
prepared the designs or not) and building, unless the contract
for defects in the construction of specifies a longer period. The
the works (to the extent that the above shall apply unless the
consultant identified as the architect contracting parties intend that such
has supervised the construction of installations should remain in place
the works). for a period of less than ten years.
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(2) The said obligation to make more than one consultant, especially

compensation shall remain on projects using the FIDIC forms
notwithstanding that the of contract (see ‘Y is for Yellow
defect or collapse arises out Book’), where employers will often
of a defect in the land itself or appoint a design consultant to
that the Employer consented to carry out the traditional ‘architect
the construction of the defective design role’ and the Engineer to
buildings or installations. perform the contract administration
and supervisory role (see ‘E is for
(3) The period of ten years shall Engineer’). It is commonly understood
commence as from the time of in such instances that an architect
delivery of the work.” that has not administered
the construction contract (or
Article 882 renders void any supervised the construction) is
agreement which attempts to liable only for design errors, and
exempt the Contractor or the not for defective workmanship.
architect from decennial liability, Joint liability with the Contractor
or to limit such liability (see ‘M is for design and workmanship is
for Mandatory’). The effect of these triggered where the architect is also
provisions is that the main contractor responsible for supervising the
and the consultant identified as construction phase.
architect are jointly and severally
liable for the cost of rectifying a Thus from an employer or developer
structural defect appearing in perspective, it is prudent to require
a building or installation within the consultant identified as the
ten years of the Employer’s taking architect to also administer
over. This is a strict liability under the construction contract and
UAE law which will operate even supervise the works in order to
without fault or breach of contract on ensure that the architect remains
the part of the main contractor and/ jointly and severally liable with the
or the consultant. main contractor for both design
and construction defects in the
It is common in projects in the UAE completed works under the decennial
for responsibility for design and liability provisions of the Civil Code.
supervision to be divided between
7
“B” is for Boilerplate

The following common boilerplate Dhabi”, for example, this should be
clauses are commonly included in explicitly stated.
construction contracts in the UAE.
ENTIRE AGREEMENT
GOVERNING LAW AND The purpose of an entire agreement
JURISDICTION clause is to make it clear that the
The UAE courts are generally agreement between the parties in
reluctant to uphold an agreement relation to the subject matter of the
which gives jurisdiction to contract is completely dealt with
a foreign court or arbitral in that contract and that any prior
tribunal where the UAE courts agreements or negotiations in
would otherwise enjoy jurisdiction relation to that subject matter
(for example, for projects located are superseded. Although under
in or which are otherwise closely common law an entire agreement
connected to the UAE). Where the clause will usually bind the parties in
UAE courts have jurisdiction, accordance with its terms, it may not
they will usually seek to apply always do so under UAE law (as it
UAE law instead of any other may not overcome the effect of pre-
governing law chosen by the contract conduct or representations
parties. Therefore, whilst the UAE which is or are fraudulent, nor
recognises the principle of freedom prevent the application of additional
to contract, in practice local courts terms such as mandatory provisions
are often reluctant to apply foreign of UAE law (see ‘M is for Mandatory’)
laws citing public order or policy. or overriding concepts of good faith
Another key point to note is that the and custom which are present in all
UAE is a federal legal system and contracts governed by UAE law
as such the law applicable in any (see ‘G is for Good Faith’)).
given Emirate will comprise both
federal (UAE) laws and Emirate INTERPRETATION
specific laws. As such, if the contract The purpose of an interpretation
will ultimately be governed by the clause is to provide clear rules of
“laws of the Emirate of Abu Dhabi interpretation which apply when
and the federal laws of the UAE as interpreting the contract. These rules
applicable within the Emirate of Abu provide certainty and avoid the need
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for repetition. It should be noted that will continue on foot. A severability

under UAE law, the interpretation clause should therefore be
and application of contracts is included in all UAE law governed
guided not merely by the words contracts to try to ensure that an
of the agreement itself but also invalid clause does not render an
by intentions, good faith and the entire contract invalid.
mutual interests of the parties
(see ‘G is for Good Faith’). NOTICES
There are two main rationales for
SEVERABILITY including a notices clause. The first
Article 211(1) of the Civil Code is to establish the valid means of
provides that in circumstances where giving notices and the second is to
one part of a contract is determined deem when those notices have
to be void, this renders the entirety been delivered, which is particularly
of the contract void. The effect of this important given the time bars that
provision can be avoided if each part are often included in construction
of the contract is separately identified contracts for the giving of certain
such that it can be severed from the notices (see for example the time
contract if determined to be void, limits for notifying claims under the
and the remainder of the contract FIDIC forms of contract).
NON-WAIVER/EXERCISE OF RIGHTS
This clause is included to ensure that
a party is not deemed or implied to
have given up its contractual rights
by failing to exercise them. Rights can
only be waived if done so explicitly.
This is important to ensure that
the courts do not imply a party’s
consent from a course of conduct.
9
“C” is for Concurrent Delay

“Delay” refers to a failure to achieve additional payment in respect of
the contractually agreed completion associated costs of delay (referred
date. Where a project is in delay the to as “prolongation costs”)1); and
Contractor will typically (if it has not
caused or assumed the risk of such 3. Delays caused by ‘neutral’
a delay) seek an extension to the events which are not the fault
contractual completion date (referred of either party. Whether or not
to as an ‘extension of time’ (see ‘X is the Contractor is entitled to an
for extension of Time’)), and if the extension of time (thus making
Contractor is able to demonstrate the ‘neutral’ event an employer
that completion has been or will risk) in such circumstances is a
be delayed due to a cause or event matter for negotiation between
entitling the Contractor to such relief the parties.
under the contract, an extension of
time may be awarded. A concurrent delay occurs when two
or more causes of delay overlap
Delay can be divided into so that the Contractor is delayed
three categories: by two events, one the fault and/
1. Delays caused by the Contractor

(for which the Contractor should
not be entitled to an extension
of time);
2. Delays caused by the Employer

(for which the Contractor should
be entitled to an extension of
time which may be accompanied
by a contractual entitlement to
1
The issue of whether or not the Contractor is entitled to an extension of time is (both contractually
under standard form contracts and under UAE law) a separate issue to whether or not the Contractor is
entitled to compensation for delay. The FIDIC Red and Yellow Books, for example, do not explicitly link an
entitlement to an extension of time to an entitlement to additional payment for time related costs.
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or risk of the Contractor under the principles of the Civil Code (which
contract, and the other the fault and/ generally favours proportionality
or risk of the Employer. Standard and offers the courts wide discretion
form contracts commonly used in the to apportion liability accordingly),
UAE such as the 1999 editions of the others have expressed the view that
FIDIC forms of contract are silent on the Contractor will not (without an
the issue of concurrent delay2 and express entitlement) be able recover
the issue is not expressly recognised its prolongation costs unless the
by the Civil Code. This raises the Employer-risk event in question
question of whether the Contractor is is an employer breach of contract
entitled to an extension of time and/ (thereby entitling the Contractor
or prolongation costs where there is to recover its time-related costs as
concurrency between an employer- contractual damages). It is good
risk event and a contractor-risk event, practice therefore to include a
both of which impact on the program concurrent delay clause in all
for the works and cause delay. construction contracts, since
remaining silent on the issue
In the scenario described above, may lead to uncertainty and
under UAE law the Contractor would disputes. UAE laws do not prevent
generally be considered to have the parties from specifying in the
an entitlement to an extension contract the Contractor’s entitlement
of time in relation to the delay to an extension of time and/or
which is the fault and/or risk of prolongation costs in the event of
the Employer, but the position a concurrent delay. If, for example,
regarding the Contractor’s the contract provides that the
entitlement to prolongation Contractor is not entitled to any relief
costs in these circumstances is where there is concurrent delay,
more complicated. While some a court or tribunal should give effect
commentators believe that the costs to this drafting, in accordance with
flowing from a concurrent delay are the principle that contracts should be
likely to be apportioned between interpreted in accordance with their
the parties by a court-appointed terms (Article 259).
expert in keeping with the underlying
2
The possibility of concurrent delay has been recognised by the 2017 editions of the FIDIC rainbow suite,
however question of whether the Contractor is entitled to an extension of time and/or prolongation
costs is expressly left as a matter for negotiation.
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“D” is for Delay Damages

In practice, all construction contracts for delay. However, although the
require works to be completed liquidated damages rate chosen by
by a specified date. Instead of the parties may be a strong indicator
the Employer bringing a claim for as to what the actual rate will be:
general damages (compensation)
for late completion of the works (a) either party may apply to
by the Contractor (which may be a court or arbitrator to
difficult to quantify), it is standard vary the agreed rate of
for the Contractor to be liable to pay liquidated damages so that the
‘liquidated damages’ (LDs) for delay. compensation awarded reflects
LDs are damages that are fixed actual loss suffered; and
and the quantum is agreed by the
parties in advance. A typical LD (b) in contrast with common law
clause requires the Contractor to pay jurisdictions such as England
or allow the Employer to deduct LDs and Wales, there is no express
at a rate per day or week of delay in prohibition in UAE law on
the completion of the works. penalties and no specific test
which the courts will apply in
Article 390 of the Civil Code provides each case to establish whether
that the parties can pre-agree an LDs are enforceable in a
amount for damages, including particular set or circumstances
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or not. Any attempt to distinguish viewed as a predetermined level of

between “penalty”, “liquidated damage for a particular breach. The
damages”, and “compensation” is provisions of Article 390 may provide
likely to fail under UAE law as the a significant advantage to employers
words are used interchangeably in circumstances where the actual
within the Civil Code, in other damages suffered by the Employer
UAE laws, and as a matter of exceed the pre-estimated damages
commercial custom. and the liability cap. However Article
390 works both ways: whilst
Accordingly, the UAE law position it allows an employer that has
as regards LDs is different from underestimated its loss to request
the English law position, in so far the court to revise that estimate in
as the Civil Code allows the liquidated light of actual losses, it also allows a
damages regime to be altered by contractor to claim that (for example)
a court having regard to the losses the agreed liquidated damages rate
actually suffered by the innocent exceeds the Employer’s actual losses,
party, whereas under English law a and that in those circumstances, the
court/arbitrator will generally seek Employer’s claim should be reduced
to give effect to the bargain struck to its actual losses.
between the parties and would be
very reluctant to vary a liquidated The prevailing view is that a
damages clause which constituted a contractor’s claim for a reduction
genuine pre-estimate of the loss likely in the rate of LDs under Article
to be suffered at the time of signing 390 is more likely to succeed
the contract (irrespective of what than a claim by an employer for
the actual losses proved to be). The additional compensation above
court’s power to vary the agreed the agreed LD rate, since the
level of LDs is discretionary, and UAE courts appear to be more
it is the party seeking to have the concerned with agreements
LDs reassessed must be able to resulting in excessive rather than
demonstrate that the rate of LDs insufficient compensation, and are
should be adjusted. thus more likely to reduce the agreed
level of LDs awarded to the Employer
Importantly, Article 390 could than to increase them beyond the
potentially apply to situations agreed rate.
where a contractor seeks to cap
its liability, as such a cap could be
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“E” is for Engineer

The FIDIC Red, Yellow and Gold • administering the contract
Books all provide for the appointment in relation to certifications
of the Engineer by the Employer and disputes.
to administer the construction
Whilst the Engineer is not a party
contract (whereas under the
to the construction contract, he is
Silver Book the responsibility for
deemed to act as the Employer’s
contract administration rests with
agent when performing his duties
the Employer or an employer’s
under the Contract and is appointed
Representative). Under the 1999
(and paid) by the Employer in order
editions of the FIDIC Red and Yellow
to discharge this role. This inevitably
Books, the role to be performed
leads to concerns amongst
by the Engineer for the Employer
contractors over the Engineer’s
comprises the following:
lack of independence, and this
remains a significant cause of
• procuring the design of the
construction disputes in the UAE. The
project, and preparing the
Red and Yellow Books recognise that
specifications and bills of
the Engineer acts on the Employer’s
quantities for the works;
behalf and attempts to address
• preparing tender documents this issue by requiring the Engineer
and advising the Employer on the to make “fair” determinations
relative merits of each contractor’s (under the 1999 forms) or to
bid during the tender process; act “neutrally” (under the 2017
forms). The 2017 editions also seek
• issuing instructions to the
to prohibit employers from requiring
Contractor for the execution of the
the Engineer to obtain the Employer’s
Works under the Contract;
consent before determining a
• supervising and inspecting the matter or a claim under the contract,
work undertaken by the Contractor however given established market
during the project (on the practice in the UAE employers
Employer’s behalf); are likely to continue specifying
matters for which employer consent
• determining the Contractor’s
is required.
claims for extensions of time and/
or additional payment; and
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The procurement structure who are individually appointed by the

contemplated by the 1999 and 2017 Employer, it is not uncommon for
editions envisages the Engineer employers to appoint additional
being in charge of all activities in persons to carry out duties and
the design office and on site, and responsibilities on site which
the Engineer’s role has been further include those forming part of
expanded and enhanced under the function of the Engineer, and
the 2017 editions of the FIDIC Red the statutory role of the architect
and Yellow Books, which are more under the UAE Civil Code (which
prescriptive than the 1999 editions is understood to cover both design
in detailing the role and function of and supervision of the works: see
the Engineer and how these are to ‘A is for Architect of Record’) also
be discharged. encompasses certain duties and
responsibilities of the Engineer.
In many projects where the FIDIC Red As these additional titles and roles are
and Yellow Books are used in the UAE, not contemplated within the FIDIC
the Engineer is assisted by specialist procurement procedure or FIDIC’s
assistants who are responsible contract conditions, employers should
for supervision, quality control, carefully consider how these functions
measurement and other required are to be incorporated within the
functions falling within the Engineer’s project framework.
scope. Where the design, contract
administration and supervisory roles Where the Engineer’s role is split
of the Engineer are divided between between separate consultants, then
several consultants or individuals it would be advisable from both
an employer’s and contractor’s
perspective for such persons
to work under the Engineer’s
team (as sub-consultants) and
be given detailed description
of the task or tasks allocated to
them from within the scope of the
Engineer’s responsibilities, rather
than to dismantle or undermine
the contractual responsibility
framework envisaged by the Red and
Yellow Books.
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“F” is for Force Majeure

Force majeure is a civil law (and in certain circumstances cost)
concept which traditionally refers relief in the event that the Contractor
to unforeseen events which suffers delay and/or incurs cost by
are beyond the control of the reason of such force majeure event.
parties and which adversely In cases of prolonged force majeure,
affect a party’s performance of its the Contractor will often have the
contractual obligations. In general right to terminate the contract.
there are three essential elements Another key provision affected by
to a force majeure event: (i) it would the doctrine of force majeure is the
occur with or without human Contractor’s responsibility for care
intervention; (ii) its occurrence of the works and the obligation to
cannot have reasonably been reinstate any damage to the works
foreseen by the parties at the time due to the occurrence of a force
of entering into the contract; and majeure event prior to completion.
(iii) it was completely beyond the In the UAE these provisions will be
parties’ control and they could not affected by the following articles of
have prevented its consequences. the Civil Code:
Two important caveats to consider
are that a party cannot invoke a force • Article 273 of the Civil Code
majeure clause if it is relying on its provides for the automatic
own acts or omissions, and the force cancellation of a contract
majeure event must be a legal or in circumstances where the
physical restraint on performance performance of the contract
and not merely an economic one is prevented or rendered
(however, it is becoming increasingly “impossible” due to an event
common for force majeure of force majeure (see ‘I is for
clauses to deal with questions of Impossible’). In circumstances
commercial impracticability). where performance of the
contractual obligations is partially
Construction contracts typically or temporarily affected by the
excuse the Contractor from event of force majeure, any part
performance of obligations which are of the contract which is, as a
prevented by force majeure events result, impossible to perform,
and entitle the Contractor to time will be cancelled. However, whilst
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the party whose performance is that any loss arose out of an

affected by the force majeure event ‘extraneous’ cause in which he
retains the ability to cancel the played no part, such as a natural
contract, it is commonly accepted disaster, unavoidable accident,
that the parties can agree to force majeure, act of a third party,
continue the contract despite an or act of the person suffering loss.
element or period of impossibility; In such circumstances, provided
that the affected party can prove
• Article 249 of the Civil Code is a
that its failure to perform the
mandatory provision (see ‘M is for
obligation is due to an external
Mandatory’) allows the court to
cause, he shall not be held liable
adjust the effect of a contract
or be bound to make it good in
if “exceptional circumstances of
the absence of a legal provision or
a public nature which would not
agreement to the contrary; and
have been foreseen occur” which
make performance of an obligation • Article 878 of the Civil Code
“oppressive” (but not impossible), provides that the Contractor will
in order to “reduce the oppressive not be held liable for any loss
obligation to a reasonable level”. or damage resulting from his
This provides the court with the act or work if it arises out of an
ability to provide relief, in the form event which “could not have been
of an extension of time to the prevented”, but does not explain
Contractor, for example, provided the meaning of an act “that could
that performance within a specified not have been prevented”. Given the
time was part of the Contractor’s uncertainty it would be prudent
obligation, and the Contractor is from the Employer’s perspective
not itself at fault; when drafting the contract to
include an acknowledgment that
• Article 287 of the Civil Code
“an act that could not have been
provides relief in the event of
prevented” as contemplated by
a failure to achieve a required
Article 878 means an event of force
outcome if a person proves
majeure as defined in the contract.
“G” is for Good Faith

It is common to see the term ‘good In contrast, a duty of good faith
faith’ used in dispute resolution clearly applies in the United
clauses and in contracts involving Arab Emirates by virtue of
future performance of the parties, Article 246 of the Civil Code which
including construction contracts. provides that all contracts “must
However, the traditional view under be performed in accordance with
English law is that an agreement to its contents and in a manner
negotiate in good faith is unlikely to consistent with the requirements
be enforceable on the grounds of of good faith.” The upshot of this
uncertainty, incompatibility with the is that a contractual right will be
principle that each party must be unenforceable to the extent
free to advance its own interests in that it is performed in bad faith.
negotiations, and because it would The role that good faith plays under
be too difficult to assess damages for UAE law must always, therefore,
breach of such an obligation because be considered in addition to the
the outcome of negotiations cannot written words of the contract. But
generally be foreseen. English law what do “the requirements of good
thus does not recognise a distinct faith” mean in practice for the parties
implied obligation to conclude and to a contract?
perform contracts in good faith, and
the bar for proving a breach of an The key point to note in this regard is
express contractual duty of good that the requirement to act in good
faith has traditionally been extremely faith relates to the way in which the
high, despite being thrown into a parties exercise their contractual
degree of doubt by recent case law.3 rights, but will not alter the
As such, the duty of good faith is an substance or interpretation of the
area of law still lacking in certainty in contractual rights and obligations
common law jurisdictions. of the parties provided such rights
3
Recent English case law has shown that where there is an express contractual duty to act in good faith,
the court will be prepared to look at whether the parties have acted reasonably in exercising their rights in
light of the nature of their relationship and their conduct over the course of the contract.
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and obligations are clear from the of good faith is likely to depend
wording of the contract or from the on commercial custom and the
intention of the parties4. Similarly, nature of the transaction: if the
the mere exercise of good faith is right in question is exercised in a
unlikely to succeed as a defence to manner which is not in keeping
a breach of contract claim. with prevailing custom in the
construction industry and is
The purpose of the overriding duty regarded as being unconscionable,
of good faith is generally understood then the party’s conduct may be
to be to regulate the parties’ perceived as bad faith and may
behaviour in performing their be held to be unenforceable, or
contractual obligations (rather than may influence a court or arbitrator’s
to guide the courts in interpreting determination of remedies
the contract): by seeking to regulate including the assessment of
the way in which a party’s contractual damages. When drafting contracts
rights are enforced, the duty of governed by UAE law it may therefore
good faith is intended to prevent be prudent to include a ‘deeming’
one party to a contract from clause by which the parties agree that
seeking an unfair advantage over, the exercise of certain specific and
or exploiting, the other. This is identified rights by either party under
consistent with the provisions of or in connection with the contract will
Article 106 of the Civil Code5. be deemed to have been exercised
lawfully for the purposes of Article
Whether contractual rights will 106 and in a manner consistent with
be found to have been exercised the requirements of good faith as
in accordance with the principle required by Article 246.
4
Articles 258, 259 and 265 of the Civil Code identify contractual drafting and the intention of the parties as
the main criteria to be taken into account when interpreting the wording of any contract and its clauses
(see ‘W is for Writing’).
5
Article 106 indicates that even in circumstances where a contractual right exists, the way in which that
right is subsequently exercised by a party to the contract may be considered unlawful if the intention
or purpose of the exercise of the right is to infringe the other party’s rights; if the exercise of the right
is contrary to Shari’ah, the law, public order or morals; if the interests served or benefit gained by the
exercise of the right is disproportionate to the harm/damage that will be suffered by the other party, and/
or if the exercise of the right would exceed acceptable limits of custom.
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“H” is for Harm

Article 282 of the Civil Code sets The key distinctions between contract
out the basic doctrine that a party and tort based liability under UAE law
will be held liable for any harm are as follows:
caused to another. This is the
closest equivalent to the common • tort based liability cannot be
law doctrine of liability in tort. excluded or limited. Article
Harm in this context is not limited 296 of the Civil Code provides
to physical harm, but can include that “any agreement purporting
financial or economic harm: the to provide exemption from liability
only test appears to be one based on for a harmful act shall be void.”
causation. For tort based liability (or Although Article 296 only refers
“harmful acts”, using the terminology to the exemption of liability, it
of the Civil Code) to be established, is commonly understood that
there must be: this rule also applies to the
limitation of tort based liability
1. a breach of a duty/obligation under Article 282 (where there
imposed by law; is no applicable contractual
term addressing the situation
2. loss sustained by a party; and
in question). It could therefore
3. causation between the breach and be argued that even clear and
the loss. concisely drafted clauses that seek
to limit liability for a harmful act
The UAE courts have clarified that could be invalid under UAE law,
tort based liability only applies in particularly in light of Article 390
cases where: there is no contract (as discussed above – see ‘D is for
in place between the claimant and Delay Damages’); and
the defendant, or there is a contract
• contractual claims arising out of
in place but the contract does not
commercial transactions will be
address the situation in question, or
time-barred within 10 years from
in cases of fraud and gross breach
the breach of contract, whereas
of duty (which trigger the application
tort based claims will be
of tort based liability notwithstanding
time‑barred within 3 years from
the existence of a contract).
the discovery of damage (see ‘L is
for Limitation’).
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In general therefore, a contractor for “consequential” loss. Article

will be liable for all harm arising 283(2) provides that if the harm is
from its work, irrespective of ‘direct’ loss and/or damage, it must
whether the harm was caused by a unconditionally be made good; and
wrongful act or not, unless the harm if the harm is consequential loss
arises out of an act that could not and/or damage, the responsible
be prevented. party will not be liable to make
good such loss unless that act had
In relation to the assessment of a wrongful, malicious or deliberate
compensation in circumstances element (not merely negligence)
where an act of the Contractor at the time the act was committed.
causes harm to the Employer, Article This is a difficult burden of proof
283(2) of the Civil Code (which is to discharge. If the harm is both
not expressed to be mandatory direct and consequential, the rules
and thus is likely to be capable of relating to direct harm would appear
contracting out of) distinguishes to apply and the harm must be
between damages payable for unconditionally made good.
“direct” loss and damages payable
21
“I” is for Impossible

Article 273 of the Civil Code provides the contract) whose impact is not
for the automatic cancellation of confined the party in question and
a contract in circumstances where would prevent performance by any
the performance of the contract is party in such circumstances.
prevented due to the occurrence
• The event must be unforeseeable
of an event of force majeure that
(rather than merely improbable).
makes the performance of the
obligations absolutely impossible
Article 273(2) provides that in
(as opposed to merely burdensome).
circumstances where performance
In practice, it is typically understood
is partially affected by such an
that the following conditions would
event, any part of the contract
need to be satisfied in order for such
which is as a result impossible
a cancellation to take effect:
to perform will be cancelled, and
that the party whose performance
• The obligor (typically the
of the contract is temporarily
Contractor in a construction
rendered impossible by an event of
context) must prove (on the
force majeure retains the ability to
balance of probability) the
cancel the contract. The fact that
impossibility of performing
Article 273 does not specify that an
the contractual obligation(s) in
agreement contrary to the provisions
question.
of the article will be considered void
• The impossibility of performance suggests that it is not a mandatory
must be due to an ‘unavoidable provision of the Civil Code, and as
external’ cause (and not a result such it is unlikely that the contract
of any act or omission of a party to will be automatically cancelled if the
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contract is stated to continue despite the parties) the parties must be

an element or period of impossibility returned to the position they
(see ‘M is for Mandatory’). were in before the contract was
executed, or compensation must
In addition to automatic cancellation be paid if this is not possible
for impossibility under Article 273, (for example, if work has been
the Civil Code also confers on each performed under the contract);
party to a construction contract
• Article 894 provides that where
a right to terminate the contract
the contract is terminated due
‘if any cause arises preventing the
to the Contractor’s performance
performance of the contract or
being prevented by an external
completion of the performance
cause, the Contractor will be
thereof’ (Article 893). Thus if the
entitled to be paid the lesser of
performance of the Contractor’s
(a) the value of work done and
obligations becomes impossible,
materials supplied up to the date
in the absence of contractual
of termination, and (b) the value
provisions to the contrary, either
derived by the Employer from such
party may cancel or terminate the
work and materials; and
contract without the need for a court
order or agreement between the • Article 895 allows the courts to
parties. It is unclear whether the award compensation in favour
impossibility of performance must be of innocent parties injured by
in relation to all obligations under the the cancellation of a contract,
contract or only some of them (and in particularly if this would be
the latter case whether there is any consistent with custom in the
materiality threshold), so this issue construction industry.
should be expressly addressed in the
construction contract. The UAE courts have indicated that
contractual force majeure provisions
The consequences of a termination will generally prevail over these
due to impossibility under statutory provisions, so if the parties
Article 893 are similar to those for to a construction contract wish to
automatic cancellation: avoid the statutory consequences
of force majeure type events,
• Article 274 provides that in then it is important that these
circumstances where a contract is are expressly provided for in
terminated (whether automatically the contract.
by operation of the law or by
23
“J” is for Joint Liability

Article 291 of the Civil Code provides contrasted with the general position
that “if a number of persons are under common law which imposes
responsible for a harmful act, each joint and several liability on each
of them shall be liable in proportion culpable party irrespective of each
to his share in it, and the judge party’s proportionate contribution
may make an order against them to the loss suffered, with the party
in equal shares or by way of joint or being sued then able to recover
several liability.” the share of the liability for which
it was not responsible from the
Pursuant to Article 291, the general other contributing party through a
position under UAE law (save in contribution claim.
respect of the decennial liability
provisions of the Civil Code As such, ‘net contribution’ clauses
(see ‘A is for Architect’)) is that commonly found in collateral
damages for defects in the works are warranties (and which seek to limit a
not necessarily payable on a joint and party’s liability to the share of the loss
several basis where both a designer for which that party is responsible)
and another consultant or contractor are enforceable in the UAE subject
are independently liable for the to the same conditions as apply to
same defect. any other limitation or exclusion of a
party’s liability, namely that they do
Whereas the wording of Article not seek to limit or exclude liability
291 allows the courts to impose for causing harm to another (see ‘H
proportionate or joint and is for Harm’), liability arising from a
several liability in circumstances mandatory provision (see ‘M is for
where more than one contractor or Mandatory’), and/or liability for fraud
consultant is held to be responsible or gross mistake.
for a defect in the works, in our
experience the UAE courts tend to The following provisions of the
favour a proportionate approach Civil Code will affect the approach
whereby the Employer’s losses adopted by the courts in relation to
are apportioned by the court allocating contractual liability and
between the parties responsible assessing compensatory damages
for the defect. This may be under Article 291:
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• joint liability (between the • the court may adjust the level
designer and contractor) applies of damages to reflect any
in the case of decennial liability contribution of the claimant
for structural defects (see ‘A to the loss under Article 290. If,
is for Architect’). The Employer for example, an employer claiming
can join both the architect and against a contractor caused or
the Contractor in actions for contributed to the loss by its own
compensation without being act or omission, he might not be
obliged to decide whether the awarded damages or the damages
defect is caused by the design or may be reduced proportionately.
construction of the works; If the claimant seeks the full
amount of its loss from one
contributing party only, that party
(as respondent to the claim)
may join other parties to the
proceedings for the purpose of
applying for an apportionment
at the Court’s discretion; and
• Article 287 provides that a party

may escape liability for harm
caused to the other party if
it can prove that any losses
resulted from “extraneous
causes” including acts of third
parties. Article 287 is not
mandatory and can be contracted
out of, and thus appears to allow
parties to agree that one party will
be liable for all loss, even where
such loss is not caused by an act or
omission of that party.
25
“K” is for “Knock-For-Knock”

A knock-for-knock clause (sometimes against B and B’s group. In this way,
known as a mutual indemnity or knock-for-knock clauses operate
cross-indemnity) is an agreement as a mutual ‘hold harmless’ regime
that loss or damage should stay where each party is responsible for
where it falls, regardless of who its own property, plant, equipment
was “to blame” for the incident in and personnel, and indemnifies the
question. Typically, one party (“A”) other party against loss and damage
agrees to indemnify the other (“B”) to such items.
for any damage to A’s property,
plant or equipment and for injury It is common for EPC contracts in
to A’s personnel, and in return B the UAE (particularly in the oil and
indemnifies A for damage to B’s gas sector) to include knock-for-
property, plant or equipment and knock clauses, principally for the
for injury to B’s personnel. Loss following reasons:
and damage suffered by A or its
employees and sub-contractors • each party is likely to carry
(together “A’s group”) is borne employer’s liability or workers’
by A, regardless of fault, with compensation insurance covering
no recourse to B, and vice versa. work-related death and personal
A’s insurance protects A’s group injury to its own employees, and
against losses, and A’s insurers will typically insure their own
waive their rights of subrogation property against damage and
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destruction: knock-for-knock Article 296 (exclusion of liability for

provisions can provide clarity from harmful acts – see ‘H is for Harm’) and
an insurance perspective as to Article 383 (exclusion of liability for
when claims can be made on such fraud or for willful or gross mistake –
policies; and see ‘L is for Limitation’) are particularly
relevant in this context: in order
• they offer the parties greater
not to fall foul of these mandatory
certainty regarding the division
provisions, the parties must ensure
of responsibility for risk in the
that any knock‑for‑knock clause is
works since liability is allocated
drafted to clearly identify and set
by the contract and there is
out the liabilities and losses which
no need to attribute fault and
are intended to be covered by the
establish causation in the event
indemnities, so as to prevent the
of death, personal injury or
knock-for-knock agreement being
property damage which saves
rendered void on the basis that it
time and expense associated with
seeks to exclude a party’s liability in
such claims.
tort for harm caused to another (see
‘H is for Harm’)6, or that it seeks to
Since knock-for-knock clauses are
indemnify a party in circumstances in
consistent with commercial custom in
which such party would otherwise be
EPC contracts in the UAE oil and gas
liable for losses caused by fraud and/
sector, they are generally understood
or gross negligence (which cannot be
to be enforceable under UAE law
excluded or limited under Article 383
provided that they are drafted in a
of the Civil Code), for example.
way which does not contravene any
mandatory provision of the Civil Code
(see ‘M is for Mandatory’) and seek to
exclude a party’s liability for matters
which cannot be excluded under
UAE law.
6
To the extent that such liabilities are clearly identified in the drafting of the clause, they are likely to be
construed as contractual exclusions of liability as opposed to an exclusion of liability in tort, and the risk of
the clause being held to be void pursuant to Article 296 will be significantly reduced.
27
“L” is for Limitation

In construction contracts, the term of a high degree of negligent,
‘limitation’ is commonly used in the careless and reckless conduct
following two contexts: without regard to the potential
consequences7; or
Limitation of the parties’ liability:
• acts causing harm where there
clauses excluding or limiting a
is no applicable contractual term
party’s liability for specified losses
which addresses the situation in
or breaches are generally effective
question (Article 296) (see ‘H is
and relatively commonplace in UAE
for Harm’).
construction contracts, however
under the Civil Code contracts
Any clause excluding liability for
cannot limit or exclude liability
loss arising from the circumstances
arising from:
identified above will be void, and
even clear and concisely drafted
• mandatory provisions of
clauses that seek to limit liability in
UAE law (such as decennial
such circumstances may be found
liability under Article 882)
to be invalid under UAE law. When
(see ‘M is for Mandatory’);
considering limitation of liability
• fraud or gross mistake provisions, the parties should also
(Article 383). In this context, have regard to the court’s powers
the UAE courts have understood to adjust the award of damages
fraud to involve a refusal by an due to a party under Article 390
obligor to perform a contractual if the actual loss suffered differs
obligation provided such a refusal from a contractually pre-agreed
constitutes bad faith (see ‘G is for amount of damages (see ‘D is for
Good Faith’), even if the obligor Delay Damages’), and to render
does not intend to cause damage unenforceable contractual
to the other party. Gross mistake provisions which are contrary to
has been described as consisting public order or morals under Article
7
This is broadly consistent with the limitation of the Contractor’s liability under the FIDIC rainbow suite
contract conditions, from which fraud, deliberate default and reckless misconduct are expressly excluded.
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205(2) – a limitation of liability for for major defects affecting the

death or personal injury is often cited stability or safety of a structure
as an example of such a provision. is 3 years from the collapse or
discovery of the defect. This means
Limitation period for making that contractors and architects can
claims: limitation periods impose still be “on the hook” in respect of
time limits within which a party decennial liability for almost 13 years
seeking to bring a legal action after completion of the building.
or assert a right must do so. If a
claim is brought out of time, the It is important to distinguish the
defendant will be able to plead the contractual limitation period (the
defence of limitation and the claim period during which the Contractor
will be ‘statute-barred’. The general will remain liable for the cost of
position under the Civil Code is repairing defective work) from the
that contractual claims arising defects liability period, which
out of commercial transactions refers to the period specified in a
will be time-barred within 10 construction contract (typically 12
years unless a specific provision months from taking-over) during
states otherwise. In a commercial which the Contractor will be required
construction contract claim for to repair any defects notified to it
defective works, the limitation period by the Employer. The latter is not
will run for 10 years from the date explicitly recognised by the Civil
when the contract was breached, Code so appropriate defects liability
which for non-apparent (or latent) provisions will need to be expressly
defects is understood to be the date included in construction contracts
of taking over.8 The limitation period in order for defects liability period
under UAE law for initiating a claim provisions to apply.
8
Article 487 prohibits agreements to extend or reduce a statutory time limit, which suggests that an
agreement that denies a party a right to commence legal proceedings in respect of a construction
contract before the expiry of 10 years from taking-over will be void.
29
“M” is for Mandatory

The UAE Civil Code generally realised is disproportionate to the
recognises freedom of contract harm suffered by others, or where
(Article 257). However, that freedom the interests sought to be realised
is restricted to the extent that an conflict with the Islamic Shari’ah.
agreement will be unenforceable if:
‘Mandatory provisions’ of the law
(a) it conflicts with a mandatory apply to all contracts and are
provision of the law in intended to serve a protective
accordance with Article 31; or function in order to preserve public
order. Any parts of an agreement
(b) it is contrary to public order
which conflict with or are inconsistent
or morals pursuant to
with such mandatory provisions will
Article 205(2); or
either be rendered automatically
(c) it is performed in bad faith void, or will provide the courts
pursuant to Article 246(1) with the power to adjust the
(see ‘G is for Good Faith’); or agreement to ensure consistency
with mandatory provisions.
(d) a right is exercised in an unlawful
manner pursuant to Article
Mandatory provisions can be clearly
106, including where the benefit
identified where the Civil Code
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provides explicitly that an agreement Relevant mandatory provisions in

of a specified type is void; or any the context of construction contracts
agreement having a proscribed include those relating to:
effect is prohibited. The extent to
which certain other provisions of • relief from unfair contract terms
the Civil Code are mandatory so that (Article 248) (see ‘U is for Unfair
they apply regardless of the contract Contractual Provisions’);
between the parties is less clear as
• relief from circumstances of an
in many circumstances there are no
exceptional nature (Article 249)
clear statements in the Civil Code
(see ‘F is for Force Majeure’);
regarding which provisions are
mandatory and which are not, and/ • exclusion of liability for
or which mandatory provisions will harmful acts (Article 296)
override the terms of an agreement (see ‘H is for Harm’);
to the contrary and which will only
• exclusion of liability for fraud
apply where the issue in question is
or for wilful or gross mistake
not referred to in the contract.
(Article 383) (see ‘L is for Limitation’);
On balance, if a statutory provision • agreement of compensation

does not expressly state that any (Article 390) (see ‘D is for Delay
attempt to contract out of it is Damages’); and
void, a reasonable starting position
• exclusion of liability for
would be to view this provision as
structural failure or defects
non-mandatory (and therefore
(decennial liability) (Article 882)
able to be contracted out of by
(see ‘A is for Architect’).
the parties).
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“N” is for Nominated

Subcontractor
The majority of subcontractors on or on behalf of the Employer9.
a construction project are selected There is no corresponding right for
and appointed by the Contractor: the Employer to intervene in the
the Employer traditionally plays payment process for the benefit of a
no part in the selection and domestic subcontractor.
appointment process other than
simply giving consent to the identity Nomination allows employers to
of the subcontractor to the extent retain control over the selection
that it is required under the terms of specialist subcontractors or
of the main contract. Nominated suppliers on construction projects
subcontractors are subcontractors without having to directly appoint
who are selected by the Employer and interface with the nominated
but who are appointed directly by subcontractors or to administer their
the Contractor under a subcontract subcontracts. This raises the question
to perform a specific scope of works. of whether, as a matter of UAE law,
the Employer assumes responsibility
The FIDIC Red and Yellow for the acts and omissions of a
Books distinguish a ‘nominated’ nominated subcontractor on the
subcontractor from a ‘domestic’ grounds of the Employer’s role in
subcontractor (a subcontractor their selection.
who has been selected by the
Contractor) by affording the Article 890(2) of the Civil Code
former the right to have amounts provides that the Contractor remains
due to it under a nominated liable to the Employer for the for the
subcontract certified by the acts or defaults of any subcontractor,
Engineer under the Main Contract, his agents or employees, as if they
and in certain circumstances were the acts or defaults of the
the right to direct payment by Contractor (this principle is known as
9
For example, see Sub-Clause 5.4 of the 1999 Red Book, and Sub-Clause 5.2.4 of the 2017 Red Book.
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vicarious liability). In the case of a relation to the Contractor’s liability

nominated subcontractor, the general for delay damages in circumstances
rule is that the Contractor’s vicarious where the delay has been caused
liability remains in place since Article by and attributed to a nominated
890(2) does not draw a distinction subcontractor. In the decision of the
between nominated and domestic Dubai Court of Cassation in case No.
subcontractors: if a nominated 266 of 2008, for example, the court
subcontractor is a ‘subcontractor’ held that “when the subcontractor
for the purpose of the contract (as is selected by the Employer or its
appears to be the case under the consultants, the Employer shall be
FIDIC forms, which stipulate that a liable for any delay in the performance
‘nominated subcontractor’ as a type of the subcontracted part and the
of ‘subcontractor’), the Contractor main contractor shall not be liable
is likely to be held liable for for any delay fines if they can prove
a nominated subcontractor’s that the delay is caused by such
default. The Contractor should subcontractor and the main contractor
therefore exercise its rights under played no part in the delay.”
the main construction contract10 to
refuse the Employer’s nomination Whilst there is no system of binding
of a subcontractor with whom the judicial precedent in the UAE and
Contractor is uncomfortable where it the court did not appear to provide
has reasonable grounds to do so. any specific criteria for disregarding
the general rule of vicarious liability
However, the Contractor’s vicarious set out in Article 890(2), this decision
liability in the event of a nomination may be cited to support the view
may not be as clear cut as the that under UAE law, in the absence
preceding paragraph (and the Civil of any agreement to the contrary,
Code) appears to suggest, since a contractor is not liable for delay
the UAE courts have recognised damages attributable to delay caused
a difference between nominated by a nominated subcontractor.
and domestic subcontractors in
10
See Sub-Clause 5.2 of the 1999 Red Book and Sub-Clause 5.2.2 of the 2017 Red Book.
33
“O” is for on-demand and

on-default
Employers on UAE construction obligation imposed on the bondsman
projects generally require is simply to pay a sum of money upon
contractors to provide performance the making of a demand and there is
bonds, bonds securing the no requirement under UAE law for
Employer’s advance payments, the demand to be accompanied by a
and also occasionally bonds in statement by the beneficiary of the
lieu of retentions from interim basis on which the demand is made
payments due to the Contractor. (for example, by asserting a breach of
In general, the vast majority of the underlying contract as is required
advance payment bonds and under the forms annexed to the
retention bonds are ‘on‑demand’ FIDIC Conditions of Contract).
instruments. Performance bonds,
in contrast, may be ‘on-demand’ Under an ‘on-default’ bond, the
or ‘on-default’ depending on the Employer is not entitled to make a
agreement reached between the call for payment by the bondsman
parties. The maximum aggregate unless and until the Employer
value of the performance bond is suffers loss as a result of the
typically calculated as a percentage Contractor’s default under the
of the contract price under the construction contract or by reason
construction contract. of the construction contract being
terminated due to the Contractor’s
An ‘on-demand’ bond is one default or insolvency. An ‘on-default’
according to which a demand bond is a secondary obligation
(or a call) made under it must be akin to that undertaken by a
honoured simply on presentation guarantor under a guarantee
of a conforming demand even (under which a claim or demand
if there is a dispute under the can only legitimately be made once
construction contract as to the there is proof of breach under the
Employer’s entitlement to payment. construction contract or proof of
Contractually, an on-demand bond another trigger event). Whilst an
is a primary, independent payment on-demand bond will provide the
obligation undertaken by the Employer with greater security than
bondsman akin to an indemnity – the an on-default bond, there is likely to
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be a higher price premium passed should ensure when making a call on

back to the Employer for procuring a bond in the UAE that the demand
an on-demand bond as the bank will is in accordance with the terms of
require a counter-indemnity from the the contract and/or the bond and
Contractor which will be factored into that the individual who signs and
the contract price. presents the demand has clear and
demonstrable the authority to do so.
Payment under an on-demand bond Provided that the relevant demand
can typically only be resisted by the formalities are complied with, it is
bondsman if it has clear evidence standard practice for local banks
that the demand is fraudulent or the to make bond payments within
construction contract clearly and 5 working days of the demand.
expressly prevents the Employer from
making a demand. Article 417(1) of A contractor who has “serious and
the Commercial Code provides that certain reasons” for believing that
“The bank shall not be entitled to refuse the Employer intends to liquidate
payment to the beneficiary for reasons an on-demand bond unjustifiably
relating to the bank’s relation with or fraudulently can apply to the
the client or the client’s relation with court seeking an attachment order
the beneficiary”, so the bank cannot to stop the liquidation of the
refuse liquidating the performance performance bond, as provided for
bond on the basis that there is a in Article 417(2) of the Commercial
dispute between the Contractor and Code. Examples of “serious and
the Employer for example. The bank certain” grounds include the fact
is obliged to make the payment that the project has been completed
to the Employer in accordance and handed over, large pending
with the terms of the performance payments are due to the Contractor
bond itself and has no interest in, or, there are letters or documents
and should not consider, the terms showing that the Employer has no
of the construction contract between right to liquidate. In the event that
the parties. the performance bond is liquidated,
the remedy available to the
However, some banks in the UAE Contractor is to file a case (or file for
have been known to resist calls on arbitration if the contract provides for
on-demand bonds on the basis arbitration) and seek the repayment
that certain formalities for issuing of the amount of the performance
and serving the demand have not bond, along with interest or
been complied with, so employers damages, as the case may be.
35
“P” is for Payment

In general the methods of payment using the whole of the works, free
usually adopted for construction from major defects. Conversely,
work in the UAE are substantially a contractor may claim that under
similar to payment procedures this article it is entitled to payment
contemplated by industry standard on delivery of part of the works,
form contracts and those used in especially if the contract provides
other jurisdictions, however the for staged completion of the works
following local law issues should in defined sections. In order to
be noted: provide certainty on this issue, a
sufficiently detailed payment
• Article 885 of the Civil Code mechanism and schedule
provides that “the Employer shall should be (and typically is) agreed
be obliged to pay the consideration and specified in all construction
upon delivery of the property contracts.
contracted for, unless there is an
• It is customary in the UAE for
agreement or a custom to the
employers to make advance
contrary”. Article 885 does not
payments secured by bonds or
impose a time limit for making
bank guarantees as an interest-
payments, so whilst the parties
free loan to the Contractor
can agree and enforce a payment
to cover some of the costs of
schedule and payment terms
the Contractor’s mobilization
which details their respective
and procurement of lead-in
obligations, in the absence of
items. The advance payment
such agreement or customary
is typically repaid through
practice to the contrary, the
percentage deductions in
time for payment is on delivery
subsequent payment certificates.
of the works. Whether or not
Subsequent payments are based
“delivery of the property” means
on the Engineer’s (or employer’s
the whole of the works is not
representative’s) certification
specified, so where there is no
of measured quantities of work
agreed payment schedule an
completed or by milestones
employer could argue that it is
achieved, and are generally paid in
not required to pay the Contractor
arrears. A retention is typically
until it has obtained the benefit of
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deducted from each payment a result of commercial custom

and withheld by the Employer than any legal restrictions on such
until taking-over, when half of the forms of security.
retention is usually returned to the
• Unlike in some jurisdictions such
Contractor, and the other half of
as England and Wales, there
the retention is usually retained by
is no statutory regulation of
the Employer until the expiry of the
conditional payment clauses in
defects notification period.
the UAE, so the payment terms
• Contractual payment security in subcontracts often include
mechanisms, whether by way of ‘pay when paid’ clauses allowing
a payment bond, parent company the Contractor to manage its cash
guarantee from the Employer, or flow by making the obligation to
escrow and project bank account pay its subcontractors conditional
arrangements, are unusual in on the Contractor’s receipt of
the UAE, though this is more as payment from the Employer.
37
“Q” is for Quantum Meruit

The expression quantum meruit refers contract or where a construction
to a reasonable sum of money contract is terminated before the
to be paid for services rendered works are completed. The provisions
or work done when the amount of the Civil Code which are most
due is not stipulated in a legally likely to be cited by the courts when
enforceable contract. The Civil awarding a monetary payment on a
Code provides that the courts may quantum meruit basis are as follows:
in certain circumstances award a
money payment to a construction • Article 888, which provides that
contractor or consultant where the if the price for the work is not
amount of such payment is not specified in the contract, “the
determined by a contract. This occurs Contractor shall be entitled to
most commonly where work is fair remuneration, together with
performed in the absence of a formal the value of the materials he has
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provided as required by the work.” an unforeseen event prevents

Thus, if the Employer was to the architect from completing
instruct a variation for works his work in accordance with the
which were not contemplated at plan prepared.
the outset of the agreement and
• Article 894, which provides that
for which there are no relevant
if the Contractor commences
rates for payment specified in
performance of the works and then
the contract, then the Contractor
becomes incapable of completing
will be entitled to fair or reasonable
the works due to an extraneous
rates plus the value of materials
cause in which he played no part,
for that variation. However,
“he shall be entitled to the value of
no guidance is given as to what
the work which he has completed
constitutes fair remuneration or
and the expenses he has incurred in
whether the Contractor is entitled
the performance thereof up to the
to profit.
amount of the benefit the Employer
• Article 889(1), which is a has derived therefrom”. It is not
corresponding provision to Article entirely clear whether a payment
888 in relation to consultants’ on termination provision that
remuneration “in accordance with attempts limit this entitlement will
custom” in circumstances where be void under UAE law. This will
a fee has not be pre-agreed by depend upon whether Article
the parties. Additionally Article 894 is construed as mandatory
889(2) allows a consultant to (see ‘M is for Mandatory’), or
claim ‘fair remuneration’ for work whether it is subject to any
performed in circumstances where agreement to the contrary.
39
“R” is for Retention of Title

Retention of title rights permit Thus, if the parties so agree,
contractors to claim that until they a supplier may retain ownership
have been paid they retain title of materials delivered to site until
to goods and supplies used in the payment is made in full. However,
works and thus have the right to parties to a construction contract in
remove such goods and materials the UAE will often agree to override
from the site pending payment. the retention of title provisions
of the Civil Code, and the statutory
In general, UAE law provides for principle that the Contractor need
retention of title: the passing of not hand over the works until they
title in goods and materials will have been paid for by the Employer
follow payment to the supplier for is usually reversed by the terms of
the goods and materials, and a seller the construction contract which
may resell goods to a third party if will typically provide that title in
they have not been paid for by the goods and materials supplied for
purchaser. Article 513 of the Civil the works passes to the Employer
Code expressly recognises and prior to their incorporation into
preserves the right of a materials the works. For example, the FIDIC
supplier to retain ownership in its Red and Yellow Books provide that
supplies by agreement in this way: plant and materials become the
property of the Employer upon the
513(1): “If the price is deferred or earlier of the date on which such
payable in instalments, the seller may plant and materials are delivered
stipulate that the transfer of ownership to the site or the Contractor is
to the purchaser be suspended until he entitled to be paid for the plant and
pays the whole price, notwithstanding materials by virtue of their inclusion
that the goods have been delivered.” in a payment certificate. Therefore,
notwithstanding the statutory
513(2): “If the price is paid in full, the position, in many UAE construction
transfer of ownership to the purchaser contracts the passing of title in
shall operate retrospectively to the time goods and materials provided for
of the sale.” the works does not always follow the
payment of money for such goods
and materials.
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Article 879(1) of the Civil Code has improved pending payment by

provides a contractor with the the Employer, and if the beneficial
additional potential remedy of a effect on the property is lost
statutory lien over property in before such payment is made, the
circumstances where its work has Contractor will not be liable for
produced a beneficial effect on the the loss nor will it be entitled to
property, so that the Contractor is payment for the improvement made
entitled to retain the property he to the property.
41
“S” is for Set-Off

Under UAE law, if the Employer under such as in the case of a separate
a construction contract owes money cross-claim which the Employer
to the Contractor, the Employer can has against the Contractor, or in
set-off against the sums due to the the event that the Employer claims
Contractor the sums the Contractor that there are defects in the
owes to the Employer pursuant to: Contractor’s work such that the
work itself is worth less than the
• Article 370 of the Civil Code, amount the Contractor claimed
which provides for a mandatory for it (i.e. there is a determination
statutory right of set-off (without that the proper value of the
the need for agreement or a court work is worth less than claimed,
order) in relation to mutual rather than a deduction from the
obligations (i.e. obligations of the proper value of the work).
same type and description, such as
mutual debts of each party vis-à-vis A number of conditions need to be
the other) which are “equally due satisfied in order for a mandatory
and of equal strength or weakness” set-off to apply and this may in
in circumstances where that set-off practice make the occurrence of
is not prejudicial to the rights of a a mandatory set-off relatively
third party; and unlikely, though how literally the
courts will interpret the requirement
• Article 372 of the Civil Code,
for the obligations to be “equally due
which allows the courts to apply
and of equal strength or weakness”
a judicial set-off between the
is not entirely certain. Where the
Employer and the Contractor,
requisite conditions are not satisfied
either between separate legal
however, the parties may agree to
actions (cross-claims) or between
exercise a voluntary set-off, or the
competing claims in a single action
courts may order a judicial set-off
(such as in relation to the amount
under Article 372.
properly owed by the Employer
to the Contractor). Judicial set-
Rights of set-off are commonly
off may thus be ordered where
included in construction contracts,
some of the requirements of a
and project participants in the
mandatory set-off are absent,
construction industry often seek
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to exercise their right of set-off to • the Employer must give notice

reduce the extent of their payment and particulars to the Contractor
obligations to one another. Sub- relating to any claim for payment
Clause 2.5 (Employer’s Claims) of the as soon as practicable after the
1999 FIDIC Red and Yellow Books and Employer has become aware of the
Sub-Clause 20.2 (Claims for Payment event or circumstance which gives
and/or EOT) of the 2017 editions rise to the claim; and
detail how the Employer should
• the Employer must also provide
make a claim for payment against
substantiation including the basis
the Contractor under the Contract
of the claim and details of the
and provides that such payment can
relief sought.
be set-off against a certified sum (i.e.
an amount included by the Engineer
Once notice has been given, the
in a Payment Certificate) provided
Engineer makes a determination,
that the following conditions are
and the Employer cannot make any
complied with:
deduction by way of set-off or any
other claim unless it is in accordance
with the Engineer’s determination.
Sub-Clause 14.3 of both the 1999

and 2017 FIDIC Red and Yellow
Books appears to contemplate
a broader right of set-off than
that envisaged by the sub-clauses
relating to Employer’s claims
(as detailed above) by referring to the
Contractor’s obligation to include in
any application for interim payment
any deductions that have “fallen due
under the Contract or otherwise”.
This language suggests an ability
to set off contractual damages
arising out of a cross-claim
the Employer may have against
the Contractor.
43
“T” is for Third Party Rights

Due to the complex nature of most interested third parties and
large developments, there are those responsible for the design
typically a number of parties and construction of the project
with an interest in the successful so that third party beneficiaries
delivery of a construction project. could recover losses arising out
In addition to the developer or of defective work or services
employer, parties such as funders, directly from those responsible
purchasers, tenants and operators for the defects. Such contractual
typically require that their interests warranties run in parallel to, or are
in the development are contractually stated to be ‘collateral’ to the main
protected through contractual contract or appointment and are
rights of recourse against the fairly commonplace in the UAE
construction team, usually in the construction industry, primarily
form of collateral warranties or because the industry adopted
third party rights. English law practices at a time
when English law contracts did
Historically under English common not confer rights on any party
law a contract could not confer rights other than the signatories to
or impose obligations on anyone the contract.
other than the parties to the contract.
In order to avoid developers having However, as a matter of UAE law
to provide long term warranties collateral warranties are generally
in respect of latent defects in not required in order to confer
a constructed development, enforceable rights on third parties
it became the practice of developers in the absence of any contractual
to impose on their contractors relationship between third party
and consultants an obligation to end users of construction projects
provide interested third parties and the project participants, as the
with contractual warranties in doctrine of privity of contract
respect of the work that they does not apply in the UAE in the
carried out, thus creating a privity way it traditionally has done in
of contract between the various common law jurisdictions. Article
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252 of the Civil Code provides that expressly provides for it, or if the
whilst a contract ‘may not impose an term in question confers a benefit
obligation on a third party’, ‘it may on the third party: privity of contract
create a right in him’, and Article 254 does not restrict the beneficiary’s
allows third parties with an right to take action to have the right
interest in a construction project enforced. Such third party rights
to claim directly against the party make available to the third party
which undertook the works or beneficiary any remedies that
services if the contract allows it, would have been available to it in
even though such persons are not an action for breach of contract as
party to the construction contract. if it had been party to the contract,
These provisions of the UAE Civil and therefore have the same
Code effectively provide for third effect and application as the rights
party rights in the same way as contained in a collateral warranty.
English law now does following the
implementation of the Contracts However, lenders, purchasers and
(Rights of Third Parties) Act 1999, tenants in the UAE are generally
which is now widely used in the reluctant to rely on the rights
England and Wales construction afforded under Article 254, in
industry to grant rights of recourse part due to concerns over the
to third parties against contractors assignability of such third party
and construction professionals rights11 and due to doubts over the
without the requirement to ability to confer step-in rights
procure the execution of individual under Article 25412, and as such
collateral warranties. at the time of writing construction
contracts in the UAE typically require
Under UAE law, a third party with an contractors and consultants to
interest in a construction project can provide such interested third parties
acquire enforceable rights directly with executed collateral warranties in
against the relevant members of the respect of the works and/or services
construction team pursuant to the they have carried out.
construction contract if the contract
11
Article 254 is silent on the issue of whether such rights are assignable by the third party beneficiary or not.
12
Funders have been particularly wary of accepting third party rights instead of collateral warranties on
the basis that step-in rights carry duties on the beneficiary to discharge the obligations of the Employer
(namely payment) and only rights can be conferred under Article 254.
45
“U” is for Unforeseen

Ground Conditions
Unforeseen ground or site conditions must be had to provisions of the
encountered by the Contractor may Civil Code, including decennial
affect the method of constructing the liability provisions and certain
project, and in extreme cases may mandatory provisions. By virtue of
require that the design of the entire the former, the Civil Code provides
project has to be changed. Either of that even if the collapse or defect
these consequences is likely to result affecting the stability or safety
in the Contractor incurring additional of a structure is due to a defect
cost and suffering delay. in the land itself (rather than a
defect in the works), the Contractor
The general position in common law and architect (designer) will be
jurisdictions is that in the absence liable for any destruction or defect
of contractual provisions to the in buildings they have constructed
contrary, the Contractor bears the or fixed installations they have
cost and time risks arising out of erected (Article 880). The UAE Civil
unforeseen ground conditions and Code does not, however, deal with
remains bound by the agreed price the issue of who bears the cost and
and completion date stipulated time consequences of unforeseen
in the contract. Furthermore, the ground conditions during the
Contractor’s obligation to complete construction period. These are
the project in accordance with the typically governed by express risk
specification will remain unaffected, allocation provisions in the contract
notwithstanding that the unforeseen and are thus a matter for negotiation.
ground conditions may mean that
the design of the project may need The FIDIC Red and Yellow Books
to change. entitle the Contractor to claim an
extension of time and additional
In the UAE, ground conditions cost to the extent that these were
provisions (particularly in relation due to “physical conditions which
to the allocation of cost and time are Unforeseeable” (Sub-Clause
risk) are generally a matter for 4.12). “Unforeseeable” is defined
negotiation, however regard as “not reasonably foreseeable by
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an experienced contractor by the The FIDIC Silver Book also provides

date for submission of the Tender” that the cost and time risks arising
(1999 edition), or “not reasonably out of unforeseen ground conditions
foreseeable by an experienced in completing the works are to be
contractor by the Base Date” borne entirely by the Contractor who
(i.e. 28 days prior to the latest date remains bound by the agreed price
for submission of the Tender) (2017 and completion date. The Silver
edition). These commonly-used Book goes a step further than the
standard forms of contract in the typical employer amendments to
UAE thus treat unforeseen ground the Red and Yellow Books described
conditions as an employer risk above by also seeking to absolve
from a time and cost perspective. the Employer of responsibility
for any information or ‘Site Data’
However, many employers in the UAE supplied to the Contractor by the
(including many government entity Employer or on the Employer’s
standard forms of public works behalf. The position adopted by the
contract) seek to alter the position Silver Book is typical of the position
set out in the FIDIC Red and Yellow commonly adopted in bespoke EPC
Books to significantly alter the risk contracts in international projects,
allocation between the parties such however provisions of the Civil Code
that the Contractor is not entitled such as Article 878 (which provides
to an increase in the contract that the Contractor will not be
price or to an extension of time held liable for any loss or damage
for additional costs and delays resulting from his act or work if it
incurred by the Contractor as a result arises out of an event which could not
of physical conditions (including have been prevented) may have an
sub-surface conditions) and other impact on enforceability of wholesale
conditions of or affecting the site, risk transfer such as under the Silver
whether they ought reasonably to Book. In particular, the possibility of a
have been discovered or foreseen successful force majeure claim by the
or not. Such amendments typically Contractor pursuant to Article 249
make the Contractor responsible must be taken into account (see ‘F is
for obtaining all information as for Force Majeure’).
to risks, contingencies and other
circumstances which may influence
or affect the execution of the Works.
47
“V” is for Variation

The term ‘variation’ generally refers • changes to the sequence and
to changes in the scope of works, timing of the execution of
though contractual definitions can the works.
be much wider. The FIDIC Red and
Yellow Books adopt the following The Contractor may not make any
definition: “any change to the Works, alteration and/or modification to
which is instructed or approved the works without being instructed
as a variation under Clause 13”. to implement a variation, and as
Sub-Clause 13.1 provides that a a general rule, if a contractor has
Variation may include: been instructed to implement a
variation which does not amount
• changes to the quantities, quality
to an omission, he will be entitled
and other characteristics of any
to recover payment for it. Although
item of work;
all standard construction contracts,
• changes to the levels, positions including the FIDIC forms, make
and/or dimensions of any part of provision for the instruction of
the works; and payment for variations, the
following provisions of the Civil
• omission of any work unless it is to
Code may apply in the absence
be carried out by others;
of express agreement or if for
• any additional work, plant, some reason there is no operative
materials or services necessary for price adjustment mechanism in
the works (including testing and the contract:
exploratory work); and/or
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• Article 886 provides the Contractor work proves more difficult than
with an express entitlement to expected due, for example, to
additional payment where the unforeseen ground conditions,
contract price is to be calculated on or more expensive due to
a schedule of rates basis (namely, price escalation, is borne by
agreed unit rates and a bill of the contractor.
quantities) and, the actual quantities
• Article 887(2) allows for variations
“substantially exceed” the estimated
to the works requested by
quantities. However, the Contractor
the Employer (by providing
will be barred from claiming this
the Employer with a right to
entitlement if it fails to immediately
unilaterally instruct a variation to
notify the Employer of a substantial
the works) and those requested
increase in quantities. In addition,
by the Contractor, as long as
where the increase in quantities is
the Employer has agreed to the
substantial, the Employer is entitled
Contractor’s request for a variation.
to withdraw from the contract and
Any additional or varied work that
suspend works. In the absence of
is agreed is subject to the same
any relevant contractual definitions,
conditions as the original scope
no guidance is provided on the
of works
meaning of “substantial” and it is
unclear what percentage increase
In contrast with some common law
is necessary before the Contractor
jurisdictions, there is no prohibition
would be entitled to an increase
in the Civil Code on the Employer
in the contract price or at what
omitting work through a ‘negative
point the Employer can elect to
variation’, even where the Employer
withdraw from the contract and
performs the omitted works itself
suspend works
or instructs a third party to do so.
• Article 887(1) prevents the However, whilst contractors may
Contractor from claiming any accept that employers retain the
additional payment for works ability to omit certain works for
which are a necessary part of reasons of commercial viability,
the execution of the plan (i.e. the they generally resist a right for the
scope or specification) on which Employer or a third party to perform
the contract is based. In general the omitted works, and the exercise
therefore, the opportunities of such rights may in some cases be
for a contractor to secure an considered contrary to the pervasive
adjustment to a lump sum price principle of good faith (See ‘G is for
are limited, and the risk that the Good Faith’).
49
“W” is for Writing

There is no express requirement Thus if the parties do not wish for a
under UAE law for a construction contract to be formed until such
contract to be evidenced in time as they have negotiated
writing: offer and acceptance and confirmed agreement on
are capable of creating a binding all points, they should expressly
contract notwithstanding that agree that position in writing.
they are contained in separate If this is not done and a dispute
documents, or made orally, provided arises, the parties risk having their
that the evidence demonstrates rights and obligations determined by
mutual consent. Article 129 sets a court.
out the requirements for the
formation of a valid contract in the In relation to construction contracts
UAE. The necessary elements for the in particular, Article 874 provides
making of a contract are: that a muqawala contract (i.e. a
contract of work, including any
• that the two parties to the contract construction contract) also requires:
should agree upon the essential
elements (Article 141 indicates (1) a description of the subject
that as long as the essential matter of the contract,
elements of the agreement have
(2) particulars of the type and
been determined by the parties,
amount of work to be completed,
a contract will be deemed to have
been made, even in circumstances (3) the manner and time for
where some details have not been performance to be specified and
agreed to);
(4) the price to be specified.
• the subject matter of the
contract must be something In practice, the absence of a formal
which is possible and defined (or written contract is likely to result
capable of being defined) and in uncertainty, especially if the
permissible; and negotiations have produced a written
record of some but not all of the
• there must be a lawful purpose
contemplated terms, or if offers and
for the obligations arising out of
counter-offers are exchanged over a
the contract.
prolonged period. In such instances,
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it may be difficult to identify the • Article 259 makes it clear that a

precise point at which a contract contract will be interpreted first
is brought into existence, and the and foremost in accordance with
courts will determine whether the its provisions. If the meaning
parties’ conduct is sufficient to of the words of the contract
constitute offer and acceptance and are clear, a court is unlikely to
thereby a concluded contract. attempt to construct/interpret any
other meaning.
The provisions of Articles 258,
• Article 265 indicates that a UAE
259 and 265 relating to the
court will not explore potential
interpretation and construction
interpretations for the meaning
of contracts clearly indicate a
of a clause in a contract in
presumption that contracts are
circumstances where that
to be expressed in writing:
clause has a clear meaning on
its face. If the words of a clause
Article 258 indicates that when
are not plain, the court may
construing or interpreting a contract
make enquiries as to the mutual
the intention of the parties is the
intentions of the parties.
main criterion.
An important exception to the
principle that contracts need not
be in writing is where the parties
intend to resolve disputes by
arbitration. In such an instance, a
formal written agreement will be
required since in the absence of a
signed contract, it will be extremely
difficult to argue that there is a valid
and binding arbitration agreement,
as the UAE courts treat arbitration
as an exceptional remedy requiring
a number of formalities, including a
written arbitration agreement signed
by authorized representatives of
each party.
51
“X” is for Extension of Time

Extension of time provisions in mechanism should be expressly
construction contracts are provisions included in the construction
for extending the time for completion contract.
where specified delays beyond the
Contractor’s control cause delay to Generally, contractual extension
completion. Contractual extension of time provisions require the
of time provisions provide certainty Contractor to notify the Employer
as regards the grounds under which or contract administrator when a
the Contractor is entitled to claim an delay occurs and make a written
extension of time, and regulate the claim for an extension to the time
application of liquidated damages for completion in accordance with
for failure by the Contractor to the requirements of the contract.
complete the works within the Contractors will typically risk losing
time for completion (see ‘D is for their entitlement to an extension
Delay Damages’). Extensions of of time (or additional payment) if
time may be awarded prospectively they fail to comply with strict (and
(as the contract proceeds) and/or occasionally onerous) provisions
retrospectively (following completion relating to notification and particulars
of the works). of claims. Where a contractor has
failed to comply with a strict
There is no statutory entitlement condition precedent for obtaining
to an extension of the time an extension of time, it may be
for completion under the UAE offered some relief under UAE law
Civil Code, and the provisions if it can establish that the Employer
of the Civil Code relating to has acted in breach of the statutory
construction contracts do not requirement to exercise its
provide for any specific extension contractual rights in good faith
of time mechanism. In order for (see ‘G is for Good Faith’).
the Contractor to have a legally
enforceable claim to an extension Subject to compliance with the
to the time for completion, an contractual claims procedure,
appropriate extension of time whether or not a contractor is
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entitled to an extension to the reasonable time, rather than within

time for completion will depend on the contractual time for completion
the causes of delay, which may be which would effectively fall away,
categorised as follows: thus preventing the Employer from
deducting liquidated damages
(1) delays caused by acts or for delay. This is known as the
omissions of the Contractor ‘prevention principle’ and although
(for which the Contractor is there is no direct equivalent under
typically excluded from claiming UAE law, certain provisions of the
an extension of time); Civil Code which prevent a party
benefiting from its own breach
(2) delays caused by acts or of contract may be invoked and a
omissions of the Employer court or tribunal may consider the
(for which the Contractor is overall consequences of the delay
typically awarded an extension of and decide to award the Contractor
time); and an extension of time (and possibly
prolongation costs) for employer-
(3) delays caused by ‘neutral’ events
caused delays notwithstanding the
outside of the control of both
terms of the contract.
parties (such as adverse weather,
industry-wide disputes and force
It should be noted that whether or
majeure events). Whether an
not the Contractor is entitled to an
extension of time will be granted
extension of time is a separate
for delays caused by such events
issue to whether or not he is
is a matter for negotiation
entitled to compensation for
between the parties.
delay (which is usually dealt with
under ‘loss and expense’ provisions
In common law jurisdictions, in the
of a construction contract), and it
absence of a contractual extension
is common for employers in the
of time mechanism for employer-
UAE to amend standard FIDIC
caused delays, then in the event of
claims provisions by removing the
delays occurring under (2) above,
Contractor’s entitlement to costs
time will be set ‘at large’ and the
associated with extensions of time in
Contractor would be required
certain circumstances.
to complete the works within a
53
“Y” is for Yellow Book

‘Yellow Book’ refers to the FIDIC works may also include elements
Conditions of Contract for Plant of Contractor’s design, though
and Design Build for Electrical and the testing and commissioning
Mechanical Plant and for Building provisions are less detailed than
and Engineering Works, Designed under the Yellow Book. The work
by the Contractor, a widely-used done is quantified, with payment
industry standard form contract in made on the basis of a bill of
the UAE construction industry which quantities (although it is also
is intended for design and build possible for payment to be made
projects (i.e. where responsibility on a lump sum basis). The Red
for design rests with the Contractor, Book is the most commonly used
who is required to design the project standard form of construction
in accordance with the requirements and engineering contract where
specified by the Employer) with most (or all) of the works are to be
payment being made on a lump sum designed by (or on behalf of) the
basis, usually against a schedule of Employer; and
payments. The other most commonly
• Conditions of Contract for
used FIDIC contracts in the UAE are:
Engineering Procurement and
Construction/Turkey Projects (the
• Conditions of Contract for
“Silver Book”). The Silver Book
Construction for Building and
is intended for Engineering
Engineering Works Designed by the
Procurement and Construction
Employer: The Construction Contract
(“EPC”) arrangements. Under an
(the “Red Book”). The Red Book
EPC contract, the Contractor is
follows a substantially similar
responsible for the entirety of
structure as the Yellow Book
the works and design required
and is intended for projects
to provide the Employer with
where the main responsibility for
a facility that is ready for
design rests with the Employer
operation at the “turn of a key”
(or its Engineer). Thus, the works
upon taking-over. Accordingly,
are usually completed by the
the Contractor’s risk for time and
Contractor in accordance with the
cost is considerably greater than
Employer’s design. However, the
the risk it would assume under
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the Yellow Book (see, for example, • Conditions of Contract for

our comments under ‘U is for Construction for Building and
Unforeseen Ground Conditions’). Engineering Works Designed by the
Employer, Multilateral Development
The first editions of these contracts
Bank Harmonized Edition
(which remain the most prevalent
(the “Pink Book”);
standard forms in the UAE) were
published in 1999 along with • Conditions of Contract for Design,
FIDIC’s Short Form of Contract Build and Operate Projects
(the “Green Book”)13 and are (the “Gold Book”);
commonly referred to as the
• The Dredger’s Contract
“Rainbow Suite”. FIDIC published
(the “Blue Book”); and
updated editions of its 1999 Rainbow
Suite in December 2017 but these • The Client/Consultant Model Services
have not yet been widely adopted in Agreement (the “White Book”)14.
the UAE market. An overview of the
key changes introduced to the 1999 However, these more recent forms
Rainbow Suite by the 2017 editions of contract are not (at the time
is available on DLA Piper’s website, of writing) regularly used in the
at https://www.dlapiper.com/en/ UAE market.
dubai/insights/publications/2018/01/
fidic-2017-first-impressions-a-gcc-
perspective/. Since the publication of
the initial 1999 Rainbow Suite, FIDIC
has also introduced further forms of
contract including:
13
The Green Book is intended for engineering and building work of relatively small capital value and is
thus suitable for relatively simple or repetitive work, or work that will not require input from specialist
subcontractors.
14
FIDIC have released the 2017 edition of the White Book but it remains to be seen whether this form is
more widely adopted than its 2006 predecessor.
55
“Z” is for Zoning

A zoning permit is generally required
not clearly stated in legislation, much
before the construction or
of the process is based on practice
alteration of any structure, the use
and custom, which in ‘onshore Dubai’
of a new property or change in use of
is broadly as follows:
any property. In outline, the following
legislative and governmental controls
• An owner or developer obtains
apply to strategic planning/zoning in
an ‘affection plan’ from Dubai
Dubai and Abu Dhabi:
Municipality, which is a high
level general site plan that is
Dubai
issued with basic information
Currently in Dubai there is no
containing the plot number, the
published legislation or guidelines
land use classification and any other
in relation to the process and
particular zoning requirements that
procedures of obtaining planning and
are required by Dubai Municipality
zoning permission. As the process is
such as the height allowance,
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parking requirements and any which is based on a comparison of

setback requirements. In addition, the drawings originally submitted
the affection plan will state what to obtain the building permit
permissions from the particular (and any subsequent, approved
government authorities or third revisions) and the actual structure
parties will need to be obtained which has been built. Again, as
prior to approval, including Dubai part of this process, the approval
Electricity and Water Authority, of other statutory authorities
Civil Defence, Etisalat, the master is required to demonstrate
developer (if applicable) and the compliance of what has been
Environmental Department of built with the original approvals.
Dubai Municipality. There are Without a municipality
no general rules regarding the completion certificate, use and
requisite authorisations as each occupation of the building by
affection plan is issued on a plot end users is not permitted.
by plot basis. Depending on the
location of the plot, there may Abu Dhabi
be additional approvals that will In Abu Dhabi, the Department of
need to be obtained. The affection Urban Planning and Municipalities
plan may also state whether (DUPM) has planning powers.
environmental impact studies are The DUPM was mainly set up to
required and whether there are drive and support Abu Dhabi’s urban
any aesthetic requirements that development strategy and urban
must be complied with. growth and also deals with the larger
strategically important applications.
• As part of the review process
Part of the DUPM’s mandate is
for the issue of building or
to ensure public and private land
work permits, other statutory
and infrastructure development
authorities (telephone, civil
proposals are in line with the
defence, road transport, electricity,
Emirate’s long term development
water, and sewerage) are all
vision. This vision is encapsulated
required to provide approvals for
within their comprehensive urban
the scheme.
structure framework plans:
• Once completed, a completion Plan Abu Dhabi/Al Ain/Western
certificate must be obtained Region 2030 (Capital 2030).
from the relevant municipality,
57
Major developments are subject to 2. Preliminary

a review process established by the development options
DUPM. Every development must fit The applicant will then prepare
within the framework contained site analysis (including elements
within Capital 2030, as well as such as transportation, habitat,
adhering to other government climate and infrastructure) to
regulations, policies and guidelines prepare preliminary development
(such as those of the Department of options for the site. Two options
Municipal Affairs (DMA) which is the for general land use and site
regulatory body that supervises the layout must be provided.
three regional municipal councils and The DUPM will review the options
municipal administrations). to check compliance with the
Emirate’s urban planning policies
The DUPM has established a (e.g. Capital 2030, land uses,
streamlined process to review densities, DUPM guidelines
development proposals, for design and construction,
depending on the nature of the the International Codes of the
development. This 4-step process in International Code Council, the
short includes a review which will be Abu Dhabi Environmental Health
tailored to small, medium and large & Safety Management System,
applications, comprising: and Estidama (an environmental
concept/plan)). The applicant and
1. The information meeting the DUPM select the preferred
The DUPM will hold an initial development option and work
meeting as soon as a development together to prepare a complete
site has been acquired, where concept review application.
the DUPM will explain plans and
3. The concept plan
policies that will determine site
This application covers all of the
development potential and outline
systems-level components of
the upcoming development review.
a development consent. It will
It also helps set the parameters
include site and massing plans,
for supportable development
a comprehensive approach to
and alerts the applicant to the
open space and community
documents/agencies that should
facilities. The DUPM and up to
be consulted.
58
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20 other review agencies evaluate move on to apply for municipal

the plan to check that it complies building permits from the relevant
with other plans and polices and municipality. Additional developer
agree on the seven key elements and DUPM/municipal review is
of the plan which include: land required for large projects to
use; density; building form; site ensure compliance with DUPM-
layout/design; services; strategies; approved regulations and
and phasing. guidelines before applications for
building permits can be made.
4. The detailed plan
The building permit is required
Applicants with small and medium
from the relevant municipality
sized projects then prepare and
before carrying out any new
submit detailed site and building
builds, significant alterations or
plans for review. This step also
changes of use.
confirms that any conditions of
approval have been met. For large All DUPM approvals are now
projects, this stage of the process subject to specified time limits
is aimed at helping applicants (2 years for individual projects and
translate concept masterplans 3 years for master plans) during
into detailed regulations and which construction works must
guidelines. For small and medium be commenced. If construction
sized projects once these steps works are not commenced within
have been satisfactorily carried the prescribed period, the DUPM
out, this is the end of the planning approval will automatically expire.
review process and they can
59
About DLA Piper

DLA Piper is a global law firm with lawyers located in more than 40 countries
throughout the Americas, Europe, the Middle East, Africa and Asia Pacific,
positioning us to help clients with their legal needs around the world.
We strive to be the leading global business law firm by delivering quality and
value to our clients. We achieve this through the delivery of practical and
innovative legal solutions that help our clients succeed.
In the Middle East we have over 100 lawyers operating from offices in the
GCC countries. Our lawyers are fully versed in their local and cultural business
communities and bring a deep understanding of the laws of the countries in
which we operate – understanding that is informed by international insight
and an appreciation of global best practice.
Home to one of the largest construction teams in the region, we advise

developers, contractors, government bodies, financiers and consultants on
all aspects of their projects. Our market leading experience extends across all
sectors including energy, infrastructure and development.
From identifying project risk, to selecting the best type of delivery method,
to agreeing terms and conditions, we devise and negotiate agreements that
focus on delivery and reward in demanding construction schedules and
balance the needs of various stakeholders.
Our team is also there for you when things go wrong, helping you to minimise
disruption to your business whilst resolving claims and disputes that arise on
any aspect of your project.
To find out more visit www.dlapiper.com
60
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Key contacts
Trevor Butcher
Partner
T +971 4438 6259
M +971 55 176 7474
[email protected]
Suzannah Newboult
Partner
T +971 4 438 6252
M +971 55 182 8686
[email protected]
Hasan Rahman
Legal Director
T +971 438 6446
M +971 55 346 2358
[email protected]
61
DLA Piper is a global law firm operating through various separate and distinct legal entities. Further details of these
entities can be found at www.dlapiper.com. This publication is intended as a general overview and discussion of the
subjects dealt with, and does not create a lawyer-client relationship. It is not intended to be, and should not be used
as, a substitute for taking legal advice in any specific situation. DLA Piper will accept no responsibility for any actions
taken or not taken on the basis of this publication. This may qualify as “Lawyer Advertising” requiring notice in some
jurisdictions. Prior results do not guarantee a similar outcome.
Copyright © 2021 DLA Piper LLP (US). All rights reserved. | 17 Mar 2021 | A08987-3

The A-Z of Construction Laws in The UAE

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The A-Z of Construction Laws in The UAE

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The A-Z of construction law in

the United Arab Emirates

Each letter of the alphabet is prepared as a self-contained explanation of

“B” is for Boilerplate 08

“C” is for Concurrent Delay 10

“D” is for Delay Damages 12

“E” is for Engineer 14

“F” is for Force Majeure 16

“G” is for Good Faith 18

“H” is for Harm 20

“I” is for Impossible 22

“J” is for Joint Liability 24

“K” is for “Knock-For-Knock” 26

“L” is for Limitation 28

“M” is for Mandatory 30

“N” is for Nominated Subcontractor 32

“O” is for on-demand and on-default 34

“P” is for Payment 36

“Q” is for Quantum Meruit 38

“R” is for Retention of Title 40

“S” is for Set-Off 42

“T” is for Third Party Rights 44

“U” is for Unforeseen Ground Conditions 46

“V” is for Variation 48

“W” is for Writing 50

“X” is for Extension of Time 52

“Y” is for Yellow Book 54

“Z” is for Zoning 56

About DLA Piper 60

“A” is for Architect

(2) The said obligation to make more than one consultant, especially

“B” is for Boilerplate

for repetition. It should be noted that will continue on foot. A severability

“C” is for Concurrent Delay

1. Delays caused by the Contractor

2. Delays caused by the Employer

“D” is for Delay Damages

or not. Any attempt to distinguish viewed as a predetermined level of

“E” is for Engineer

The procurement structure who are individually appointed by the

“F” is for Force Majeure

the party whose performance is that any loss arose out of an

“G” is for Good Faith

“H” is for Harm

In general therefore, a contractor for “consequential” loss. Article

“I” is for Impossible

contract is stated to continue despite the parties) the parties must be

“J” is for Joint Liability

• Article 287 provides that a party

“K” is for “Knock-For-Knock”

destruction: knock-for-knock Article 296 (exclusion of liability for

“L” is for Limitation

205(2) – a limitation of liability for for major defects affecting the

“M” is for Mandatory

provides explicitly that an agreement Relevant mandatory provisions in

On balance, if a statutory provision • agreement of compensation

“N” is for Nominated

vicarious liability). In the case of a relation to the Contractor’s liability

“O” is for on-demand and

(2) The said obligation to make more than one consultant, especially

1. Delays caused by the Contractor

2. Delays caused by the Employer