United Arab Emirates: Constructing Railways In The UAE: Liability For Defective Work

Last Updated: 15 April 2015
Article by Mark Blanksby and Alexa Hall

Unless defined by contract, a "defect" is not a term of art; it relates to the concept that works do not conform to contract requirements. Defects encompass defects in workmanship and materials, and design defects. In relation to defective work, a contractor will, depending on the nature/extent of the defect, potentially (1) assume obligations to its employer pursuant to the defects liability clauses of its contract, (2) be liable to its employer in damages for breach of contract, and (3) be liable to its employer under the decennial liability provisions of local law.

Contractual defects liability

Most industry standard construction contracts contain "defects liability" clauses. These clauses oblige a contractor to return to site and remedy any defects in its works that are notified by (or on behalf of) an employer within a certain time period calculated from the date on which the works are certified as complete in a taking-over certificate. In a rail project, the defects liability period may be 24 months or longer. The employer frequently withholds a portion of the contractor's retention money until the expiry of the defects liability period.

A contractor does not ordinarily have the "right" to return to remedy a defect unless the contract expressly confers that right. Consequently, without a defects liability provision, an employer is entitled to employ others to rectify any defects that may arise after the date of taking over and claim the cost of doing so from the contractor. Such clauses are therefore often said to benefit the contractor: they afford the contractor a "grace period" during which it possesses a first (and depending on the wording, exclusive) right of refusal to rectify defects that are not apparent at the date of taking over. It is in a contractor's interest to ensure that any defects are dealt with promptly once it is given notice of them. Doing so, avoids the risk of being back charged with remedial works costs which potentially exceed those which it would have incurred in remedying the defects in question itself (and any dispute arising in relation to which contractor is responsible for the defect).

However, it is important to appreciate that the expiry of the defects liability period does not release the contractor from all liability for defects. This simply constitutes the end of a period during which the contractor is contractually obliged to return to site and make good defects. An employer remains entitled to pursue the contractor for breach of contract.

Liability in damages for breach of contract

A defect ordinarily constitutes a breach of contract. The existence of a contractual defects liability period does not limit the employer's rights in respect of that breach, absent express words to the contrary. Therefore, unless the defective work is removed/remedied before taking over, the employer is entitled, subject to the contract, to pursue an action for breach of contract against the contractor.

The period during which the contractor may be liable for defects will be determined by reference to the applicable limitation period prescribed by law, namely the period of time within which an action must be commenced. Federal Law No. 5/1985, as amended by Federal Law No 1/1987 (UAE Civil Code), Article 473 provides that a claim is timebarred after a period of 15 years unless a specific provision of the law provides otherwise. In relation to breach of contract, UAE Federal Law No. 18 of 1993, the Commercial Transactions Code, Article 95 provides the non-defaulting party with a time limitation period of 10 years from the date of breach to issue proceedings. In consequence, a contractor responsible for defective work in breach of contract will be liable to its employer for a period of 10 years from the due date for performance. In the context of defective work, this will usually be the date of the taking over certificate (commencement of the defects liability period).

This 10-year limitation period therefore runs in parallel with the defects liability period and potentially, as set out below, overlaps with a decennial liability period.

The employer shoulders the burden of proving that the contractor is responsible for the defective work. If successful, its remedy is damages, which by virtue of the general principles applicable to the calculation of compensation under UAE law, will likely constitute substantiated costs of reinstatement, or where the defect is irreparable, an award to reflect the diminution in value of the project in question.

A contractor's liability for defective work in breach of contract may be curtailed or extinguished by virtue of any liability limitations or exclusions contained in the contract.

Decennial liability

Decennial liability applies if the subject matter of the contract in question is the construction of buildings or other fixed installations, the plans for which are made by an architect to be carried out by a contractor under its supervision. Pursuant to the UAE Civil Code, Article 880, the architect and the contractor will be jointly liable, for a period of 10 years from the time of "delivery" of the work (unless the contract prescribes a longer period), to compensate the employer for a total or partial collapse of the building/installation constructed and for any defect which threatens the stability or safety of the building. It is important to distinguish decennial liability from the forms of liability described above.

Importantly, decennial liability is applicable by law in the country where the site is located irrespective of any choice of law clauses contained in the contract.

Another distinguishing feature is that liability only arises where a total or partial collapse of a building or fixed installation occurs and/or a defect threatening the stability or safety of a building is discovered during the decennial liability period. The terms "fixed installation" and "building" are neither defined in the law, nor considered in any detail by the local courts. Decennial liability under Article 880 also applies only to structures which are intended to be in place for 10 years or more. The distinction therefore lies between those works that are considered to be "permanent" structures with an intended installation life of 10 years or more, and those which are considered to comprise "temporary" structures (i.e. those that will be removed/ demolished on or after completion or aren't intended to remain in place for 10 years or more).

Applying this principle in the context of UAE rail infrastructure development, means that contractors constructing, by way of example, elevated metro stations, underpass structures which support those stations, depot areas or elevated viaducts will fall within the ambit of Article 880. Contractors engaged to procure rolling stock will not (as rolling stock does not comprise "structures"). Decennial liability is strict; it is imposed jointly and severally on a contractor and architect regardless of fault/ breach of contract. The contractor and designer remain liable even if the structural defect/collapse is the result of a defect in the land, or if the employer consented to the defective construction. A contractor engaged under a design and build contract is equally likely to be liable.

The 10-year decennial liability period ordinarily runs from the date of the taking-over certificate - the date of "delivery" of the works under Article 880.

Any agreement which seeks to exempt this liability is void and unenforceable (UAE Civil Code, Article 882).

Any claim on the basis of decennial liability must be commenced within 3 years of the discovery of the collapse or defect (UAE Civil Code, Article 883). Applying this limitation period may result in shortening the decennial liability period if the collapse occurs/defect occurs during the first 7 years, or extending the decennial liability if the collapse occurs/defect is discovered in the last 3 years.

The employer's remedy will be the measure of damages required to compensate it for the total/partial collapse of the structure, namely the substantiated costs of replacing the structure.

Conclusion

A 10-year limitation period relating to legal liability for the consequences of defective performance generally exists in relation to a contract governed by UAE law. This is not replaced by either the defects liability period or decennial liability.

In relation to the former, the defects liability period is a supplementary contractual remedy available to the employer which operates alongside the limitation period for claims in breach of contract. As to the latter, decennial liability constitutes a supplemental liability in law for the particular events of total or partial collapse of a building or fixed installation.

Generally decennial liability falls outside the scope of standard CAR and PI insurance available in the UAE, and so, unless particular cover can be obtained, contractors and architects commonly retain this residual risk. It is for this reason that rail infrastructure providers operating in the UAE should continue to be aware of decennial liability.

Decennial liability is also a facet of other key Middle East jurisdictions in which large-scale rail projects are being or are to be performed. Decennial liability provisions are found at Articles 711 to 715 of the Qatar Law No. 22 of 2004, Articles 692 to 697 of Kuwait Law No.67 of 1980, and Article 76 of the Government Tenders and Procurement Law of the Kingdom of Saudi Arabia.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions