Construction Law in the UAE
Construction laws in the UAE are complex, with some concepts related to construction contracts codified in the Federal Law No 5 of 1985 (Civil Code). The Civil Code contains the general principles of contract and has a specific chapter dealing with contractors, sub-contractors, architects and related issues concerning construction contracts.
In addition to the Civil Code, Federal Law No. 18 of 1993 is also generally applicable to commercial activities. Apart from these laws which are applicable at the federal level, there are local laws which specifically govern the concerned Emirates’ construction activities.
Given the complexity of the laws, it is generally advisable to hire legal experts or construction lawyers who are well versed with the rules and regulations related to construction laws in the UAE. This is especially relevant for Dubai as Dubai is the hub for construction in the UAE, with the construction sector’s contributing 7.3% to Dubai’s GDP during the first half of 2020.
Construction Law: Things to Remember
While the construction law is diverse, involving varied factors and players (such as contracting companies, financial institutions, and performance issues leading to disputes and litigation), there are some standard things that should be considered when it comes to construction contracts.
For instance, it is crucial to perform the construction contract in good faith. The duty of good faith in contracts is applicable on all contracts under Article 246 of the Civil Code, and is applicable to a construction contract as well.
Article 246/1 of the Civil Code states as follows.
The contract shall be implemented, according to the provisions contained therein and in a manner consistent with the requirements of good faith.
There is no express explanation as to what consists of good faith. That said, expert construction lawyers in Dubai, with years of experience, will provide legal guidance, based on case laws and jurisprudence, on what actions form part of good faith in a construction contract.
Under the Civil Code (Article 273), a contract can be automatically rescinded if a force majeure makes the performance of the contract impossible. If the impossibility is partial, the consideration for the impossible part will be extinguished.
In a construction contract, unless the contract provides otherwise, a person will not be held liable if he can prove that the loss resulted from a cause beyond his control, such as natural disasters or force majeure under Article 287. A contractor also will not be liable for any loss that could not have been avoided.
Experienced construction lawyers would be in a position to draft, review and advice on the appropriate language that should be inserted in a construction contract to sufficiently cover concerns regarding force majeure.
A construction contract may be sub-contracted by the contractor to a sub-contractor, either in whole or partly. While Article 890/2 of the Civil Code states that in cases of sub-contract, the contractor is responsible towards the master of the work, it does not clarify as to what would happen in a situation if the master himself has chosen the sub-contractor.
Having said that, in a case involving contraventions related to a construction contract, the Dubai Cassation Court in Case No 266 of 2008 noted that the original contractor will not be held responsible for the delay caused by the sub-contractors if the sub-contractors were chosen by the employer or the consultant.
The Court recorded that if it is proved that the breach of the original contractor’s obligation to deliver the building on the specified date in the contract occurred for reasons beyond his control, then he will not be held responsible for any delay fine. The responsibility for the delay in achievement will be borne by the employer instead of the original contractor.
Parties to the construction contract can mutually decide on how any disputes related to the contract will be resolved. They can agree to refer their disputes to the courts or to arbitration. A construction lawyer would be able to provide expert advice on which dispute resolution method is recommended based on the type of contract, the parties and the sum involved.
Construction laws are often difficult to navigate as there are many laws which are in force, depending upon the area in which the construction contract is to be performed. Litigation is common in the construction sector and generally involves high stakes. It is, therefore, crucial to hire construction lawyers in Dubai with vast experience, who have expertise in drafting, reviewing and finalizing multi-party construction contracts, providing advice related to any legal matters and representing clients in courts/ arbitration in case of disputes.