The UAE Civil Code and Claims under the Red Book FIDIC in the UAE

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The UAE Civil Code and Claims under the Red Book FIDIC in the UAEFiled in Contract Administration on Nov.13, 2008

The UAE Civil Code and Claims under the Red Book FIDIC in the UAE For all its innovation and spectacular achievements, the construction industry in the UAE has been slow to move on from its close relationship with the FIDIC Red Book (4th Edition) (the Red Book). This was, of course, superseded long ago and it is

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The UAE Civil Code and Claims under the Red Book FIDIC in the UAE

scarcely used anywhere else in the world, outside of this region.

The Red Book provides a number of notoriously tricky procedures for claim notification and particularisation to be followed by the Contractor. They are not sharply drafted and their meaning and intent are not always clear. However, it seems to be implied in some cases that if these procedures are not strictly adhered to by the Contractor, the claim will be dead in the water – in other words, the Engineer may be entitled to reject the claim outright. Building and civil works contracts in the UAE are generally governed by UAE law and hence the UAE Civil Code (the Civil Code) will apply. This article considers how, when express notification procedures are read in the light of applicable provisions of the Civil Code, a more moderate and fair outcome may emerge. Entitlement to Claim The Red Book provides that in certain circumstances a Contractor’s entitlement to claim may be lost if he fails to give notice of his intention to claim or fails to provide detailed claim particulars within the timescales prescribed. There are two provisions of the Red Book which state that a failure to comply with the specified notice or particularisation procedures for making a claim will justify the rejection of the claim. First, Clause 44.2, which is concerned with applications for extensions of time. This clause provides that in case of noncompliance with the time limit to provide notice and/or to provide detailed claim particulars, the Engineer “is not bound to make any determination” of a claim for an extension of

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The UAE Civil Code and Claims under the Red Book FIDIC in the UAE

time. The Engineer, therefore, has a discretion not to make a determination if either the time limit for notice or for particularisation is not met. Second, Clause 52.2, which applies to applications for payment for variations. This clause states that the varied work will not be valued unless notice of an intention to claim extra payment is made within 14 days of the date of the instruction. Strictly construed, this clause allows for a claim to be disallowed if the 14 day time limit is not complied with The Civil Code If the Engineer feels inclined to reject an otherwise meritorious claim solely by reason of non-compliance with strict technicalities of the notification procedures it is important for him to consider the provisions of the Civil Code, which might have a bearing on the issue. For instance, the Civil Code makes clear that neither party to a contract should act in bad faith. Article 246 states that contracts must be performed in a manner consistent with the requirements of good faith. This could apply, for example, where a Contractor points to information given in agreed minutes of a meeting or a periodic report as written notice of an intention to claim, as required by the Red Book. If, as is sometimes the case, a question arises as to whether information in a formal minute or a written report is strictly “written notice”, consideration of good and bad faith may, as a matter of UAE law, be relevant. The Contractor may argue, in such a case, that the Employer and the Engineer have actually been notified of the existence of the claim, in a written form, within the stipulated time period and, as such, the purpose of the notification provision has been fulfilled and that it would be an act of bad faith not to accept this. The Civil Code also states that neither party may exercise its rights under a contract in a manner which is oppressive or abusive to the other. Article 106 says that the exercise of a right shall be unlawful if, among other things, the interests desired are disproportionate to the harm that will be suffered by the other party. Thus, if an otherwise valid and meritorious claim is disallowed solely by reason of purely technical breach of a notice provision, this may well be unlawful, especially if the likely financial harm to the Contractor is disproportionate to the interests in upholding the Employer’s contractual right to receive timely notice. Furthermore, Articles 318 and 319 of the Civil Code provide that unjust enrichment is unlawful. If, for example, the Engineer rejects a claim for additional payment for varied work purely on the grounds that the time limit for notice has not been met, it could, as a matter of UAE law, be the case that the Employer has been unjustly enriched by benefiting from additional work while seeking to avoid payment by relying on a procedural

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The UAE Civil Code and Claims under the Red Book FIDIC in the UAE

technicality. Consequently, the claim may succeed in the eyes of UAE law even if the notice procedures were not complied with. Comment This article highlights only a few examples of how the Red Book, when read in the context of the applicable provisions of the Civil Code, might not have the meaning, or at least the effect, suggested by the express words used. There are, of course, numerous other provisions of the Civil Code which are likely to be relevant and must be considered when advising the Contractor, Engineer or Employer. Contractual provisions which appear to have drastic consequences as written in the Red Book (or in any other standard form contract which may be used in the UAE) may, in fact, have a modified or different effect when read together with applicable provisions of the Civil Code.

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One Response to “The UAE Civil Code and Claims under the Red Book FIDIC in the UAE”

Roland Tannous Says: November 5th, 2010 at 9:12 am

The arguments advanced by the author are very valid but I find them insufficient and incomplete. The Claims Management procedures present in FIDIC are both beneficial and therefore also hurtful at times to both the Employer as well as the Contractor. While protecting the Contractor from Liquidated Damages, EOTs also protect the Employer from time becoming

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The UAE Civil Code and Claims under the Red Book FIDIC in the UAE

at large. Once this is understood, it would become clear the purpose for which the notice provisions are there for. Under FIDIC terms of contract it should be taken in account that the claim procedures are part of a balanced risk allocation One reason for time bars and other procedural restrictions lies in the fact that a claim notice enables matters to be investigated while they are contemporary. A second reason is that it gives the Engineer the opportunity to withdraw or to give instructions when the financial and timely consequences of a claim event become apparent. Not giving a timely notice could also be interpreted under civil law to be a an act of bad faith on the part of the contractor towards’ the Engineer’s right to realise the financial and timely consequences of a claims event in a “timely manner”. Therefore this behaviour by the contractor would also be against ARticle 246 of the UAE Civil Code. Also remember that in most Civil Code countries, the absence of a “time bar” (i.e within 28 days for example) means that the obligation is due immediately. In this aspect , the time bars on notice provisions are therefore fair even under Civil Law Context. Best Regards, Roland Tannous

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