Practical Law

When entering into contracts in the UK, most parties will understand that there are time limits under UK law within which they must bring a claim under the contract. There are also time limits for the bringing and defending of claims under UAE law.

However, parties contracting in the UAE may not be aware that both the type of claim and the time period are rather different to those that apply in the UK jurisdiction. In this blog we consider some of these differences.

Time bars in England and Wales and the UAE

One of the first questions to consider before bringing a claim is whether it can be brought at all. Is it time barred? If so, this will be a complete defence to the claim.

Many contracting parties will be aware of the rules on limitation periods when it comes to entering into contracts in England and Wales, with the general principle being that actions must be commenced either within six years (where they arise out of a simple contract or are founded in tort) or within twelve years (where they arise out of a deed or similar arrangement). However, in the UAE, which operates under civil law principles, the provisions are rather different.

Under UAE law, there are a number of statutory limitation periods set out in the UAE’s codified laws that may determine a party’s right to bring a claim. Generally, a party’s claim will be time-barred after fifteen years, unless a specific provision states otherwise. However, there are many exceptions to the general rule. The following limitation periods may be applicable to claims arising under contracts for construction work or design services:

• Ten years for claims arising from commercial transactions which are governed by the UAE Commercial Code.
• Five years for claims for professional fees.
• Three years for acts causing harm (torts).
• Two years for claims for payment for goods and services.

Decennial liability

In addition, UAE law contains provisions in relation to what is known as decennial liability. Article 880 of the Civil Code imposes mandatory obligations in circumstances where the design of a building is prepared by an architect (whether or not on behalf of the employer) with the intention that the contractor would carry out the works under the architect’s supervision. Both the architect and the contractor will be jointly and severally liable to the employer for the structural integrity of the building or installation for a period of ten years from the date of handing over the works.

Taking these elements in turn, the key decennial liability provisions are as follows:

• Decennial liability provisions impose strict liability and are mandatory. It is not possible to contract out of or disapply decennial liability provisions, and they will apply regardless of whether fault can be proven.
• Architects responsible for preparing designs will be held to be jointly liable with the contractor if their services include a supervision role. Where the architect and contractor are found to be jointly liable, the employer may bring a claim against either or both and it is not a defence for either party to show that they were not at fault. If the contractor becomes aware of any errors in the design it is advisable that it warns the architect to avoid possible subsequent decennial liability.
• The work carried out relates to the erection or construction of buildings or other fixed structures. There is no definition of “buildings” or “fixed structures” in the UAE Civil Code and there have been few reported cases. Although there is no doctrine of binding case law, the cases that have dealt with this issue suggest that the courts will extend the scope of the provision to cover structures such as bridges or road overpasses.
• While the decennial liability provisions apply in the case of total or partial destruction of the building, liability may also arise where there is any defect which “threatens the stability or safety of the building”. Again, while there is little guidance from reported cases as to how this might be interpreted, it is likely that minor defects that would be covered by the defects liability period will not be subject to decennial liability provisions. The court in the case of Dubai Court of Cassation 6/2004 gave an indication of what may be considered to be a more significant defect to which the decennial liability provisions apply when it decided that water leaking from a swimming pool was a defect that threatened the stability and safety of the structure.
• Decennial liability provisions will apply even if the destruction or defect is due to an issue within the ground itself, and regardless of whether the employer consented to the construction of the building or structure on the particular site. The contractor is deemed to have specialist knowledge and skills that would allow it to satisfy itself of the ground conditions, which the employer is deemed not to possess.
• If the intended life of the building is less than ten years, decennial liability provisions will only apply for the duration of the intended life of the building. The English translation of the codified decennial liability provisions is somewhat ambiguous and there is some commentary which suggests that where the intended life of the building is less than ten years, the provisions simply do not apply at all. However, as there is uncertainty as to the translation, it is advisable to consider that such provisions will apply to the intended life of the building, whether that is ten years or less.
• The decennial liability period begins from the time that the work is “delivered”, which will typically be from the date of the Taking Over Certificate. The employer has three years from the discovery of defects or destruction within which to seek compensation from the liable parties.

Know the different limits

If you intend to contract in the UAE, you should be aware not only of the different limitation periods that apply to different types of contracts and claims in the UAE, but to the very rigorous and potentially onerous decennial liability provisions. The possibility that as an architect or contractor you may bear full liability for a major structural defect in a building, regardless of fault, highlights the importance of knowing your limitations.