This is the second of a three-part blog series in which we consider some key contractual issues in the context of the Qatari and UAE construction markets.
In our first blog, we looked at the principle of freedom to contract as a matter of UAE and Qatari law in the context of liquidated damages (LDs). You might expect this principle would extend to allowing parties to a construction contract to agree a contract term that barred recovery of additional time and money, except where strict notice procedures are followed. This is not necessarily the case: a court or tribunal will not always uphold and enforce such a term, often referred to as a “time bar”. In this article we explore whether time bars may be considered contrary to the provisions of the UAE and Qatari Civil Codes.
Common practice and FIDIC
It is common for an employer to rely on a contractor’s failure to provide the correct contractual notice as justification for denying a claim for compensation, where that contractor would otherwise have an underlying entitlement to time or money. However, in the UAE and Qatar, a failure to adhere to a contract’s notice provision will not necessarily, of itself, restrict claims from being pursued. It is only where a contract expressly links valid notice to an entitlement to recovery and can therefore be considered a condition precedent, that a claim may be barred.
The FIDIC Conditions of Contract are the most common standard form of contract in the Middle East region and are a good illustration of the treatment of notice provisions. Unlike Article 53.1 of the 1987 FIDIC Conditions of Contract, which is still commonly in use in the Middle East, Article 20.1 of the 1999 Conditions of Contract seeks to prevent a contractor from pursuing a claim if it has failed to notify the employer within 28 days of the event giving rise to the claim. We have seen parties argue that the purpose of Article 20.1 is to introduce a contractual limitation period in addition to the statutory limitations prescribed by the Civil Codes of Qatar and the UAE.
Qatar and UAE’s approach
As a matter of both Qatari and UAE law, parties to a contract are free to agree to the contract terms. In Qatar, this is subject to the proviso that such terms may not be “prohibited by law or contrary to public policy or morals” (Article 154 of the Civil Code). The same exception to the primacy of a contract is codified under Article 126 of the UAE Civil Code. Statutory limitation periods are prescribed as a matter of Qatari and UAE law. Therefore, in both jurisdictions, parties should treat them as principles of public policy that cannot be varied by contract.
Support for a time bar defence can also be found in Article 418 of the Qatari Civil Code, which stipulates that “it shall not be possible to agree on limitation for a period other than those specified by the law.” Article 487(1) of the UAE Civil Code includes a similar provision. When coupled with the overarching obligations of good faith and unjust enrichment found in the Civil Codes of both countries, a court will likely tread cautiously when asked to deny a claim following an alleged failure to adhere to a contractual notice regime.
Condition precedent under English law compared
Under English law, a properly drafted condition precedent clause will generally be held to be effective and can have serious consequences for a contractor. It may expose the contractor to liability for liquidated damages, even where the employer is responsible for the delay. Accordingly, provided that the wording of the contract is clear, a claimant may be precluded from bringing or winning an otherwise valid claim. However, and as always, the circumstances peculiar to an individual case will be considered as part of any judgment.
In contrast to the English position, it is extremely rare in either Qatar or the UAE for a party to successfully argue that another is barred from bringing a legitimate claim solely by reference to a failure to comply with a contractual notice period. That said, parties can be successful in such arguments where there is another contributing factor, such as failure to comply with another aspect of the contract or breach by the petitioning party.
Contract administration and notice clause
As always, the best defence is to negate the argument so far as possible by implementing effective contract administration procedures and ensuring that new contracts have a workable notice clause.