UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Archive for May 17, 2010

Architect’s Liability Under UAE Construction Law

It is important to have construction contracts reviewed by UAE lawyers before execution in order to ensure rights and understand obligations and make sure that the contract complies with UAE law.  UAE law supersedes the construction contract including FIDIC standard form contracts within the UAE. 

One Article of UAE law which might surprise Architects is Article 880 of the UAE Civil Transactions Law, Federal Law No. 5 of 1985 (“Civil Transactions Law”).

Article 880 of the Civil Transactions Law states:

  1. If a job contract is for construction of buildings or other fixed installation designed by an architect and executed by the contractor under his (architect’s) supervision, they shall be JOINTLY liable to indemnify the client for any total or partial dilapidation that occurs, within ten years, in the buildings or installations constructed or erected by them, and for any defect that threatens the strength and safety of the structure if no longer period is fixed in the contract, unless the two contracting parties want the installation to survive for a period of less than ten years.
  2. The liability for said indemnity shall remain even if the fault or dilapidation arises from a defect in the land itself, or if the client agrees to the construction of the defective buildings or installations.
  3. The ten years period shall start from the delivery of the works.

 

Therefore, the architect is jointly liable with the contractor for at least ten years to pay compensation to the employer if the architect’s design led to partial or total collapse of the building or installation and for any major defect which threatens the stability and safety of the building or installation.   It is possible to extend the defects liability period for longer than ten years in the construction contract in the UAE. 

It may be even more alarming to an architect to learn that the architect’s obligation to compensate the employer shall remain even if the defect or collapse was due to a problem with the land or the employer consented to the construction based on the architect’s design.  The employer is not liable for failing to overlook defects or faulty designs or for knowingly consenting to a faulty design. 

However, an architect’s liability may be limited in the case where he or she did not supervise the execution of the plans or the installation was meant to be erected for less than ten years.  It is important to make it clear in a contract that the scope of the architect’s work is limited to designing the drawings and plans for the building or installation in order to limit the liability of the architect to design errors under UAE law.  Any structural error would then become the liability of the contractor. 

Article 881 of the Civil Transactions Law states:

“If the work of the architect is restricted to making the plans to the exclusion of supervising the execution, he shall be liable for defects in the plans.”

Contrast with FIDIC 1999 Red Book defects liability clauses:

Under the 1999 FIDIC Red Book Contract (“FIDIC Contract”), the architect is not jointly liable with the contractor for remedying defects.  Under the FIDIC Contract, the Contractor is liable to the employer for damages and adaptation of the project plans due to defects and structural collapse. 

Article 11.1, Completion of Outstanding Work and Remedying Defects, of the FIDIC Contract states:

In order that the Works and Contractor’s Documents and each Section shall be in the condition required by the Contract (fair wear and tear excepted) by the expiry date of the relevant Defects Notification Period or as soon as practicable thereafter, the Contractor shall:

  1. complete any work which is outstanding on the date stated in a Taking-Over Certificate, within such reasonable time as is instructed by the Engineer, and
  2. execute all work required to remedy defects or damage, as may be notified by (or on behalf of) the Employer on or before the expiry date of the Defects Notification Period for the Works or Section (as the case may be).  If a defect appears or damage occurs, the Contractor shall be notified accordingly, by (or on behalf of) the Employer.

 

Clause 11.2, Cost of Remedying Defects, of the FIDIC Contract states:

All work referred to in sub – paragraph b of sub-Clause 11.1 (Completion of Outstanding Work and Remedying Defects) shall be executed at the risk and cost of the Contractor, if and to the extent that the work is attributable to:

  1. any design for which the Contractor is responsible,
  2. Plant, Materials or workmanship not being in accordance with the Contract,
  3. or failure by the Contractor to comply with any other obligation.

If and to the extent that such work is attributable to any other cause, the Contractor shall be notified promptly by (or on behalf of) the Employer and Sub-Clause 13.3 (Variation Procedure) shall apply.

Clause 11.4, Failure to Remedy Defects, of the FIDIC Contract states:

If the Contractor fails to remedy any defect or damage within a reasonable time, a date may be fixed by (or on behalf of) the Employer on or by which the defect or damage is to be remedied.  The Contractor shall be given reasonable notice of this date. 

If the Contractor fails to remedy the defect or damage by this notified date and this remedial work was to be executed at the cost of the Contractor under Sub-Clause 11.2 (cost of remedying defects), the Employer may (at his or her option):

  1. Carry out the work himself or by others, in a reasonable manner and at the Contractor’s cost, but the Contractor shall have no responsibility for this work; and the Contractor shall subject to Sub-Clause 2.5 (Employer’s Claims) pay to the Employer the costs reasonably incurred by the Employer in remedying the defect or damage;
  2. Require the Engineer to agree or determine a reasonable reduction in the Contract Price in accordance with Sub-Clause 3.5 (Determinations); or benefit of the Works or any major part of the Works, terminate the Contract as a whole, or in respect of such major part which cannot be put to the intended use. Without prejudice to any other rights, under the Contract or otherwise, the Employer shall then be entitled to recover all sums paid for the Works or for such part (as the case may be), plus financing costs and the cost of dismantling the same, clearing the Site and returning Plant and Materials to the Contractor.

 

Clause 11.10, Unfulfilled Obligations, of the FIDIC Contract states:

After the Performance Certificate has been issued, each Party shall remain liable for the fulfillment of any obligation which remains unperformed at that time.  For the purposes of determining the nature and extent of unperformed obligations, the Contract shall be deemed to remain in force.

Those using the FIDIC Contract in the UAE should be aware that UAE law supersedes the FIDIC Contract and under UAE law, the architect may be jointly liable with the contractor for defects for ten years  if the contract is not drafted properly.

UAE Stock Markets Fact Sheet

 

 

http://www.univestbrokerage.com/UAE%20Stock%20Markets%20Profile2008.pdf

Federal Research Division Library of Congress UAE Country Profile

 

http://memory.loc.gov/frd/cs/profiles/UAE.pdf

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance