Extension of time in contracting contracts
A construction contract is a contractual agreement where one party agrees to undertake the manufacturing or construction of something in exchange for a consideration provided by the other party.
According to Article 872 of the Civil Transactions Law, a construction contract is defined as a contract where one party agrees to perform work or create something in exchange for a consideration provided by the other party. Additionally, Article 890 of the same law stipulates that the contractor has the right to assign all or part of the work to another contractor if it is not prevented by a condition in the contract or if the nature of the work does not require their personal performance.
Construction contracts are governed by the legal provisions outlined in the Civil Code of the United Arab Emirates and Federal Law No. 5 of 1985, along with its amendments. The specific regulations pertaining to construction contracts can be found in Articles 872 to 896 of the Civil Transactions Law.
It is important to ensure that the contractual provisions included in construction contracts are in line with the applicable laws and regulations. The consistency of the contractual provisions with the relevant laws helps establish a legally binding and enforceable agreement.
Extension of time in contracting contracts:
In construction contracts, the contractor has the right to request an extension of time. The contracts typically include a specific deadline set by the employer for the completion of the work, which aims to prevent the contractor from being negligent or slowing down the progress. The construction contracts also often include provisions for imposing penalties for delays. Both parties in the contract agree upon the completion time, the preventive principle, the duration of the project, and the conditions for extension and liquidated damages.
Clear and binding terms must be included in the construction contracts, ensuring that both parties understand their obligations. If the contractor fails to deliver the completed building to the owner within the specified timeframe, they may face consequences, such as fines. Various factors can cause project delays, ranging from unavoidable circumstances like the COVID-19 pandemic, which resulted in numerous construction delays, to delays caused by the contractor’s default or challenges in labor availability and material procurement.
The precautionary principle, which is a common law principle, is designed to protect the rights of contractors. It ensures that the contractual terms are fair and that both parties are held accountable for their respective obligations.
So can the contractor claim an extension of the contract period?
Yes, the contractor can request an extension of the contract period by submitting a notice to the employer, as per the contract’s provisions. However, it is essential that the contract between the parties includes a clause specifically addressing time extensions, commonly referred to as a “time bar clause” or a time extension clause. This clause enables the contractor to provide a convincing justification to the employer and commit to delivering the project within a reasonable additional period. Failure to do so may result in the contractor being obligated to pay a lump sum penalty for the delay.
In the absence of an extension clause in the contract, the contractor is required to complete the construction within the timeframe specified in the contract. Failure to meet the deadline would make the contractor liable to pay the delay penalty as outlined in the contract.
What is the late fine and what are the laws governing it:
Article No. 39 governs the imposition of late fines in construction contracts.
According to this article:
If the contractor fails to complete the work and hand it over within the specified timeframe, and the employer does not decide to terminate the contract, the contractor becomes liable to pay a fine for the duration of the delay. The amount of the fine is calculated based on the average daily cost of the project, determined by dividing the value of the contract by its duration.
The fine is divided into three parts:
- For the initial part of the delay period, the fine is a quarter of the average daily cost for each day of delay, until either fifteen days have passed or the delay amounts to five percent of the contract period, whichever is longer.
- For the second part of the delay period, the fine is half of the average daily cost for each day of delay, until either thirty days have passed or the delay amounts to ten percent of the contract period, whichever is longer.
- For the third part of the delay period, the fine is the full average daily cost for each day of delay that occurs after the longer of the two periods mentioned in Paragraph (B).
The total amount of fines imposed should be at most ten percent of the value of the contract.
However, if the employer determines that the delayed portion does not hinder the full utilization of the completed work, does not cause any inconvenience in its use, and does not have a detrimental impact on the completed portion, the total fine shall not exceed ten percent of the value of the delayed work.
Oversight costs arising from the delay:
Article No. 40:
In addition to the fine mentioned in the previous article, the contractor is also responsible for bearing the fees of the supervisor overseeing the project during the period in which the contractor is subject to the fine. The fees are calculated based on the terms stipulated in the supervisor’s contract, whether it is a fixed periodic amount or a percentage of the value of the contracting contract.
Article No. 41 – Maintenance Period:
First: Definition of the maintenance period:
The term “maintenance period” referred to in these conditions refers to the duration specified in the contract, which begins from the initial delivery date until the final delivery date. In case of partial deliveries, the maintenance period for each part is calculated from its respective initial delivery date.
Second: Carrying out repairs and other works:
The objective is to hand over the works to the employer at the end of the maintenance period or as soon as possible thereafter, ensuring that the quality and condition meet the engineer’s satisfaction and are not less than the condition at the start of the maintenance period, except for normal wear and tear resulting from use. During the maintenance period or upon final delivery, the contractor is obligated to carry out any repairs, modifications, reconstruction, or rectification of defects as required by the employer or the engineer, based on written instructions.
It should be noted that maintenance work does not include repairs required due to normal wear and tear that does not result from a defect in maintenance or implementation.
Third: Costs of carrying out repairs and other works:
The contractor is responsible for covering all costs associated with repair works, if, in the engineer’s opinion, the need for such works arises from non-compliance with the contract specifications or due to negligence or default on the part of the contractor in fulfilling explicit or implied obligations under the contract.
Fourth: Dealing with the contractor’s refusal to carry out required works:
If the contractor refuses to carry out any of the works specified in this Article as required by the engineer, the employer has the right to carry out such works with the contractor’s knowledge or through other contractors, and the contractor is liable for the costs incurred. The employer may deduct these costs from the amounts payable to the contractor or from any future payments.
Fifth: Guarantee for demolition due to implementation defects:
The contractor is obligated to guarantee the total or partial demolition of the structures he has built within ten years from the date of project handover to the relevant authority, in cases where demolition is required due to implementation defects. However, the contracting parties may agree to a shorter maintenance period for the facilities.
Article No. 42 – The Contractor’s Obligation to Investigate Defects and Errors:
If the engineer requests in writing that the contractor investigates the causes of any defect, error, or malfunction, the contractor must comply with the engineer’s instructions. The contractor is responsible for repairing, correcting, and rectifying such defects, errors, or malfunctions at their own expense, in accordance with the provisions stated in Article (41) of these conditions.
Article No. 43 – Amendments, Additions, and Cancellations:
First: The engineer, with the approval of the employer or within the limits of their authority, may make changes in the form, type, or quantity of the works or any part thereof as they deem necessary. The contractor is obliged to implement these changes, provided that they do not alter the essence of the contract or exceed the limits specified in the following paragraph:
Second: During the execution of the contract, the employer has the right to increase the amount of work by a percentage not exceeding ten percent (10%) of the contract’s total value, either through an increase or decrease in scope accordingly.
Third: The contractor is not permitted to make any of the aforementioned changes without a written order issued by the engineer.
Article No. 44 – Evaluation of Changes:
First: The engineer shall determine the value, if applicable, to be added or deducted from the amount mentioned in the bid due to any extra or additional work that has been executed or canceled as per their order.
Such work shall be evaluated based on the rates specified in the contract, if applicable. If the contract does not include any rates for extra or additional work, the employer and the contractor must agree on determining fair prices for such work.
The contractor must submit a monthly account to the engineer, detailing all claims related to additional expenses that the contractor believes they are entitled to, as well as any extra or additional work ordered by the engineer and carried out by the contractor during the previous month. No claim will be considered valid for payment if it is not included in the aforementioned account.
Article No. 45 – Equipment, Temporary Works, and Materials:
First: Use of equipment and others in the works:
The equipment, temporary works, and materials provided by the contractor and brought to the site are solely dedicated to the construction and completion of the works. Without the written consent of the engineer, the contractor is not permitted to move or relocate them from the site, except when transferring them from one location to another within the same site. The engineer shall not unreasonably withhold their consent.
Second: Transfer of equipment and others:
Upon completion of the works, the contractor must remove all mentioned construction equipment, remaining temporary works, and any unused materials brought to the site, and clean the site.
Third: Employer’s responsibility for equipment and breakdowns:
The employer shall not be held liable for any loss or damage to the equipment, temporary works, or materials, except as stipulated in Article (54) of these conditions.
Article No. 46 – Quantities:
The quantities stated in the bill of quantities are estimated quantities for the works. Accounting is based on the actual quantities executed.
Article No. 51 – Initial Handover:
Upon completion of the works, the contractor is responsible for clearing the site of all equipment, materials, dust, and waste, and ensuring its suitable condition for use. The contractor must then send a written notice to the employer, who will set a date for the inspection in preparation for the initial handover. The employer must provide written notice of the inspection date within a maximum of fifteen days from the date of receiving the Contractor’s notification.
The employer or their representative shall inspect the works upon receipt and conduct the initial handover in the presence of the contractor or their representative. A record of the initial acceptance process is prepared, and multiple copies are made as necessary. The contractor receives a copy of the record. If the handover takes place without the presence of the contractor, despite being notified by a registered letter, the absence is recorded in the record. If the inspection confirms that the works have been completed satisfactorily, the date of the contractor’s notification to the employer expressing readiness for handover is considered the completion date of the work and the start of the maintenance period.
If, during the initial acceptance, it is discovered that certain items or parts have not been implemented by the contractor, and the preliminary acceptance committee determines that these omissions do not hinder the use of the works for their intended purpose, the employer may consider the works initially delivered. The contractor will be requested to complete the missing works within a reasonable period. If the contractor fails to do so, the employer has the right to deduct the value of these works and assign others to carry them out at the contractor’s expense, while also seeking compensation for any price differences.
Article No. 52 – Final Handover:
The contractor must send a written notice to the owner of the works before the end of the maintenance period, allowing sufficient time to set a date for the inspection in preparation for the final handover. If the inspection confirms that the works comply with the conditions and specifications, they will be finally received based on a report prepared by the employer or their representative, with multiple copies as needed. The report will be signed by both parties or their representatives, and a copy will be provided to the contractor.
If, during the inspection, it is discovered that there are deficiencies, defects, or malfunctions in some of the works, even if they were not included in the initial delivery report, the final handover will be postponed. As a result, the maintenance period will be extended until the deficiencies are addressed, or the defects are repaired by the contractor within a reasonable period specified by the engineer. The contractor will be responsible for fulfilling their obligations. The employer may choose to make the necessary repairs at the contractor’s expense and under their responsibility or deduct the value of the repairs from the guarantee, as per the list of quantities and prices.
In a dispute concerning the contracting contract, it is determined that the trial court has the authority to gather and comprehend the reality of the lawsuit, provide an accurate legal interpretation of the agreements, contracts, and conditions in question, and determine the common intention of the contracting parties. The Court of Cassation does not have control over the trial court’s judgment as long as it is based on valid reasons and does not deviate from the intended meaning implied by the expressed terms.
Disputes between the contractor and the employer regarding the contracting contract will be resolved in accordance with the general conditions of contracting (FIDIC), which include an agreement to arbitrate all disputes arising from the obligations stated in the contract. It is not necessary for the contracting contract to include the details of this condition; it is sufficient to make a reference to it.
Based on the above, it is evident that contracting contracts require accuracy and importance. It is crucial for the contracting parties to rely on experienced lawyers specializing in real estate and property contracts to safeguard their rights and avoid misunderstandings, penalties, or legal accountability.
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