Posts Tagged ‘law’

Decennial Liability and Latent Defects Contractors’ and Developers’ Liability in Dubai

By Lisa Dale & Steven Hunt
Since the advent of Dubai’s construction boom circa 2002, fuelled by the relaxation of restrictions on property ownership by foreign nationals, thousands of new residential property units have been completed by developers and handed over to their new owners for occupation. This relatively recent phenomenon of home ownership on any significant scale has heightened the need for both contractors and developers to understand their potential legal exposure to home owners when defects begin to appear in the properties that they have either constructed or sold to them. (Read more..)

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To What Extent Does Freedom of Contract Exist for You in the UAE?

by Melanie Grimmitt

If you are a construction contractor accustomed to operating in common law jurisdictions where the doctrine of “freedom of contract” is generally upheld, you should be aware that the position under UAE law is different. We explore how it is different below …

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Issues involved in Taxation of Construction contracts

by Sujjain Talwar

There is a lot of mystery regarding taxation of Construction activities in India. The mystery starts from the fact that a Construction contract involves both labour and material and hence, both Service tax and Value Added tax is levied on one transaction.

The process becomes more complex depending upon a number of factors such as the Scope of work, the nature of the contract, whether the contract includes any further sub-contracting, whether individual prices have been specified for each part of the scope of work and whether the contract involves off-shore and on-shore activities etc.
Let us first consider the Indirect taxes applicable on a Construction contract. As already stated above, a Construction contract involves both labour and materials. Hence, a Construction contract is liable to both Service tax and Value Added tax.

(Read more..)

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Effect of civil code on supply contracts

By James Williams

In terms of the large-scale construction projects familiar to Dubai, the building contract has received more attention than any other agreements, which include development agreements and deals to lease, the contractor’s security package, warranty documents and documents relating to the provision of finance. (Read more..)

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GCC in catch-22 over FIDIC forms

The Fidic form of contracts has been in the Middle East since the 1970s, yet it is far from popular. Adam Webster looks at legal issues that should be borne in mind when negotiating Fidic-based contracts.
THE legal systems of the Middle East are founded upon civil law principles (most heavily influenced by Egyptian law, which is itself based on the Napoleonic Code) and Islamic Shariah law – the latter constituting the guiding principle and source of law. (Read more..)

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Key points while entering into a joint venture in the Middle East

by James Bremen

The use of joint ventures or consortiums are attractive because they allow contractors, consultants and financiers to team up and offer owners a single interface for all needs of a project.

Owners are increasingly requiring that consortiums be formed to provide a single point responsibility and to ensure bidders have the ability to perform the scope of work.

In light of this development, this article seeks to highlight some of the key legal and practical issues, which should be considered when entering into a joint venture or consortium agreement. The term “consortium” is used throughout the article to refer to both “consortium” and “joint venture.” (Read more..)

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Be careful when you terminate a contract

In the current economic climate, there is growing interest in whether a contract can be cancelled, if one party is no longer able to fulfil its obligations due to financial difficulties.

A basic principle of contract law is that the contracting parties must perform their obligations with good faith and in a manner consistent with the contract. However, subject to this basic principle, a party to a contract that is subject to UAE law, can seek to end the contract in one of three ways: (Read more..)

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Arbitration and civil procedure

by Dennis Brand

I think it is fair to say that occasionally some thought is given as to enforcement of the arbitration award, but rarely if any real thought is given to the jurisdiction of the local courts, either as to any challenge to an arbitration award or its enforcement.

Unlike many jurisdictions, the UAE does not have an arbitration law; in 2008, a draft arbitration law was in circulation, but as of today it is still in draft form. (Read more..)

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‘Swift’ arbitration is key

‘Swift’ arbitration is key
by Dr Chandana Jayalath
Construction contracts often include ‘keep working provisions’ for the parties to perform their obligations, despite the existence of a dispute. The contract may expressly forbid the contractor’s right to suspend work or terminate the contract, although inconsistent with the local law.
For example, under English law, there is a statutory right to suspend work for non-payment, which can not be excluded by contract.
Also, the employer may have the right to require a contractor to proceed with variations despite the time and cost consequences, not having been agreed in advance. In a fixed lump sum contract, the contractor may lodge a claim for variation, but the employer might deny it upfront on the basis of ‘lump sum’ or pay half of the cost pending evaluation at a later stage. The engineer may ask the contractor to go ahead with the rates he deems suitable whenever the contractor has no option, because of his obligation to complete works on time.
Although the contractor is supposedly responsible for quantity errors, in any typical lump sum contract where the quantities are said to be actual and correct, he will purposely keep silent in a windfall such as overestimated quantities that bring him money for nothingAlthough the contract expressly says no re-measurement is possible, the losing party may bring out this case and attempt to interpret the function of re-measurement as the ‘standard practice’.
There is usually a term implied to the effect that the client will not prevent the contractor from carrying out work in accordance with the terms of the contract, which is sometimes referred to as the prevention principle. In the UK case of Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970), some defective work was discovered before practical completion had been achieved.
The client was responsible for long delays owing to failure to approve a scheme of remedial works. A dispute arose concerning the contractor’s entitlement to an extension of time. Unfortunately, there was no specific provision for an extension of time when the contractor is delayed by the client, which is a fatal shortcoming in the contract. Another aspect is that many contracts do not have a mechanism to compensate the loss behind unprecedented price escalation in the Gulf region. This is where swift solutions are required to minimise potential losses suffered by parties, instead of allowing ‘loss to prevail where it lies’, particularly when contracts are silent.
Perhaps some claims are indeed necessary and the provision for making claims is essential in order to accommodate unavoidable changes, for example by granting justifiable extensions without invalidating the contract. However, problems arise when the provision is abused, for example by contractors who allegedly tender at low prices with the objective of profiting from their claims. For example, the government sector has now been bombarded by claims more than ever before.
Claims specialists have been busy with compiling claims for work suspended in recession. On the other hand, clients who attempt to aggressively suppress legitimate claims may provoke exaggerated, unjustified or even frivolous claims with the help of their in-house experts. Needless to say, the vicious circles generated by such exaggerated actions and reactions definitely add to the avoidable costs of construction.
The author therefore strongly believes in a speedy, flexible and a fair process, indeed a gentlemanly way to resolve disputes between gentlemen, as Alexis Mourre says, rather than too formal court lawyering. This is where ‘swift’ arbitration comes into play in the context of construction thus minimising the legal expenses for making and breaking claims and demoting the tendency towards interim awards and temporarily-binding decisions.
CW

by Dr Chandana Jayalath

Construction contracts often include ‘keep working provisions’ for the parties to perform their obligations, despite the existence of a dispute. The contract may expressly forbid the contractor’s right to suspend work or terminate the contract, although inconsistent with the local law. (Read more..)

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Legal ramifications of the recession

by Michael Pilkington and Peter Smith

As the economic slowdown continues to affect the Dubai construction market, there is no doubt that for much of the industry one inevitability will be an even greater squeeze on cashflow. (Read more..)

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