The UAE Civil Code and Claims under the Red Book FIDIC in the UAE

The UAE Civil Code and Claims under the Red Book FIDIC in the UAE
For all its innovation and spectacular achievements, the
construction industry in the UAE has been slow to move on from
its close relationship with the FIDIC Red Book (4th Edition) (the
Red Book). This was, of course, superseded long ago and it is
scarcely used anywhere else in the world, outside of this region.
The Red Book provides a number of notoriously tricky
procedures for claim notification and particularisation to be
followed by the Contractor. They are not sharply drafted and
their meaning and intent are not always clear. However, it seems
to be implied in some cases that if these procedures are not strictly adhered to by the Contractor, the claim will be dead
in the water – in other words, the Engineer may be entitled to
reject the claim outright. Building and civil works contracts in
the UAE are generally governed by UAE law and hence the
UAE Civil Code (the Civil Code) will apply. This article considers
how, when express notification procedures are read in the light
of applicable provisions of the Civil Code, a more moderate
and fair outcome may emerge.
Entitlement to Claim
The Red Book provides that in certain circumstances a
Contractor’s entitlement to claim may be lost if he fails to give
notice of his intention to claim or fails to provide detailed
claim particulars within the timescales prescribed. There
are two provisions of the Red Book which state that a failure
to comply with the specified notice or particularisation
procedures for making a claim will justify the rejection of the
claim.
First, Clause 44.2, which is concerned with applications for
extensions of time. This clause provides that in case of noncompliance
with the time limit to provide notice and/or to
provide detailed claim particulars, the Engineer “is not bound
to make any determination” of a claim for an extension of
time. The Engineer, therefore, has a discretion not to make
a determination if either the time limit for notice or for
particularisation is not met.
Second, Clause 52.2, which applies to applications for payment
for variations. This clause states that the varied work will not
be valued unless notice of an intention to claim extra payment
is made within 14 days of the date of the instruction. Strictly
construed, this clause allows for a claim to be disallowed if the
14 day time limit is not complied with The Civil Code
If the Engineer feels inclined to reject an otherwise meritorious
claim solely by reason of non-compliance with strict
technicalities of the notification procedures it is important for
him to consider the provisions of the Civil Code, which might
have a bearing on the issue.
For instance, the Civil Code makes clear that neither party
to a contract should act in bad faith. Article 246 states that
contracts must be performed in a manner consistent with
the requirements of good faith. This could apply, for example,
where a Contractor points to information given in agreed
minutes of a meeting or a periodic report as written notice
of an intention to claim, as required by the Red Book. If,
as is sometimes the case, a question arises as to whether
information in a formal minute or a written report is strictly
“written notice”, consideration of good and bad faith may, as a
matter of UAE law, be relevant. The Contractor may argue, in
such a case, that the Employer and the Engineer have actually
been notified of the existence of the claim, in a written form,
within the stipulated time period and, as such, the purpose of
the notification provision has been fulfilled and that it would be
an act of bad faith not to accept this.
The Civil Code also states that neither party may exercise its
rights under a contract in a manner which is oppressive or
abusive to the other. Article 106 says that the exercise of a
right shall be unlawful if, among other things, the interests
desired are disproportionate to the harm that will be suffered
by the other party. Thus, if an otherwise valid and meritorious
claim is disallowed solely by reason of purely technical breach
of a notice provision, this may well be unlawful, especially if the
likely financial harm to the Contractor is disproportionate to
the interests in upholding the Employer’s contractual right to
receive timely notice.
Furthermore, Articles 318 and 319 of the Civil Code provide
that unjust enrichment is unlawful. If, for example, the Engineer
rejects a claim for additional payment for varied work purely
on the grounds that the time limit for notice has not been met,
it could, as a matter of UAE law, be the case that the Employer
has been unjustly enriched by benefiting from additional work
while seeking to avoid payment by relying on a procedural
technicality. Consequently, the claim may succeed in the eyes
of UAE law even if the notice procedures were not complied
with.
Comment
This article highlights only a few examples of how the Red
Book, when read in the context of the applicable provisions
of the Civil Code, might not have the meaning, or at least the
effect, suggested by the express words used. There are, of
course, numerous other provisions of the Civil Code which are
likely to be relevant and must be considered when advising
the Contractor, Engineer or Employer. Contractual provisions
which appear to have drastic consequences as written in the
Red Book (or in any other standard form contract which may
be used in the UAE) may, in fact, have a modified or different
effect when read together with applicable provisions of the
Civil Code.

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