COMPARISON OF SELECTED
CONSTRUCTION ISSUES
BAHRAIN, QATAR & SAUDI ARABIA
SOCIETY OF CONSTRUCTION LAW (GULF)
17 SEPTEMBER 2012
Presented by: GAVIN WITCOMBE
Partner
Baker & McKenzie Limited
Bahrain
BAHDMS 326052 v1
INTRODUCTION
– GCC States of Bahrain, Qatar, UAE, Kuwait, Oman – contract law
generally governed by Civil Codes.
– Civil Codes have many similarities, particularly Bahrain and Qatar.
– Saudi Arabia – contracting law governed by Islamic (Shariah) law.
Islamic law supplemented by statutes, regulations, decrees and
circulars but not generally relevant to contracting or construction.
– Saudi Government contracting regulated by Government Tenders and
Procurement Law 2006 and its Implementing Regulations 2007.
– Saudi Government entities must use approved forms of contract.
– Understanding law applicable to construction critical, not only for
disputes but at tendering stage.
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ISSUES COVERED:
1. Liability Periods
2. Design Liability of Contractor
3. Scope of Damages Recoverable
4. Liquidated Damages
5. Time Bars
6. Limitation/Exclusion of Liability
7. Contractor's Right to Suspend
8. Force Majeure/Unforeseen Events/Changed Circumstances
9. Subcontractor's Rights Against Head Contractor's Employer
10.Unjust Contracts
11.Termination for Convenience
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DISCLAIMERS:
– This analysis is a brief overview of some legal principles that will apply
to construction contracts in Bahrain, Qatar and Saudi Arabia. It is
intended only as a general guide and not as legal advice.
– In relation to Bahrain, advice from qualified Bahraini counsel should be
obtained before embarking on any transaction or course of action
where these issues may be relevant.
– This analysis has, to some extent, been based on English translations
of the relevant Arabic laws, which translations may be not entirely
accurate.
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1. Liability Periods
BAHRAIN QATAR SAUDI ARABIA
Bahrain Civil Code 2001 (BCC), Similar to Bahrain. See Qatar Civil Unlimited.
Articles 615-620: Code 2004 (QCC) Articles 711-715.
In addition, in Government contracts
Contractor and Supervising contractor provides 10 year warranty
Arch/Eng.- Jointly liable for total or for partial or total collapse (A. 76
partial demolition and other defects Tenders and Procurement Law).
which threaten strength and safety of
building or structure for 10 years from
completion.
Designer – Liable for design defects
for 10 years.
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2. Design Liability of Contractor
BAHRAIN QATAR SAUDI ARABIA
In construct-only contract, contractor In construct-only contract, contractor Likely to be similar to Bahrain and
will be liable for design defects which will be liable for defects in design Qatar.
are obvious (BCC 617). which should be obvious to a
contractor and should have been In Government contracts, contractor
identified by the contractor in has an obligation to check and notify
accordance with professional Government of errors in plans,
standards of the industry . Contractor specifications and soil tests (A. 48 of
will have obligation to notify employer Implementing Regulations of Tender
of such defects and obtain and Procurement Law).
instructions before proceeding (QCC
715 and Qatari general law).
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3. Scope of Damages Recoverable
BAHRAIN QATAR SAUDI ARABIA
Direct and indirect damages Similar to Bahrain (QCC 263) Only actual, direct and quantifiable
recoverable but such damages shall damages may be claimed.
not be greater than those which could Consequential damages, such as
have normally been foreseen at the loss of anticipated profits, are not
time of entering into the contract – ordinarily claimable.
unless defaulting party is guilty of
fraud or gross negligence (BCC 223)
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4. Liquidated Damages
BAHRAIN QATAR SAUDI ARABIA
BCC: 225-227 LD's are permitted but will not be
LD's are permitted but will not be due Similar to Bahrain (QCC 265-267) claimable unless damage has
if contractor establishes that employer actually been incurred.
has not suffered any loss.
LD's cannot include compensation for
Court can adjust LD's if greatly lost profit – only direct losses.
overestimated.
Court may not enforce where the
If employer's actual loss exceeds agreed LD's are very excessive.
LD's, cannot claim for additional loss
unless contractor was guilty of fraud or Government Contracts contain a
gross negligence. complex penalties formula but total
amount of delay penalties may not
Apart from BCC, courts have a exceed 10% of the contract value.
discretion to award more than the
agreed LD's if employer's loss greatly
exceeds the LD's.
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5. Time Bars
BAHRAIN QATAR SAUDI ARABIA
Likely to be enforced subject to any Similar to Bahrain. Parties required to Not generally enforceable under
rights available under the BCC. For act in good faith (QCC 172) Saudi law.
example, lack of good faith (BCC 129)
if employer encouraged non-
compliance.
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6. Limitation/Exclusion of Liability
BAHRAIN QATAR SAUDI ARABIA
Liability can be capped or excluded Similar to Bahrain (QCC 259 (1)) Contractual limitations on, or
other than for fraud or gross exclusions of, liability not generally
negligence (BCC 219) enforceable under Shariah as
considered to be a waiver. Future
rights cannot be waived unless the
waiving party has a very clear idea of
the specific nature and value of the
right he is waiving.
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7. Contractor's Right to Suspend
BAHRAIN QATAR SAUDI ARABIA
Either party to a contract may abstain Similar to Bahrain Will depend on contract terms.
from performing if other party does not (QCC 191)
perform their obligations – unless In Government contracts, contractor
agreed to the contrary (BCC 150). is prohibited from suspending even if
Government is in default (A.49
Implementing Regulations of Tender
and Procurement Law).
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8. Force Majeure/Unforeseen
Events/Changed Circumstances
BAHRAIN QATAR SAUDI ARABIA
Force Majeure Force Majeure Saudi courts have expressed a concept
of unforeseen and exceptional
BCC 216,218: Contractor not liable for QCC 256,258 (extraneous causes circumstances.
events beyond its control – subject to beyond a party’s control)
contract. In addition, in Government contracts the
Unforeseen Events contractor will be entitled to an extension
Unforeseen Events Similar to Bahrain of time if the delay is due to unforeseen
BCC 130: (QCC 171) circumstances or for reasons beyond the
''When, however, as a result of contractor's control (A.51 Tenders and
exceptional and unpredictable events of Procurement Law).
a general character, the performance of
the contractual obligation, without
becoming impossible, becomes
excessively onerous in such a way as to
threaten the debtor with exorbitant loss,
the judge may, according to the
circumstances, and after taking into
consideration the interests of both
parties, reduce to reasonable limits by
lessening its extent or increasing its
consideration, the obligation that has
become excessive. Any agreement to the
contrary is void.'' 12
9. Subcontractor's Rights against Head
Contractor's Employer
BAHRAIN QATAR SAUDI ARABIA
Subcontractor has a direct right of Similar to Bahrain (QCC 702) Subcontractors do not have any
action against head contractor's direct recourse against Employer.
employer to extent sums are due by
employer to main contractor (BCC In Government Contracts,
605). Government will have recourse
against subcontractors as jointly
liable with main contractor (A.71
Tenders and Procurement Law).
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10. Unjust Contracts
BAHRAIN QATAR SAUDI ARABIA
BCC 57-59 describes contracts Similar to Bahrain Concept of Riba (unjust enrichment)
adhesion (or submission) being (QCC 105-107). may assist: Contracts where one
standard conditions not subject to party gains unjustly at the expense of
negotiation. A judge may modify harsh another could be considered void
conditions or relieve a party of its especially if the party gaining unjustly
obligations even if aware of has a monopoly or market
conditions. Any agreement to contrary dominance in the subject matter of
is void. the contract.
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11. Termination for Convenience
BAHRAIN QATAR SAUDI ARABIA
Employer may terminate contract for Similar to Bahrain (QCC 707) Nothing in Saudi law which expressly
convenience but must pay for all allows or prohibits termination for
expenses and lost profit. The court convenience, so will depend on
may reduce the compensation to the parties contract.
contractor for loss of profit if the
circumstances justify. (BCC 611). Government contracts do not
incorporate a termination for
If contract expressly excluded right to convenience right.
lost profit it is arguable the contractor
would have waived entitlement to
claim lost profit.
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