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General
3. Levels
Level 1 – Knowledge and understanding
Level 2 – Application of knowledge and understanding or strong theoretical knowledge of
procedures (if candidate has no experience)
Level 3 – Reasoned advice and demonstrate detailed dept of understanding
Ex: Procurement methods / Holistic approach – not expected to have experience in all fields
Introduction
Syllabus
What is a contract – a legally binding agreement with specific terms made between two or
more parties in which there is a promise to do something in return for a valuable benefit
known as consideration.
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Construction Contract Documents;
b) Contents;
Vol 1 – Contract Agreement, Form of Tender, Instructions to Tenderers, CoC, App to
Tender
Vol 2 – Specification
Vol 3 – BOQ
Vol 4 – Drawings
c) Key differences between Tender and Contract – Contract Ag, Tender Add, PTC added
2. Legislation
Court structure (Court of First Instance, Court of Appeal – Points on facts and law, Court of
Cassation - Dubai / Federal Supreme Court – AD – points of law only)
Important law provisions (CPC – Law no 11 of 1992 Articles 203-219 for Arbitration, Federal
law No 5 of 1985 for Contract law, Labour law Federal Law no 8 of 1980, Environmental law)
Common law (judge made, case law, precedence) – UK, Australia, Hong Kong vs Civil law
(legislature, no precedence) – UAE, Egypt, France, Germany
3. Current case law – keep reading recent publications (Not really applicable to UAE context)
a. Types of Standard forms of contracts (FIDIC, NEC/ECC, JCT, ICE, IChemE, PPC 2000 /
TPC 2005)
b. Types of FIDIC forms of contracts (1987, 1999, Rainbow edition – Red, Yellow, Silver,
Green, White)
c. Differences between FIDIC 1987 & 1999 (Engineer impartial, DAB provision, Fit for
purpose, Termination for convenience, Employer’s claims, VE, Late payment, AP, Off site
materials, Payment due date, Force majeure)
d. Differences between your contract and FIDIC (PB compulsory, Cl 44 /53 notice period,
condition precedence, AP, Price fluctuations disallowed, Cl 67 – rules changes – DIAC /
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DIFC / ADCCAC, Cl 52.3 % - adjustment of Site and general OH due to Variations, Boycott
Israel, Decennial liability)
e. Why Std forms are good? (Balance risk allocation, time tested for possible flaws, familiar
by all parties, less disputes, legal costs minimized, ready to use)
6. Assignment / Novation
.
Assignment –Mechanism to transfer rights by one party to a third party (Liabilities / burdens
cannot be assigned). Generally does not require the consent of other party (Construction
contracts usually require)
Novation – Mechanism to transfer all rights and liabilities by one party to a third party who
will replace the original party in the contract. Requires the agreement of all three parties
involved.
Question – How do you ensure the continuity of the dewatering subcontractor appointed by
the piling works contractor following the completion of the piling works?
PB – Provided by bank or financial institution, usually 10%, Clause 10.1 - issued within 28
days upon receipt of LOA, Clause 10.2 - returned within 14 days after DLC
For the Emp to recover losses in the event of a breach of contract by the Contractor
Unconditional and on demand – The Emp does not require any proof of the Contractor’s
default to claim his entitlement
9. Insurances
b. Remedy if Contractor fails to insure – Clause 25.3 (Emp may take and deduct premium)
c. Emp take third party insurance – harbor / airport construction (liability is more and
disproportionate to contract sum)
d. Umbrella cover – Emp take insurance for Works + third party (large developments),
Include later packages as a schedule, why contractor also take insurance in some
instances? (Deductible – first amount of claim not covered)
e. Cross liability (Clause 23.3) – when insurance under both contractor and employer,
damages to both parties are covered as if they are separately insured (both parties can
seek compensation for their individual losses – culvert slab collapse damaging cables)
f. Subrogation – right of the insurance company to sue whoever is responsible for causing
loss to the insured
Why AP – generally there is a negative cash flow for most part of the project, reduce finance
cost to Contractor
Generally against a bond – Need to submit approved wording, contract copy and cash flow
forecast to obtain AP Bond from bank. Specific provisions in the wording - operation clause
and reduction of value
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11. Interim valuations and payment provisions
Clause 60.1 – at the end of each month submit monthly statement in respect of;
Value of Permanent Works executed
Any other items in BOQ (Contractor’s Equipment, Temp Works, dayworks etc)
MOS (% and list as stated in App to Tender)
Price fluctuations (under Clause 70
Any other sum (claims under Clause 53)
Clause 60.2 – within 28 days of receipt of statement, deliver Interim Payment Certificate to
Emp subject to;
Retention – at % and subject to limit stated in App Tender
Deductions other than LDs – Eng’s OT (rate of progress – Clause 46.1), Cost of
insurance effected by Emp (Clause 25.3), Payment to NSC (Clause 59.5)
Issuing IPC is subject to min amount of IPC – as stated in App to Tender and performance
security provided and approved by the Emp
Clause 60.10 – within 28 days of the receipt of IPC, Emp to pay subject to Clause 47 (LD)
Interest for late payments at the rate stated in App to Tender
Material off-site
The Contract should allow material off-site payments
Vesting certificate – undertaking materials are sole property of the Emp
Insurance – as Contract insurance policies do not cover off-site materials
Clearly marked and separated from other materials
Factory inspection certificate
13. Fluctuations – Not applicable in UAE but need to know how the calculations are done
Retention – to encourage the Contractor to rectify defects / to allow Emp to take remedial
actions and recover cost in case of Contractor’s failure to rectify
Percentage – stated in App to Tender
Limit of Retention Money – stated in App to Tender
Retentions are not applicable on price fluctuations – Clause 60.2
Retention bond – bond submitted by the Contractor in order to allow early release of
retention if the Contract allows (either monthly or upon issue of TOC)
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15. Change procedures
Why changes – The Emp may change his mind, Unavailability of specified materials,
unforeseen site conditions, changes in Authority requirements etc
Contractor shall only do instructed changes as per Clause 51 (Exception – Clause 40.3,
suspension of part of the Works can be considered omitted)
Climatic conditions – Contractual entitlement only for EOT and no cost – why?, beyond control
of both parties, loss lies where it falls (Contractor – prolongation cost, Emp – revenue loss)
Delays – Contractor, Employer and Neutral
Solitary delay vs Concurrent delay – Out of above three types, two or more delays happen at
the same time or effect felt at the same time – not addressed in FIDIC.
True concurrency – delay happens at the same time
Sequential concurrency – delay happens sequentially but the effect felt at the same time
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SCL delay and disruption protocol – provide guidance says for concurrent delays;
Contractor’s delay should not reduced EOT due
However, compensation only to the extent that Contractor can separate loss that flows
from the Emp risk event
Check Prof Sam’s analysis of arguments (why contractor should be compensated)
Critical path – longest path in a programme which will establish minimum overall project
duration (programme is a network of logically sequenced construction activities), delays to CP
activities delay overall completion unless subsequent activities are compressed (work OT,
airfreight materials, revised methods of construction, additional equipment)
Mitigation vs acceleration – mitigation contractual duty, not paid for whereas acceleration is
done upon instruction from Emp/Eng except in the case of constructive acceleration (working
OT, additional labour, equipment, advancing materials delivery, changing methods of
construction)
Free Float – difference between early start and late start of an activity (float available for an
activity without affecting succeeding activity), who owns the float? (External pipeline –
Contractor delay procurement, Emp delay drawings)
Project Float – if CP ends before contractual completion date of a project
Causal link – but for the event giving rise to the claim, the contractor wouldn’t have suffered
the loss (loss should be naturally and directly arising from the breach)
Type of programmes;
Programme submitted pursuant to Clause 14.1
Revised programmes submitted pursuant to Clause 14.2 (recovery programmes – 46.1)
As-built programme
Delay analysis methods – As planed impacted, As planed as built, Collapse as built, Time slice
analysis
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Further interim accounts – accumulated amount of claim at intervals as agreed with
Eng
Final account - within 28 days of the end of effects
Clause 53.5
Contractor entitled be paid under interim PC
If particulars insufficient to substantiate whole claim, then such part substantiated
Types of claims
Contractual claims – arising out of expressed provisions of the Contract (Additional
payment under Clause 53)
Claims at law – breach of implied terms of the Contract (Decennial liability)
Quantum meruit claims (Ex: Work done based on LOI)
Ex gratia claims – out of kindness to maintain relationships (Ex: Due to substantial
pricing errors, Exceptional price fluctuations)
Structure of a claim
Facts – Contemporary records, witness statement, other evidence (news)
Legal basis – Contractual and legal provisions
Liability – Emp liability to provide relief
Quantum – Amount of EOT and/or additional payment
SCL Protocol – Evaluation of costs based on the period when the effect is felt and not the
extended period
19. Dispute avoidance and resolution – under the contract, other mechanisms, pros and cons
Dispute avoidance
Choose correct procurement path
Ensure proper coordination between different tender documents and provide timely
and proper answers to tender queries and distribute to all
Use standard forms as much as possible
Allow sufficient time to finalize contracts
Appoint qualified professionals to prepare and administrate contracts
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Dispute resolution under the contract - as per FIDIC 1987;
Clause 2.3 – If Contractor questions ER’s communication, he may refer to Eng who
shall confirm, reverse or vary
Clause 67.1 – Refer to Eng for decision / Eng decision with 84 days / If dissatisfied or
no decision given by Eng within 84 days – notice to commence arbitration within 70
days / arbitration shall commence on or after 56 days from notice unless agreed
otherwise by parties
Other mechanisms;
Challenge Arbitration Award – Procedural errors / Equal opportunity / Bias (Conflict of Int)
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21. Sectional completion / Partial possession (Clause 48.2)
Sectional completion – completion of any Section for which separate Time for Completion is
provided in the Contract
Partial possession – occupation or use of any substantial part of the Permanent Works by the
Employer either before or after completion to the satisfaction of the Eng
In both cases, the Contractor may request and Eng shall issue TOC as per Clause 48.1.
Substantial completion means – The Emp can take beneficial use of the project for its
intended purpose – Contractor still liable to complete the project in its entirety but entitled to
receive TOC
23. Determination
Determination – a valid and enforceable contract comes to an end prematurely before it has
been discharged by performance
Frustration – not possible for the contract to complete without the default of a party (illegal,
impossible to perform, radically different from original bargain)
Ex: Release of performance – Clause 66.1 – parties shall be discharged from the contract
Ex: Govt acquire land, New regulation, Tunnel instead of bridge
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Clause 69 – Employer’s default
Grounds:
1. Failure to pay within 28 days after time stated in Cl 60.10 (28 days for IPC)
2. Interfering with or obstructing issue of any PC
3. Becoming bankrupt
4. Notice as to unforeseen economic conditions
Then Contractor may terminate his employment after giving 14 days notice
Antecedent breach - a breach committed by either party before termination of the contract or
being discharged from the contract (Clause 65.6 – Outbreak of war & 66.1 – Release from
performance)
24. Final accounts – be familiar with the procedure as per your contract
As per FIDIC 1987;
Draft final statement within 56 days of issuing DLC (Value of work done + any further sums)
If agreed, Final Statement + discharge letter
If dispute exists, Eng issue Interim Payment Certificate, dispute may be administrated under
Clause 67
Final Payment Certificate within 28 days of receipt of FS (the amount finally due + balance)
Final payment within 56 days of receipt of FPC
26. LAD – Liquidated (represented by a monetary value), Ascertained (amount stated prior to
commencement of contract)
Liquidated vs Un-liquidated damages
Genuine pre-estimate of the Emp’s potential loss due to Contractor’s breach of contract, Void
if it is not a genuine estimate and Emp will recover un-liquidated damages
Remoteness of Damages – damages which could have been reasonably foreseen at the time
the contract was executed (Ex: Hotel accommodation charges of the tenants)
Penalty vs LAD?
27. Defects rectification period (in FIDIC 1987 Clause 49.1 – DLP, FIDIC 1999 – DNP)
Why is it normally 12 months – to cover all climatic seasons to test and reconfirm (Ex: leaks
not found until rain)
Consequences of DLP;
1. Eng to issue DLC, within 28 days upon expiry of DLP – Clause 62.1
2. Other half of retention become due – Clause 60.3
3. Contractor to submit FS within 56 days of issuing DLC – Clause 60.6
4. End of Contractor’s obligation for insurance
5. Performance security release within 14 days of issuing DLC – Clause 10.2
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Liabilities of Contractor after DLC
1. Extended warranties, if any
2. Unfulfilled obligations pursuant to Clause 62.2, if any
3. Decennial liability pursuant to UAE law
4. Confidentiality undertakings
h. Time is of the essence – time limits must be strictly adhered to – failure to do so may
release other party
j. Quasi-contract – Contractor commenced works at site before agreeing the essential terms
of the Contract – obligation to pay if negotiation fails
k. Quantum merit – LOI issue no price agreed, extra works done no mechanism to value in
the contract, contract is void
Entitlement - as much as one deserve / payment of reasonable sum for the work done
”The contra proferentem rule states, broadly, that where there is doubt about the
meaning of the contract, the words will be construed against the person who put them
forward.”
m. Prevention principle – party cannot benefit from its own breach to the detriment of the
injured party (Ex: no provision for EOT, Emp delay, Contractor liable for LD – this is
against good faith)
Ex: persistent failure by the Emp to pay the Contractor or not providing access to the
Contractor – make it clear that one party has no intention of performing his part of the
bargain
o. Time at large – happens when there is no completion date in the contract or no provision
to extend time for completion when Emp delays the project and time runs beyond
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r. Set-off – three types
Equitable (closely connected – Under same contract but not expressly allowed – Emp
procure materials on Contractor’s behalf),
Legal (not required to be closely connected – may be different projects but the amounts
should be liquidated / known / can be readily ascertained Ex: payment against a PC vs LD
against a separate contract)
s. Negligence – breach of duty to exercise reasonable skill, care and diligence / law of tort
In UAE – 10 years
In UK – 6 years by Limitation Act (RICS requirement for run off cover)
t. Joint & several liability – Defendants are liable for full damages regardless of their
individual share of the liability as claimant may pursue its claims against anyone party
u. Decennial liability – Designer and contractor are jointly liable for the defects threatening
the stability of the building for 10 years from the date of delivery (Articles 880-883 of Civil
Code)
Consequences of LOA;
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Consequences of TOC;
1. DLP commences
2. One half of the retention release
3. Contractor’s obligation for Works insurance ceases except for outstanding works
4. Contractor is no longer liable for LD
5. Statement at Completion – within 84 days of issuing TOC – Clause 60.5
Provisional sums;
1. Defined provisional sums – amount and type of work is mentioned and to be included
within Contractor’s programme and preliminaries
2. Undefined provisional sums – Only amount and no type of works mentioned. It is only a
contingency and not to be allowed within Contractor’s programme or preliminaries.
3. Familiar with provisions in your contract (FIDIC – Clause 58)
Suspension;
1. Engineer may instruct suspension – Clause 40.1 (Is the Contractor entitled for EOT in case
of suspension of Work due to climatic conditions?)
2. Contractor may suspend – Clause 69.4 (in case Emp’s failure to pay)
Contract Administration;
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