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Labilities of Construction Contracts Under Qatari Law
Limitation or period to bring on a Claim against the other party in a Construction Contract is very significant therefore both the Employer & the Contractor shall know of the legal perspective and be aware that if a claim is not brought forward within the prescribed period the innocent party may lose its rights for the Claim and also the failure would automatically assist other party as a defense against the Claim regardless of the merits of the Claim.
Whatever the jurisdiction of the Country weather the likes of Civil code or Common Law, generally the procedure to recover damages is through express terms of the Contract or Implied terms under the Law in accordance to any limitation or restrictions.
FREEDOM OF CONTRACT IN QATAR & LIABILITY
The Civil Code recognizes the parties’ freedom of contract, subject to certain legislative provisions. This is expressed under Article 154 of the Civil Code, which states: “The contract may include any provision agreed to by the contracting parties, unless such provision is prohibited by law or is in breach of the public order or morality.”
Article 154 of the Civil Code therefore expresses the contractual principles of freedom of contract. The parties are generally free to agree to whatever contract terms they choose (subject to certain prescribed limits), including terms governing liability and the limitation or exemption of liability.
Article 171(1) provides that binding contractual provisions become the ‘law’ between the parties, except where mandatory provisions of Qatari law apply:
“A contract is the law of the contracting parties, and it may not be revoked or amended, except by agreement of both parties or for reasons prescribed by the law.”
Article 259(1) specifically permits contractual limitation/exclusion clauses, in the absence of deception or gross mistake:
In Qatar the principal legislative instruments defining limitation periods are:
Law No. 27 of 2006 (Commercial Code), and Law No. 22 of 2004 (Civil Code).
Most construction contracts in Qatar are for “commercial activities” between “traders”, as both terms are defined in the Commercial Code. Accordingly, Article 87 of the Commercial Code identifies that the limitation period will generally expire ten years after the breach occurred
Civil Code not only permits parties to limit their respective contractual liabilities in this way, but also includes provisions to protect and safeguard such contractual limitations. For example, Article 267 of the Civil Code states: “If the detriment exceeds the amount of the compensation agreed upon, the creditor may not claim for more than this amount, unless he proves that the debtor has committed some fraud or serious fault.”
Article 267 of the Civil Code therefore affirms that contractual limitations on liability are generally valid, binding and enforceable, absent “fraud or serious fault”.
DECENNIAL LIABILITY
Decennial liability is a form of strict liability and, accordingly, offers significantly more security to real estate investors than collateral warranties, which will only be triggered by breach or negligence on the part of the contractor. Furthermore, the breadth of the pool of potential defendants lessens the risk that an owner or investor would be left out of pocket in the event that defects are discovered after one of the parties involved in the construction is adjudged insolvent. Many civil law jurisdictions worldwide – including most Middle Eastern countries – have codified decennial liability in their civil laws; the position in Qatar is set out at Articles 711 to 715 of the Civil Code (Law No. 22 of 2004).
The liability period commences at project handover, and runs for the lesser of ten years or the intended life cycle of the building or structure
The prescription period for filing claims on the basis of decennial liability in Qatar is three years from the date of occurrence of the collapse or actual discovery of the defect. Thus, in theory, a contractor or consultant could find themselves facing a claim under decennial liability some thirteen years after practical completion of the works.
As decennial liability is a mandatory provision of Qatari law, any contractual attempt to limit its scope or exclude or waive its application will be void and unenforceable as a matter of public policy. However, in accordance with general principles of Qatari law, once the collapse occurs or the defect is discovered – and the right to claim for the resulting damage has crystallised – the building owner can then validly waive that right.
LIQUIDATED DAMAGES
Contracting parties are permitted to agree on a pre-determined rate of compensation or liquidated damages. These contractual provisions generally provide for a limit on the amount of damages that a contractual party can otherwise recover. Article 265 of the Civil Code permits the inclusion of liquidated damages in a contract:
“Where the obligation is the payment of money, the contracting parties may determine in advance the value of the compensation in the contract or in a subsequent agreement.” amount of liquidated damages that can be recovered in case of delay. Often, the cap is 10% of the contract value, meaning that the non-defaulting party cannot recover liquidated damages from the defaulting party in excess of the 10% cap.
Pursuant to Article 267 of the Civil Code, if the loss exceeds the value of the agreed compensation, a party may not demand more than the agreed amount, unless there is deception or gross mistake.
TO CONCLUDE
Parties have freedom of contract in Qatar subject to the exceptions contemplated by the law. Contracting parties are therefore generally free to limit or exclude contractual liability, such as that for failure or delay in executing obligations (Article 259(1) of the Civil Code) and liability for the fraud or serious fault of an employee (Article 259(2) of the Civil Code). Conversely, the contracting parties are free to agree to hold each other liable for certain events, such as force majeure (Article 258 of the Civil Code).
Accordingly in general Art 251 (1) Contractually agreed limits or exclusions of liabilities are effective except incase of fraud, misconduct or negligence also Art 259 (3) Any liability which arises through tortious acts cannot be excluded or reassigned i.e. Fraud, gross negligence.
Therefore parties to the Contract should be mindful of their liabilities and limitations under their construction contract and operate carefully whilst respecting their obligations to avoid unnecessary delays, disruptions & disputes.
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