Covid-19 Impact on Construction Contracts In UAE
It is indeed impossible to ignore the impact of COVID-19 on construction
sector, especially in UAE which has lately been the hub for investors investing
huge amount in construction industry.
Do construction contract stand still during the pandemic, does it allow the
investor to seek for termination of the contract, Will force majeure clause
allow the property developers to escape from their contractual liability, is
corona virus a force majeure event and some similar questions are popping up in
the mind of readers and especially for those who have invested huge chunks in
construction industry in UAE.
Well, the Commercial Lawyers of Dubai will try to enlighten you with the legal
consequences of coronavirus on construction contracts in this article.
Regardless of whether this pandemic can be qualified as a force majeure event,
it is unavoidably an issue of actuality and will rely upon the conditions of
each case. Given force majeure is conditional and is dependent upon the parties'
understanding, it may not generally be maintained by the courts.
Along these lines, in a circumstance of default brought about by COVID-19,
different cures, for example, termination of contract, suspension or pacing of
works might be considered by development experts. It is exceptionally basic for
construction contracts to manage any circumstance of default or inability to
perform ones commitments.
Such disappointment could in certainty be all around expected, regardless of
whether for the contractor confronting a disruption in the hierarchy of workers
and lack of assets brought about by COVID-19 related travel bans. It could
likewise be normal by the employer confronting troubles in making sure about due
and pending payments or giving convenient variations.
Termination of the contract
The law of UAE recognize two types of termination that is by default and other
by convenience. Wherein, as the word suggest the termination by default is one
party fails to perform its contractual obligation and such events are generally
mentioned in the provisions of the contract, entitling the other party to seek
compensation for the damages suffered. Nevertheless, it is yet to be discovered
whether failure to perform contractual obligations due to unexpected impact of
coronavirus will be considered as a valid reason for termination of the contract
Alternatively, it is a strong opinion of many lawyers around the world that it
shall be considered as a force majeure event which prevented the other party to
perform its obligations, thereby seeking relief under such situations.
On the other hand, the termination by convenience is defined under Article 267
of the Civil Transactions Code (Federal Law number 5 of 1985) allowing both the
parties to terminate the contract as per their convenience.Importantly, it is
more likely in the current covid-19 situation that parties may reach to an
amicable termination of the contract to safeguard each otherís interest.
An option in contrast to termination, which is frequently viewed as a best
alternative that is mostly used to threaten than actually being utilized. In
situations like the present scenario, where the parties are unsure is impact of
coronavirus will be reviewed as force majeure they may consider the option of
suspension of work or performance of their contractual obligations.
The option to suspend is set out in Article 247 of Federal Law No. 5/1985.
Nevertheless, this must be applied warily and in accordance with some basic
honesty. Along these lines, a convenient suspension is fundamental and its
legitimacy will depend of the realities of each case. Even though the law issues
various option to contractual parties, it is still advised to reach out to best
lawyers in Dubai to seek genuine legal advice.
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