Nature of Disputes in Construction industry- An overview

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Construction industry is today fast paced, complex and involve multiple parties thereby creating numerous issues from which dispute arises.

Some of the contentious issues are as follows:

The right to suspend works:

Under FIDIC Red book, Sub Clause 40.1 & Sub Clause 69.4 determines this right. The issue is whether the party suspending the work has the right to do so and what are the reciprocal rights & remedies of the other party. Another issue is in the absence of any contractual right to suspend work, what is the remedy available under the UAE law?

Engineer’s instruction to recover lost time – Sub Clauses 46.1, 8.6 of 1987 & 1999 FIDIC Red Book . The issue which arises is whether in the particular circumstances, the contractor is obliged to give effect to such an instruction and if so, would the contractor be entitled to claim the additional costs or expenses in complying with such an instruction.

The issue becomes more complex when the contractor argues that it is not responsible for the delays and the Engineer had failed to give adequate extension of time. This requires detailed investigation.

Employer’s rights to employ a third party to take over part of the works:

FIDIC 1987 & 1999 Red Books provide that the Employer is obliged to provide access and possession of the site to enable the contractor to carry out the full scope of the works within the contractual deadline.

Save for certain circumstances, the employer is not entitled to take possession of the site or control of the works until a Taking Over certificate is issued for the whole or part of the works or the contract is terminated.

Furthermore, omission of any part of the works from the original scope of the contractor is not permitted if such works are to be carried out by the employer or any third party. (Sub Clauses 51.1 (b),13.1(d) of the 1987 & 1999 FIDIC Red Book )

Sub-Clause 7.6 of the 1999 FIDIC Red Book allows the employer to carry out urgent works for the safety of the works if the contractor fails to do inspite of notice.

The Engineer

A number of professionals may be engaged by the Employer on the project. The various interactions & communications often causes confusion as to who is the Engineer or the lawful representative of the Engineer whose instructions and determinations are binding on the parties.

So the person/Engineer who regularly issues instructions and approvals to the contractor should be named in the contract. This is very important because otherwise, either party may not be certain to whom they should refer their claims or disputes in order to obtain the Engineer’s valuation, certification or determination.

So initiating a dispute resolution mechanism under standard FIDIC Red Books under Sub Clause 67.1 & 20.4 of 1987 & 1999 FIDIC Red Book remains an issue in these cases.

Back to back or pay if paid:

This is the most contentious issue in the construction business. In the absence of any legislation that disapproves such practices and coupled with the principle of freedom of contract and the concept of good faith in exercising contractual rights, it is always an issue which creates complications for the affected party specially the sub contractor.

Added to this, the ongoing liquidity crisis due to a sustained low oil price has also added to the disputes factor & claims.

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This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

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