Contractor’s Right To Clearer Provisions For Time Extension In Construction Agreements
Posted on November 18th, 2014It is rare to come across a construction agreement that does not require the Contractor to complete the works within a specified tight deadline. Such agreements would generally entitle the Employer the right to recover liquidated damages from the Contractor, at a rate determined in the agreement, in the event of delays.
While the above practice is common and universally recognized, the practice of having clear provisions in events where delays are not due to any fault of the Contractor, is not quite as popular.
This issue is even more noticeable in Qatar, an attractive market place, where Contractors compete to win contracts for all the mega projects en route in the State. In fact, Contractors in Qatar frequently find themselves forced to sign one-sided contracts, with vague and discretionary contractual clauses, in fear of risking to lose to other bidders for these same projects.
In the present article, we will discuss the above-mentioned issue, explore possible solutions and envisage on necessary Qatari legal reforms in this respect.
Current situation of the extension of time clauses in Qatar
The standard form of contracts used in Qatar for both local and international projects is the General Conditions of Contract prepared by the Public Works Authority (PWA)- Ashghal (hereinafter referred to as the “Ashghal Contract” or the “Contract”). The Ashghal Contract has been interpreted as an incorporation of the FIDIC form of Contract with an adaptation to comply with Qatar’s market and legal requirements. This Contract, which was initially drafted to fit the expectations of the PWA, with a tendency to prioritize the rights of PWA-the Employer, is now the preferred template agreement of most Employers in the country.
The standard list of events that would relieve the Contractor from its obligation to complete the Works by the contractual deadline, as per the Ashghal Contract, is limited to the events of failure to give possession of the site, additional or extra works and some ambiguous events defined as “special circumstances” or “beyond the Contractor’s control”.
On some infrequent occasions, depending on the type of project and the parties’ respective negotiating powers, the Contractor may succeed in including straightforward provisions in the list of events allowing it to an extension of time.
However, in most other scenarios, the Contractor is often left uncertain as to what its exact rights are.
For instance, what if the Employer stops paying the Contractor which disrupts the progress of the works and causes a delay in the time required to complete said works? What if the Employer asks for a variation or suspends the works and then does not approve the extension of time claim of the Contractor? What about biased Engineers who are willing to do whatever it takes to please the Employer who is compensating them for their work? What if multiple factors or parties cause the delay?
It is unlikely that the current wording of the Ashghal Contract answers the above questions.
Unclear provisions allow for a discretionary interpretation by the Employer and the Engineer. The Contractor is therefore left more exposed to the risk of not being granted the extension of time requested, and consequently the risk of wrongfully bearing liquidated damages for delay.
Proposed remedies and recommendations to Contractors
Qatar Civil Law
The concept of extension of time is not per se recognized under Qatari Law.
Contractors may rest assured though, that the Court would apply other legal principles to the case at hand, in order to weigh up the interests of the parties and reduce an “exhausting” contractual obligation to a reasonable margin if need be [i.e. article 171 of the Qatari Civil Law no. (22) of 2004].
The Court would look to identify the party responsible of the delay and would grant or refuse to grant the extension of time to the Contractor. Accordingly, the Contractor would be relieved from the liquidated damages obligation (i.e. article 199 of the Qatari Civil Law).
FIDIC
A greater protection to the Contractor is granted under the FIDIC form of Contract, where the extension of time is accorded to the Contractor in events of “any delay, impediment or prevention caused by or attributable to the Employer, the Employer’s Personnel, or the Employer’s other contractors on Site” (clause 8.4 (c) of the FIDIC Silver Book).
Such provision should be included to the extension of time clause in construction agreements in Qatar to help preserve the Contractor’s rights.
SIDE LETTERS
It is not too late for Contractors who have signed contracts with unclear provisions to rectify the situation today, subject to agreement of the Parties.
A side letter could be signed with the Employer, in which the unclear extension of time clause is reworded to cover all possible events of delay and to clearly state the procedure for evaluating the extended time duration for each event. This letter would supersede the varied clauses of the original construction agreement where necessary, and could include amendments to various unclear provisions. It is recommended to obtain a lawyer’s input before signature.
NEW LEGISLATION
With the rising number of disputes resulting from unclear provisions in construction agreement, a new legislation is necessary. Such legislation would provide for a mandatory extensive list of events that would entitle the Contractor to an extension of time, liquidated damages to be paid to the Contractor by the defaulting party causing the delay, and ideally, penalties for late payments from the Employer.
A well-drafted extension of time clause would benefit both parties, by guaranteeing the respect of the contractual time for completion of the works, protecting the Contractors’ rights in the event of delays caused by the Employer, and also, preserving the rights of the Employer to liquidated damages.
By Aline El Sayed - Senior Associate - Al Misnad Law - In Association with the Law Offices of Khalifa Al Misnad