Summer is here at last and as temperatures are expected to soar for the next few months, the UAE Government has just extended the summer midday working break. Until recently this break applied between 12.30pm and 3.00pm in July and August only, but pursuant to Ministerial Resolution 443 for 2010, this has now been extended by a month and will now apply from June 15 to September 15. Most Contractors have welcomed the decision to extend the break but stress that it must be applied uniformly throughout the industry.

While it goes without saying that the safety and welfare of the workforce takes priority, the extension to the break will have an impact on productivity. This could affect Contractors and Employers alike. Contractors could find themselves falling behind the programme for the completion for the Works whereas Employers could find themselves faced with potential claims for late completion from third parties. The new Resolution highlights an important question as to who bears the risk of a change of law? As ever, the rights and responsibilities of the parties will depend on the wording of the Contract between them.

Negotiation of the Contract
The risk of a change of law is, in all likelihood, something that the parties will discuss and agree on when negotiating the Contract. If the Contractor is asked to accept this risk then he will no doubt include an amount in respect of its occurrence in his tender. If the proposed contract sum is too high from the Employer's perspective, the Employer will seek to negotiate a lower amount by accepting a greater degree of risk and taking responsibility for risks such as changes of law. The parties will need to ensure the Contract is carefully drafted to reflect the risk profile that has been agreed between them.

The Employer's Perspective
Where the risk of a change of law has been allocated to the Contractor, the Employer will want to ensure that the Works proceed on schedule notwithstanding the occurrence of the change of law. Depending on the wording of the Contract the Employer might be able to require the Contractor to accelerate the Works if progress is too slow to complete within the programme or if it appears that progress has fallen or will fall behind the programme.

One example of this is clause 8.6 of the 1999 Conditions of Contract for Construction produced by FIDIC (the Red Book) which is one of the most commonly used forms of building contract in the region. Taken in isolation, this clause permits the Engineer to instruct the Contractor to submit a revised programme and a report describing the methods the Contractor proposes to use to expedite progress to complete the Works within the contractual time for completion. The Engineer may require the Contractor to adopt these methods at its own cost, and if the Employer incurs additional costs as a result (such as additional supervision costs) these may also be recovered from the Contractor.

Again, depending on the wording of the Contract, the Employer is likely to be able to levy delay or liquidated damages against the Contractor for delayed completion. The relevant clause in the Red Book is clause 8.7 which requires the Contractor to pay the delay damages to the Employer for every day which elapses between the date the Contractor is supposed to complete the Works according to the Contract and the day the Works are actually completed.

Where the risk of change in law has been allocated to the Contractor, careful drafting of the Contract will be required to ensure that the Employer can require the Contractor to comply with his obligations to complete the Works on time as the Employer will, in all likelihood, have agree to pay a higher contract sum to the Contractor.

The Contractor's Perspective
Where the Employer has accepted the risk of a change of law, when that risk arises, the Contractor will look to the Contract to obtain relief. Many standard form building contracts will allow some relief to the Contractor in such circumstances. Again, taking the unamended Red Book as an example, under clause 13.7 of this Contract, if the Contractor is delayed or incurs additional cost as a result of changes in Laws (including the introduction of new Laws or the modification of existing Laws made less than 28 days before the submission of the Contractor's tender which affect the Contractor's performance of his obligations under the Contract) the Contractor will be entitled to an extension of time and to payment of his costs.

The term 'Cost' is defined in the Red Book and does not include profit. This clause does provide the Contractor with some relief but will still need amendment if the parties have agreed that the Contractor is to receive profit in respect of having to perform the Works for a longer period than was initially envisaged.

Conclusion
On the whole changes of law affecting building works are not regular occurrences, but when they do occur they can, depending on the nature of the change, have serious consequences for the performance and completion of the Works. In this instance, the extension to the midday break is unlikely to cause Contractors too many problems as the delay caused by the extension is not likely to be significant and Contractors might well be able to regain the time lost. Notwithstanding this Employers and Contractors need to ensure that their Contracts are carefully drafted so that the risk of the occurrence of a change of law is adequately dealt with and reflects the agreement reached between them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.