United Arab Emirates: Preventive Principle And Extension Of Time

Last Updated: 20 February 2018
Article by Rini Agarwal
Most Read Contributor in United Arab Emirates, August 2018

Time and again we have discussed the level of dynamicity in the sectors and industries such as construction, maritime, cryptocurrency and the like. Today, we are going to analyze why these areas in specific are comparatively more dynamic than others – mainly because projects and transactions in these sectors include numerous parties who operate on different stages. It is a mechanism for various individuals who perform their contractual obligations that are guided by internationally accepted norms. For instance, in the construction industry, engineering contracts usually are governed by the contract templates released by the Fédération Internationale Des Ingénieurs-Conseils (FIDIC), Engineering Advancement Association of Japan (or popularly known as the ENAA) among others. These templates or default contracts are in place to minimize the dynamicity that we had earlier discussed; however, they are not always viable because – every project is different from each other. No two plans or transactions are structured the same way since each project has its peculiarity in the number of parties involved, the financing structure in place, the estimated timeline for project completion and the like.

Now, coming back to the topic I was initially assigned. In this article, we have elucidated the facts and issues of a landmark case that arose due to sector dynamicity between Adyard Abu Dhabi LLC (a company established in Abu Dhabi, United Arab Emirates) and SD Marine Services (a company incorporated in the United Kingdom). The case of Adyard Abu Dhabi (or Adyard or Claimant) v SD Marine Services (or SD or Defendant)i came before the High Court of Justice (Queen's Bench Division Commercial Court). The court had to decide whether there a contractor can extend the time to complete to project when a delay that falls within the ambit of 'prevention principle' has taken place.

Facts of the Case

Adyard was an SME (small to medium size enterprise) that specialized in shipbuilding in Abu Dhabi, and SD provided commercial services in the maritime industry to the public sector in the United Kingdom. The Defendant had contracted with the Government of the United Kingdom to deliver sea-port services, navigational services and the like to the Royal Navy of the United Kingdom over a period of fifteen (15) years. SD appointed another company, SERCO, as the subcontractor and overlooked the project.

The Defendant had engaged the Claimant to construct and assemble two (2) moorings and SOSVs (special operations support vessels) under a contract dated 14 December 2007 (the Contract). The Contract had stated that the Claimant had the liability to manufacture, assemble and ready the two (2) SOSVs by 30 September 2009 and 30 November 2009 for sea-trials. Article II of the Contract had also provided that the Defendant had the right to revoke the Contract in case the SOSVs were not ready for sea-trials by the dates agreed. Clause 3.3 of article II reads as follows:

'If the Builder fails to complete either of the stages contained in Clause 3.1(c) or (e) by the dates specified therein, then the Buyer may, at its option, rescind this Contract. However, it should be by the provisions of Article X hereof, always provided that, to the extent that any delays were due to the Buyer's default or any Permissible Delay, that the increment in the period shall be to the same extent.'

Clause 2.1 of article X of the Contract states that Adyard had the liability to refund all the amounts it had received from SD if they had not commenced the proceedings. However, the SOSVs were not ready for the decided dates, and SD subsequently exercised its right to rescind the Contract vide letters dated 7 October 2009 and 14 December 2009.ii

Contentions

Claimant's Contentions

Adyard commenced proceedings by article X on 15 October 2009 and 14 December 2009iii claiming that the delay had occurred due to SD. They also contended in the circumstances that they were entitled to an extension and therefore, were not liable to refund the installments paid by SD. The primary contention of the Claimant was that SD and the Maritime Coastguard Agency had instructed them to make numerous changes in the designs of the vessels in June and July 2009. Adyard stated that the delay was not caused due to them as the variations arose from the changes in the safety standards of the Maritime Coastguard Agency.

They also submitted that the 'preventive principle' would apply in their matter since their scope of work was amended to include the variations after the contract had commenced. It has also established in the Trollope & Colls Ltd v. North West Metropolitan Regional Hospital Boardiv case that when the employer amends or increases the scope of work for the employee by asking the latter to do an additional job. In such cases, it would become impractical for the employee to complete the scope of work in the estimated or granted time. Therefore, the employer will not be liable for any liquidated damages due to the non-completion of the project on time. Adyard stated before the court that SD had asked them to undertake extra work (variations) and refused to negotiate on any adjustments or intention of time for completing the project.

Defendant's Contentions

SD, on the other hand, claimed that the design items ordered by them were not variations and also stated that there were no changes in the safety standards of the Maritime Coastguard Agency. They contended that the Maritime Coastguard Agency had merely reported that vessels would have to comply with the safety requirements of the SPS Code. They claimed that even if there were any variation in the scope of work (as Adyard had requested), it would not contribute to any additional delay. SD also emphasized on the Claimant's failure to furnish notice by Article VIII, clause two which mandated the latter to provide the cause of delay'.

The Decision of the Court

The court identified that there were contractual and factual issues in this case since the parties had raised their contentions on both grounds. The claimant successfully contended and established that there were variations in Article V, clause 2 of the Contract. However, Adyard's case ultimately depended on the applicability of the precautionary principle in this specific case. The learned court referred to the explanation of the preventive law in the judgment of Multiplex v Honeywellv, in which Jackson J stated that one party could not insist the other side perform an obligation that the latter could not complete due to specific hindrances put forward by the former. In the construction sector, employers cannot hold the contractor liable if they could not meet the completion date due to variations (act or omission) of the employer. Instead, the contractor should be provided with reasonable time to complete the project considering the degree of difference. Extension of time clauses in construction contracts aims to protect and safeguard the rights and liabilities of both the parties. There are three (3) general propositions formulated by Jackson J that is still followed in the construction sector, being:

  1. Legitimate actions by the employer could be termed as preventive if it causes delay beyond the date specified in the contract;
  2. Preventive measures by the employer that does not set time at large (provided the agreement provides for EOT or extension of time clause for those specific issues);
  3. When the parties have concluded that there is ambiguity regarding the expansion of time clause – such uncertainty should favor the contractor.

The court found that the Adyard failed to enforce the precautionary principle since they did not have any substantial claim for an extension of time. The court also observed that Article II, clause 3.3 and article VIII had laid down the circumstances when the contractor could claim for an extension of time to complete the project. However, Adyard failed to furnish notice by Article VIII, clause 2 to enforce these provisions. On the other hand, even if there were no requirements regarding the announcement, the actual reason for the delay should be analyzed to understand the extension of time. Once, they identify and analyze the right or cause of suspension; they must add the period of suspension to the initial contractual date. However, the Claimant continued to argue that the Defendant had not agreed to make any adjustments towards the completion date (date of sea-trials). Therefore, the court held that the Defendant had the right to rescind the Contract since Adyard failed to complete the work before the day of the sea-trials. The court also observed that this delay was not caused due to the Defendant and ruled the case in favor of SD.

Footnotes

i Case Number 2009 Folio Number 1361 & 1622; [2011] EWHC 848 (Comm)

ii 7 October, 2009 letter regarding the Hull 10 SOSV vessel; and 1 December, 2009 letter regarding the Hull 11 SOSV vessel.

iii 15 October, 2009 proceedings regarding the Hull 10 SOSV vessel; and 14 December, 2009 proceedings regarding the Hull 11 SOSV vessel.

iv [1973] 1 WLR 601, HL

v [2007] Bus LR Digest D109

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions