Many standard form contracts contain provisions limiting the overall liability of the contractor, upon which a contractor unfamiliar with UAE law may place mistaken reliance. The FIDIC Red Book for instance, which is widely used throughout the Middle East region, contains a number of limitations on liability including at clause 17.6, which states:

"The total liability of the Contractor to the Employer, under or in connection with the Contract other than under Sub- Clause 4.19 [Electricity, Water and Gas], Sub-Clause 4.20 [Employer's Equipment and Free-Issue Materials], Sub-Clause 17.1 [Indemnities] and Sub-Clause 17.5 [Intellectual and Industrial Property Rights] shall not exceed the sum stated in the Particular Conditions or (if a sum is not so stated) the Accepted Contract Amount. This Sub-Clause shall not limit liability in any case of fraud, deliberate default or reckless misconduct by the defaulting Party."

The wording of the clause is clear; subject to a small number of exclusions, the overall liability of the contractor is capped. As part of the commercial negotiations the contractor therefore is able to accept certain risks within the contract knowing that its overall exposure will be capped. However, in the UAE that is not entirely the whole story.

Decennial liability

The Law of Civil Transaction (the "Civil Code") sets out important statutory exceptions to the rule that the parties to a contract are free to agree limits on their liability. The most important of these is set out in Article 880, under which the Architect (which could extend to the supervising Engineer) and the Contractor are jointly and severally liable, for a period of ten (10) years from the delivery of the project, for the total or partial demolition of construction works relating to building or other fixed installation. This is commonly referred to as "decennial liability".

This is a strict no fault liability provision. This means that there is no requirement to establish fault but merely demonstrate that the conditions giving rise to the liability arose. It is a mandatory provision and cannot be contractually limited or excluded by the parties. Article 882 of the Civil Code provides that "Any agreement tending to exclude or limit the decennial liability of the architect and the contractor shall be void."

The key provisions of Article 880 are as follows:

(i) The decennial liability relates to the total or partial demolition of a building or a defect which threatens the safety and stability of a structure. The statutory decennial liability therefore relates to major structural defects only and is not intended to extend to all minor defects in the construction works. Accordingly, minor defects will be subject to the defects correction provisions, defects liability periods and limitations on liability expressly set out in the contract.

(ii) The decennial liability will apply notwithstanding that the collapse or defect is due to a defect in the ground itself or that the employer consented to the construction of the building or installation. The rationale for this provision is that the contractor is required to satisfy itself of the ground conditions where the works are being undertaken and the employer is deemed to lack specialist knowledge and is reliant on the contractor's technical expertise.

(iii) Architects/designers responsible for preparing designs and plans for the works will be held to be jointly liable with the contractor for any such major structural defects if their services include a supervision role. In the circumstances where the contractor and architect/designer are held to be jointly liable, the employer is entitled to claim against the architect or the contractor or both, and it is no defence for either party to show that it was not actually at fault.

The duty to supervise the works is key to the architect's/designer's liability under Article 880. If the architect/designer produces designs only (and does not supervise the works) then its liability shall be limited to design defects only under Article 881 of the Civil Code which provides that "If the work of the architect is restricted to making the plans to the exclusion of supervising the execution, he shall be liable for defects in the plans." Therefore, where there is no supervision carried out, if the design produced is correct and a structural defect arises out of defective construction, then the architect/designer will have no liability.

Whilst strict liability can to some extent be comprehended by contractors who are used to providing fitness for purpose obligations in contracts, the strict liability of the architect/designer under Article 880 will come as a surprise to many designers used to working in common law jurisdictions where liability is based on negligence and failure to use the requisite standards of skill and care. Designers proposing to undertake services in the UAE should accordingly check the adequacy of their professional indemnity insurance cover.

Exclusions to the decennial liability are extremely limited. Where the building or installation is intended to remain in place for less than ten years, then the provisions of Article 880 will not apply. The only other exceptions include a fault by the employer or where the defect can be shown to have been caused by external events that the contractor could not have prevented. The burden of proving these "force majeure" events is very heavily on the contractor and can be difficult to overcome.

As contractors turn their attention to involvement in Qatar's preparation for hosting the FIFA 2022 Football World Cup, it should be noted that the Qatari Civil Code has provisions equivalent to decennial liability in the UAE.

Courts' ability to vary any agreed limitation on liability

Another matter that may catch out an unsuspecting contractor in the UAE relates to the provisions of Article 390 of the Civil Code. Article 390 provides that parties to a contract are free to fix the amount of compensation payable in advance by making a provision in the contract.

Article 390, however, goes on to provide that, upon application by either party, judges (in all circumstances) have the ability to vary any such pre-agreement by increasing or decreasing the amount of compensation payable to reflect the actual loss suffered by the relevant party. The courts therefore have an overriding right to examine and vary pre-agreed levels of compensation. This will be of particular relevance to contactors when considering the pre-agreed levels of liquidated damages for delay.

If, however, the parties agree to the amount of compensation payable to the injured party after the contract provision has been breached, then this agreed amount will not be subject to review and adjustment by the courts. In this event, as the compensation amount was agreed after the date the breach occurred (rather than at the time of entering into the contract), then the courts will not interfere.


When negotiating contracts in the UAE, contractors should bear in mind the decennial liability issue and the court's powers under Article 390 of the Civil Code. When using an industry standard form of contract, such as the FIDIC form, appropriate amendments should be considered to reflect the mandatory provisions of UAE law.

International Quarterly is produced quartely by Fenwick Elliott LLP, the leading specialist construction law firm in the UK, working with clients in the building, engineering and energy sectors throughout the world.

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.