SLQS QATARCPD NO. 54

29 October 2013

‘INTERPRETATION OF FIDIC RED BOOK IN CONJUNCTION WITH THE

QATAR CIVIL CODE’

Presented by

Ananda P. WickramasingheMSc (Quantity Surveying), LL.M(Construction Law and Arbitration)

MRICS, MCIArb, ICIOB.

Contents

The Qatar Civil Code (Law No. 22 of 2004)

• Interpretation of the Contract.• The binding force of the contract.• Termination and Damages• Extension of the Time for Completion and Liquidated damages

The Civil Code - Interpretation of the Contract

Article 169(1)

If the language of the contract was clear, it is not permissible to deviate from it by interpreting it in order to identify the will of the contracting parties.

Article 169(2)

However if there is room to interpret the contract, then the common will of the contracting parties must be looked for without stopping at the literal meaning of the terms, taking into consideration the nature of the dealing and the trust and integrity that must exist between the contracting parties in accordance with the custom applicable to dealings.

Article 170

1. Doubt is interpreted in favor of the debtor.

2. However if the contract includes an exemption of liability term, it shall be narrowly interpreted.

The Civil Code - The binding force of the contract

Article 171(1)

The contract is the law of the contracting parties; it may not be revoked or amended except by the parties’ agreement or for the reasons decided by the law.

Article 172(1)

The contract must be performed in accordance with its contents and in a manner which consistent with the requirements of good faith.

Article 172(2)

The contract shall not be confined to committing a contracting party to its contents, but also includes its requirements in accordance with the law, custom and equity as per the nature of the obligation.

Termination

Termination by agreement is generally effective when expressed

in writing by the contracting parties, when the contracting parties

do not agree to terminate the contract or when a notice of

termination is rejected, then the question arises as to how

termination should be validly made. Under the Qatari Law,

termination must be made as provided for by the contract or as

per a court order, or as prescribed by law.

The following Articles deal with termination under the Qatar Civil Code:

• Article 707 deals with “Termination” at will;

• Articles 183, 184, 185, 688, 689, and 692 deal with the principle of rescission and restitution;

• Article 184 deals with Automatic termination; and

• Articles 704, and 188 deal with termination due to impossibility of performance.

Employer’s Entitlement to Termination (FIDIC 1999 Red Book)

Sub-Clause 15.5

The Employer shall be entitled to terminate the Contract, at any time for the Employer’s convenience, by giving notice of such termination to the Contractor. The termination shall take effect 28 days after the later of the dates on which the Contractor receives this notice or the Employer returns the Performance Security. The Employer shall not terminate the Contract under this Sub-Clause in order to execute the Works himself or to arrange for the Works to be executed by another contractor.

After this termination, the Contractor shall proceed in accordance with Sub-Clause 16.3 ... and shall be paid in accordance with Sub-Clause 19.6 ...

Sub-Clause 16.3Cessation of Works and Removal of Contractor’s Equipment

Sub-Clause 19.6 - Optional Termination, Payment and Release

... Upon such termination, the Engineer shall determine the value of the work done and issue a Payment Certificate which shall include:

a) the amounts payable for any work carried out ...

b) the Cost of Plant and Materials ordered for the Works which has been delivered to the Contractor, ...

c) any other Cost or liability ... reasonably incurred by the Contractor ...

d) the Cost of removal of Temporary Works and Contractor’s Equipment from the Site ...

e) the Cost of repatriation of the Contractor’s staff and labour employed ...

The Civil CodeTermination of the Contract Agreement

Article 707 (1)

The work owner may disengage himself from the contract and discontinue executing the contract at any time before completing it, provided that he indemnifies the contractor for all the expenses he has incurred, and the works he has accomplished, as well as the gain the contractor would have realized had he completed the work.

Article 707(2)

However, the court may reduce the indemnification due for the gain the contractor has lost, if conditions render such reduction equitable. The court shall in particular deduct from the compensation the portion saved by the contractor as a result of the work owner’s disengagement from the contract, and the gain he might have earned from using his time for another work.

FIDIC 1987 (Red Book) 4th Edition

Default of Contractor

Sub-Clause 63.1

If the Contractor is deemed by law unable to pay his debts as they fall due, or enters into voluntary or involuntary bankruptcy, liquidation or dissolution (other than a voluntary liquidation for the purposes of amalgamation or reconstruction), or becomes insolvent, ... or if the Contractor has contravened Sub- Clause 3.1, or has an execution levied on his goods, or if the Engineer certifies to the Employer, with a copy to the Contractor, that, in

his opinion, the Contractor:

Sub-Clause 63.1

(a)Has repudiated the Contract,

(b) without reasonable excuse has failed

(i) to commence the Works in accordance with Sub- Clause 41.1,or

(ii) to proceed with the Works, or any Section thereof, within 28 days after receiving notice pursuant to Sub- Clause 46.1,

(c) has failed to comply with a notice issued pursuant to Sub-Clause 37.4 or an instruction issued pursuant to Sub- Clause 39.1 within 28 days after having received it,

Sub-Clause 63.1

(d) despite previous warning from the Engineer, in writing, is otherwise persistently or flagrantly neglecting to comply with any of his obligations under the Contract, or

(e) has contravened Sub-Clause 4.1,

Sub- Clause 63.1

then the Employer may, after giving 14 days notice to the Contractor, enter upon the Site and the Works and terminate the employment of the Contractor without thereby releasing the Contractor from any of his obligations or liabilities under the Contract, or affecting the rights and authorities conferred on the Employer or the Engineer by the Contract, and may himself complete the Works or may employ any other contractor to complete the Works. The Employer or such other contractor may use for such completion so much of the Contractor's Equipment, Temporary Works and materials as he or they may think proper.

(FIDIC 1999 Red Book ref. Sub-Clause 15.2)

The Civil CodeContractor’s Obligations

Article 688(1)

If during the course of work it has been discovered that the contractor is performing it in a defective manor or contrary to the contract, the employer shall be entitled to warn him to correct the method of performance within a reasonable period specified to him, if such period has lapsed without the contractor returning to the correct or the agreed upon method, the employer shall be entitled to request the dissolution of the contract or to obtain a permission from the court to perform the obligation at the contractor’s expense if the nature of the work so permits.

Article 688(2)

It shall be permissible to request the dissolution of the contract without the need of a warning or specifying a period, if the correction of the defect or discrepancy shall be impossible.

Article 688(3)

In all situations the judge shall be entitled to refuse the dissolution request if the defect in the method of performance shall not decrease to a great degree the value of the work or its worthiness for the intended use, without prejudice to the right for compensation if so necessitated

The Civil CodeThe dissolution of contract

Article 183(1)

In contracts binding on both parties, if one of the contracting parties has failed to perform its obligations, the other contracting party may, after notifying the former, request the dissolution of the contract together with compensation if there are exigencies.

Article 183(2)

The judge may, if the circumstances so require, extend to the debtor until a date determined by the judge. The judge may also refuse the dissolution if what the debtor has failed to perform was of minimum importance in view of his total obligations.

The Civil Code

Article 184

It may be agreed that the contract shall be considered automatically revoked without the need for any adjudication in case of failure to fulfill the obligation arising therefrom.

Such conditions or agreement shall not result in restricting the judge’s authority in respect of rescission unless the contract statement indicates explicitly that it was the intention of the contracting parties.

The conditions considering the contract automatically revoked in other than commercial matters shall not exempt the concerned party from serving the notice. No agreement by the parties to the contrary shall be valid.

According to Article 184, the contracting parties may agree within the terms and conditions of the contract that the contract automatically terminates due to certain circumstances.

Compensation

Article 185

If the contract has been dissolved, the two contracting parties are returned to the situation at which they were before the contract. If the above is impossible, compensation may be ordered.

FIDIC 1987 (Red Book) 4th EditionDefault of Employer

Sub-Clause 69.1

In the event of the Employer:

(a) failing to pay to the Contractor the amount due under any certificate of the Engineer within 28 days after the expiry of the time stated in Sub-Clause 60.10 within which payment is to be made, subject to any deduction that the Employer is entitled to make under the Contract,

(b) interfering with or obstructing or refusing any required approval to the issue of any such certificate,

(c) becoming bankrupt or, being a company, going into liquidation, other than for the purpose of a scheme of reconstruction or amalgamation, or

(d) giving notice to the Contractor that for unforeseen economic reasons it is impossible for him to continue to meet his contractual obligations,

the Contractor shall be entitled to terminate his employment under the Contract by giving notice to the Employer, with a copy to the Engineer. Such termination shall take effect 14 days after the giving of the notice.

The Civil CodeTermination due to impossibility of performance

Article 188

In respect of contracts binding on two parties, if it has become impossible for one of the contracting parties to perform his obligation for an extraneous cause beyond his control, such obligation as well as the counter-obligations shall abate. The contract shall also terminate automatically.

In case of partial impossibility, the creditor may, as appropriate, plead the contract in respect of the performable part of the obligation or request abrogating the contract.

Article 204

If the person has proved that the damage had resulted from a extraneous cause beyond his control such as force majeure, a sudden incident, the mistake of the person who suffered the damage or the mistake of others, then he shall not be liable for compensation unless a provision providing otherwise exists.

Article 258

It may be agreed that the debtor shall sustain the consequences of surprise incident or a force majeure.

FIDIC 1999 Red Book

Sub-Clause 19.1 Definition of Force Majeure

In this Clause, “Force Majeure” means an exceptional event or circumstance:

a) which is beyond a Party’s control,

b) which such Party could not reasonably have provided against before entering into the Contract,

c) which, having arisen, such Party could not reasonably have avoided or overcome, and

d) which is not substantially attributable to other Party

Force Majeure may include, ...

i. war, hostilities ...

ii. rebellion terrorism ...

iii. riot, commotion, ...

iv. munitions of war, ...

v. natural catastrophes ...

FIDIC 1987 Red Book 4th Edition

Release from Performance

Sub-Clause 66.1

If any circumstance outside the control of both parties arises after the issue of the Letter of Acceptance which renders it impossible or unlawful for either or both parties to fulfill his or their contractual obligations, or under the law governing the Contract the parties are released from further performance, then the parties shall be discharged from the Contract, except as to their rights under this Clause and Clause 67 and without prejudice to the rights of either party in respect of any antecedent breach of the Contract, and the sum payable by the Employer to the Contractor in respect of the work executed shall be the same as that which would have been payable under Clause 65 if the Contract had been terminated under the provisions of Clause 65.

Extension of the time for completion of the works and delay damages

There is no express provision in the Qatari Civil Code for extension of the time for completion of the works.

However, under the Civil Code Article 687, the contractor is under an obligation to perform the contract in accordance with the terms and conditions contained therein and within the agreed time frame.

FIDIC 1987 Red Book 4th Edition

Sub-Clause 44.1

In the event of:

a) the amount or nature of extra or additional work,

b) any cause of delay referred to in these Conditions,

c) exceptionally adverse climatic conditions,

d) any delay, impediment or prevention by the Employer, or

e) other special circumstances which may occur, other than through a default of or breach of contract by the Contractor or for which he is responsible,

being such as fairly to entitle the Contractor to an extension of the Time for Completion of the Works, or any Section or part thereof, the Engineer shall, after due consultation with the Employer and the Contractor, determine the amount of such extension and shall notify the Contractor accordingly, with a copy to the Employer.

(FIDIC 1999 Red Book Ref. Sub-Clause 8.4)

The Civil Code

Article 687

The Contractor shall perform the work according to the conditions of the contract agreement within the agreed period. If no conditions or period is agreed, the contractor shall perform the work according to the generally accepted standards within reasonable period as required by the nature of work with due observance to the usage of workmanship.

The contractor shall also provide at his expense the any labour, tools and equipment required for performing the work unless otherwise stipulated by the agreement or usage.

Further, the Civil Code Article 172(1) provides: “a contract must be executed in accordance with the contents thereof and in a way that is consistent with the requirements of good faith.”

Liquidated Damages/Delay Damages

FIDIC 1987 Red Book 4th Edition

Damages for Delay

Sub-Clause 47.1

If the Contractor fails to comply with the Time for Completion in accordance with Clause 48, for the whole of the Works or, if applicable, any Section within the relevant time prescribed by Clause 43, then the Contractor shall pay to the Employer the relevant sum stated in the Appendix to Tender as liquidated damages for such default and not as a penalty (which sum shall be the only monies due from the Contractor for such default) for every day or part of a day which shall elapse between the relevant Time for Completion and the date stated in a Taking-Over Certificate of the whole of the Works or the relevant Section, subject to the applicable limit stated in the Appendix to Tender. The Employer may, without prejudice to any other method of recovery, deduct the amount of such damages from any monies due or to become due to the Contractor. The payment or deduction of such damages shall not relieve the Contractor from his obligation to complete the Works, or from any other of his obligations and liabilities under the Contract.

(FIDIC 1999 Red Book ref. Sub-Clause 8.7)

The Civil Code

Article 256

If the debtor fails to perform or delays performing the obligation specifically, he shall be bound to compensate the creditor for the damage he suffers unless he proves that the failure to perform or delay is due an extraneous cause beyond his control.

Article 204

If the person establishes that the damage originated from an extraneous cause he has nothing to do with, such as a surprise incident, an event of force majeure, an error from the affected person, or an error from a third party, he shall not be committed to pay compensation for such damage unless otherwise prescribed.

Article 257

The court may reduce the amount of or decide no compensation if the creditor contributes to or aggravates the damage.

Article 265

If the object of the obligation does not concern an amount of money, the contracting parties may define in advance the amount of the compensation in the contract or in a subsequent agreement.

Article 266

No agreed compensation shall be due if the debtor establishes that no damage has been caused to the creditor. The court may reduce that compensation if the debtor establishes that the compensation was greatly overestimated or the original obligation has been partially executed. Any agreement to the contrary shall be null and void.

Article 267

If the damage exceeds the amount of the agreed compensation, the creditor may not claim any sum in excess of this amount except if he establishes that the debtor has committed fraud or serious error.

It can be seen that, the Qatar Civil Code recognizes and provides that notwithstanding provision for liquidated damages, a debtor can request to have the court strike out or reduce the level of the liquidated damages where the debtor is able to prove that the creditor did not suffer any loss or that the estimate of the liquidated damages was excessive and the obligation in question had been partly performed.

Accordingly, provided that risk for these events is not contractually allocated and in the event of a successful demonstration that the delay event is solely due to matters beyond the contractor’s control, a contractor may rely on Articles 204 and 256 to establish that it has no liability to the employer, whether for liquidated damages or its actual loss.

Thank You

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