UAE Construction Law regarding Payment and Uncustomary Liabilities and its perspective under English Construction Law.
Introduction to the Research Problem
The United Arab Emirates (UAE), being a booming economy, is one of the most active nations in the construction sector. For instance, in 2016, UAE accounted for approximately 60% of the USD15bn of construction contract awards made within the Gulf Cooperation Council (GCC) and Dubai accounted for 73% of the UAE construction contract awards, which is USD 6.6bn of new contracts awarded in Dubai in the first quarter of 2016, which is the second heist figure since the last decade, and in particular 2008. Even though there was a drop in oil prices last year, the prospects for construction in UAE, especially in Dubai remained positive, attributed to manufacturing, tourism, ICT, transport, and logistics related projects.
Even so, since the construction projects boomed, the wages began hitting records. In effect, this leads to the accomplishment of unrivaled lavish projects. During the boom, the aspect of cost was not a principle interest to developers. Instead, they emphasized on the realization of bizarre structures within a short period to create profits and revenues. However, the desire for high remuneration coupled with a diminished taxes compared to the UK made foreign develops, including English to flock into UAE market. As such, with the increase in construction projects, payment is considered the biggest worries of any contractor, and thus they have to settle on what they should get paid when the payment will be made, as well as what happens if they are not paid. The most common problem is delayed payments. In essence, the reason why payment issues are important is that the construction sector is greatly reliant on cash flows. Looking into the UAE Civil Code, only a handful of provisions have been incorporated when dealing with payment and the remedies for non-payment. The article states that if the work has a beneficial effect on the property, contractors can retain it till payment is done. When the property does not have a beneficial effect, the contractor should not retain it, but when he does, and the property is subsequently lost, then he will be liable for that loss. However, the article did not define what the beneficial effects were, but it deduced that it means adding value to property, such as constructing in the land. The article further stipulates that the contractor should retain the property until he is paid but does not specify the payment duration or the procedures that can confer such a right, and does not request any serving of notices by the contractor. Also, Alhajeri stipulates that the contractor is not entitled to retention of property only, but also any plant provided by the employer for completing the project, as well as any material supplied. Article 885 also asserts that the employer is obliged to pay after the property is delivered under the contract provisions unless there is a contrary agreement and thus, the contract does not contain a payment mechanism or a law that forces the employer to pay up upon completion of the contract. Furthermore, if the contractor delays the contract, the employer is liable to keep payments tied top that milestone regardless of the quantity of work that has been accomplished.
Contractors are mainly not paid in time. For instance, David Mark, a contractor contracted in the UAE points out that after accomplishing the project, the employer did not pay up his invoices for up to 15 months, and given that they had arrears for over 700,000, it placed them at a disadvantage and caused them to face troubles in chasing their entitlements. As such, this provides evidence that there are payment problems in the construction industry in UAE. Further, according to Reuters, Michael Grose pointed out that the UAE had an increase in the number of construction projects contractors asking for help in obtaining payments, including those that should have been settled months ago on some of Dubai's largest construction projects. Further, Reuters reported that an anonymous contractor stated that contracts are not worth what is written on paper and Dubai employers do not comprehend that once the work is accomplished, they need to pay for it.
For this reason, projects have a high propensity of termination. For instance, Prelead articulates that some construction projects that contractors were forced to terminate between 2008 and 2008 were estimated to be worth $500, million. Additionally, the Association of Consulting Engineers (ACE) approximated that Middle East clients owe English construction contractors and engineers a sum of $400 million. Therefore, it can be derived that the issue of payment collection presents a significant challenge to the UAE government, and the problem stems from inadequate statutory mechanisms of payment that can be employed in overcoming the shortness of law and contracts.
Aims and Objectives of the Research
The research aims at determining how the uncustomary and payment liabilities under UAE construction law can be improved while referencing the UK construction law.
For this reason, the purpose of the research is to investigate the payment and uncustomary liabilities encountered under UAE construction law, and how these liabilities have been dealt with under the U.K. construction law. For this reason, the research focusses on investigating the ineffectiveness of UAE construction law, as well as highlighting the various problems that are encountered in UAE construction projects that are related to the construction law in the country. Also, the research will also investigate why the UK construction projects are effective while considering the effectiveness of the English law in eliminating payment and uncustomary liabilities. In consequence, the research will recommend various actions that can be adopted in eliminating these construction liabilities, including amending UAE construction laws and acts.
The following are the main objectives of the research:-
The study aims at examining the UAE construction law and judicial system, and thus, it will consider UAE case law about construction projects in the country.
To investigate how the uncustomary liabilities can be enhanced under, and in particular, under the UAE law about the UK Act.
It will aim at determining a statutory payment mechanism that can be employed in overcoming contract shortness in UAE.
To determine the uncustomary liabilities under the UAE law and examine the provision of payments under the UAE construction law.
To thoroughly examine the Law and its amendment in relation to the English law, as well as assess the issues that can be borrowed from the UK Act and be introduced into the UAE legislation.
It will aim at improving the construction law in UAE by surfacing various shortcomings that are related to payment and uncustomary liabilities.
It will examine the UAE construction Act and its amendments by the New Act as well as assess what can be incorporated in the New Act for introducing better legislations similar to those of the UK construction Act.
Proposed Chapter Outline of the Dissertation
The research consists of Six chapters which are as follows:-
Chapter 1: Introduction to the research.
Chapter 2: UAE Construction Law
Chapter 3: Uncustomary liabilities in UAE
Chapter 4: Payment provisions under UAE and UK laws.
Chapter 5: New UAE construction law provisions and the proposed Act.
Chapter 6: Recommendation and Conclusion.
Literature Review of my Research Area
The key issues that have come out of my reading so far are that the state of construction in UAE had shortcomings that subsequently lead to an uncertainty of liabilities, thereby hindering the efficient collection of construction payments. According to Kivrak et al., the gap originated from the lack of adequate attention to construction projects conditions that surround the contract particularly in the early stages of development. As the researchers posit, may construction experts are mainly concerned with task completion within the specified time and quality. As such, contract drafting occurs just as a sheer formality, and not an essential component of a construction project.
In effect, projects have a high propensity of termination, as well as conflicts because initial payments were delayed. Additionally, Prolead articulates that some construction projects that contractors were forced to terminate between 2008 and 2008 were estimated to be worth $500, million. Additionally, the Association of Consulting Engineers (ACE) approximated that Middle East clients owe English construction contractors and engineers a sum of $400 million. Therefore, it can be derived that the issue of payment collection presents a significant challenge to the UAE government, and the problem stems from inadequate statutory mechanisms of payment that can be employed in overcoming the shortness of law and contracts.
UAE construction law has not been favorable, is associated with issues of uncustomary liabilities. For example, these negative issues include decennial liability, risks endured by contractors, the uncertainty of approved amount of liquidated damages, as well as the uncertainty of agreed liquidated indemnities.
One of the regulations for UAE constructions, as Grose and Shlah note, is the decennial liability, which refers to the statutory liability implemented by Article 880883 of the UAE Civil Code on all supervisory architects, building contractors, and engineers. The Act, which influences construction in the nation imposes a joint liability on the structural flaws groups for ten years after a handover. Importantly, the Act cannot be restricted or omitted by contract, or even used by contractors against the sub-contractors. In essence, the standard contractors all-threat or professional indemnity cover does not address the issue of decennial liability. The liability requires that contractors, architects, and engineers be liable for any structural defects or damages for a period spanning ten years. In addition, many people consider decennial liability as an erroneous responsibility and create a limitation on the potential of the architects, engineers, and contractors to allocate risks that are associated with projects to the commercial companies.
In the UAE, the contractual omission of decennial liability is particularly ineffective. In addition, there are limited mechanisms that contractors and consultants can capitalize to escape the liability, and in particular, for the situations that involve serious structural collapses and defects. Further, the concept of decennial liability applies to situations in which the defects or damages occur from unforeseeable circumstances. It should be noted that the situations can occur when the employer grants his or her approval to the method of construction, as well as when the contractor or consultant receives a notice of the defect.
Decennial liability can also be applied in situations that entail the absence of the contractor or consultants negligence or fault. For instance, whenever a building collapses or becomes structurally unsafe or unusable, the contractor or consultant can be held accountable for the subsequent replacement of the entire structure, as well as compensating the loss experienced by the owner of the building. For this reason, this places the consultant or contractor at a disadvantage.
Furthermore, decennial liability also offers a valuable defense to the owner of the defective building and does not require proving or allocating fault when the building collapses. The protection applies eve when the issues of structure threaten the safety or stability of the building. Despite the existence of certain conditions in which t...
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