This article highlights some of the key mandatory provisions under Qatar law that will affect construction projects. It contrasts those provisions with the common law.
Many leading international construction and engineering practices are being attracted to Qatar by the double digit growth in Qatar’s construction sector. This is in large part being driven by procurement in the public sector and most of the contracts being let are governed by Qatar law.
This article highlights some of the key mandatory provisions (i.e. provisions that take precedence over contractual terms) under Qatar law that are likely to be implied into a construction contract and contrasts them with the common law position that many international contractors and construction professionals may be accustomed to.
For the purposes of this article, the relevant Qatar laws are set out in Law No. 22 of 2004 ‘Promulgating the Civil Code’ (Civil Code).
Article 172 of the Civil Code provides that:
“A contract must be executed in accordance with the contents thereof and in a way that is consistent with the requirements of good faith”.
This mandatory “good faith” obligation can have a significant impact upon the way that a contract is performed and each party’s obligations are interpreted. For example, the obligation to act in good faith is likely to be relevant to issues including:
the issue and valuation of progress claims
contractual notice provisions (see below)
determining whether a party is in breach of contract, and
the exercise of termination rights.
There is no good faith obligation at common law, although parties contracting under the NEC construction contracts are required to “co-operate with each other in good faith”.
Freedom to Contract and Exceptional Events
Qatar law (specifically Article 171 of the Civil Code) recognises the freedom of parties to contract, although, like in most other jurisdictions, there are several important provisions that are mandatory, so will apply whatever the contract says.
An example of such a mandatory provision is at Article 171(2) which, notwithstanding the parties’ freedom to contract, provides that, where there is an event that:
- is an exceptional event
- could not have been foreseen
- renders performance of a party’s obligations onerous, and
- threatens that party with substantial loss,
the court may reduce that party’s obligations to a reasonable limit.
Although elements similar to this provision are reflected in the common law, for example, under common law a defendant will only be liable where a risk is foreseeable, there is no equivalent to this under common law.
Decennial liability is common throughout the Middle East. In Qatar, Article 711 of the Civil Code prescribes that architects, engineers and contractors bear strict liability (meaning that fault does not need to be found) in respect of:
the partial or total destruction of buildings, or
any defects in buildings that threaten their stability and safety.
As its name suggests, decennial liability applies for a period of 10 years from completion of the building. However, a claim under decennial liability can be initiated up to three years from the collapse or actual discovery of the defect. Accordingly, contractor’s, architects and engineers may, in fact, be accountable under decennial liability for up to 13 years after completion.
Again, Article 711 is a mandatory provision which cannot be waived or assigned, limited or excluded.
Parties carrying out construction works in Qatar should carefully consider taking out insurance in respect of decennial liability, as it is unlikely to be covered by their traditional insurance policies.
There is no equivalent to decennial liability under the common law.
Statutory Time Bars
Limitation periods are not codified in one source, but the general principle under Article 403 of the Civil Code is that the applicable time period for bringing contractual claims is 15 years. There is no distinction between contracts and deeds. The prescription period for claims in respect of the rights of architects, professional consultants (and lawyers) will, however, generally lapse after 5 years (Article 405).
Parties cannot agree a prescription period that is different to that prescribed by the law until after the cause of action has come into existence (Article 418).
Whilst not common law, in England, the Limitation Act 1980 prescribes that limitation periods for bringing claims are 6 years from the date that a cause of action accrued (for contracts signed under hand) and 12 years for deeds. Further, the Latent Damage Act, 1986, provides that a longer period (possibly up to 15 years) may apply in respect of negligent latent defects; however, that provision is frequently excluded.
Contractual Time Bars
Notwithstanding that it is common in most construction contracts; a contractual time bar linked to the giving of notice is likely to be in contravention of Article 418 of the Civil Code (described above).
Further, a contractor may be able to argue that the exercise of a contractual time bar is contrary to the mandatory good faith provision at Article 172 of the Civil Code on the basis that:
- in the case of extensions of time, it could entitle the employer to profit from its own delay
- in the case of variations, it could entitle the employer to have additional work carried out without paying for that work, or
- in situations where notice is given, albeit not in the manner required by the contract, it would entitle the employer to benefit from the delay or variation, even though it was actually aware of that delay or additional work.
It is generally possible for parties to shorten limitation periods in common law jurisdictions such as England.
Whilst Qatar law permits parties to agree upon liquidated damages, Article 266 of the Civil Code, which is a mandatory provision, permits a court to reduce the amount of liquidated damages where the debtor can show that they are excessive or that the obligation was partially fulfilled.
Liquidated damages cannot, however, be increased by the Qatari courts (save in the case of fraud or gross negligence (Article 267)). Further, Liquidated damages may be reduced to zero if no loss has occurred (Article 266).
Under common law, the courts will not enforce a liquidated damages provision if it is considered to be a ‘penalty’.
Qatar is a civil law jurisdiction and there are numerous features of Qatar law will be novel to a party used to contracting in common law jurisdictions.
Further, key provisions, such as those identified above, may impact upon a party’s work, and liability, whatever their contract says. Contractors and other construction professionals looking to do business in Qatar need to ensure that they understand the risks of contracting subject to Qatar law.