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15 Oct 2018

A Condition Precedent for Time-Barring due to Notifications – Does it stand up in the Middle East?

by Stephen Rayment, Group Managing Director -

Condition Precedent
In the case of Bremer Handelgesellschaft mbH v Vanden Avenne Izegem PVBA [1978], Condition Precedent has been defined by Lord Wilberforce, where he concluded that the three factors determining whether a notice provision is a condition precedent, are:

  • The form of the clause itself;
  • The relation of the clause to the contract as a whole; and
  • General considerations of the law.

Notification timelines for delays
Where the terms of the contract are definitive and clearly states that the contractor shall give notice within a prescribed period, or it forfeits its entitlement, then this is a condition precedent.

Legal Jurisdiction of the contract
The writer refers to a project in the Kingdom of Saudi Arabia, where the Contract stated the jurisdiction as follows:

“Choice of law-the laws of Saudi Arabia shall control the interpretation and the performance of this contract and any other agreements arising out of or relating to it, regardless of where this contract shall be entered into or performed”.

Notifications and Time-Barring
One cannot automatically accept time-barring under the conditions of contract in the Middle East unless it can be proven that the employer could have mitigated, had the notification been served on time. If the sole reason for the employer’s potential rejection of the contractor’s claim for an extension of time related to the provision of contractual notices, interim and detailed final particulars, then the wider argument relating to the application of preceding civil codes and Sharia law would apply.

When assessing a claim, one must at least assess whether a form of notice was provided for each delay event and whether the Employer was fully aware of these events that caused the delays. This would clarify any potential argument in relation to notice.

The Kingdom of Saudi Arabia has not yet developed its own civil codes and as such it often relies on both Sharia law and preceding cases. In the absence of precedent cases from the Kingdom of Saudi Arabia, the courts may often refer to a similar legal jurisdiction such as the United Arab Emirates (UAE). The similar Sharia law applies in the UAE and there are precedent cases available in which this matter is clearly covered by the commercial and civil code.

In the Dubai’s Court of Cassation case of 1997, the court considered whether a contractor can successfully claim against the Employer more than 2 years after the event took place. Under the Civil Transaction Law, claims relating to late payment for goods or services have a two (2)-year limitation period (Article 476 of the Civil Code) which would render the contractor’s claim under the Civil Transaction Law inadmissible.

Consequently, the contractor claimed that his claim was of a commercial nature, and the ten (10)-year limitation period applied instead (Article 95 of the Commercial Code). The Court agreed with the contractor’s interpretation because there was a close link between the services provided by the contractor and the defendant’s commercial business, therefore, the ten (10)-year limitation period applied and the claim was not time-barred.

Article 476 of the Civil Code

المادة رقم 476

لا تسمع الدعوى عند الإنكار وعدم قيام العذر الشرعي إذا انقضت سنتان على الحقوق الآتية:
أ- حقوق التجار والصناع عن أشياء وردوها لأشخاص لا يتجرون في هذه الأشياء وحقوق أصحاب الفنادق والمطاعم عن أجر الإقامة وثمن الطعام وكل ما أنفقوه لحساب عملائهم.
ب- حقوق العمال والخدم والأجراء من أجور يومية وغير يومية ومن ثمن ما قاموا به من توريدات

TRANSLATED – “A case will not be heard if denied and no legitimate excuse exists on the lapse of two years on the following rights:

A – Traders and manufacturers of things supplied to people who do not deal in these products and the rights of owners of hotels and restaurants who paid for accommodation, food and everything spent for their clients.

B – The rights of workers, servants and employees of daily and non-daily wages and for what they have supplied”.

Article 95 of the Civil Code

المادة 95

لا تسمع عند الانكار وعدم العذر الشرعي الدعاوى المتعلقة بالتزامات التجار قبل بعضهم البعض والمتعلقة بأعمالهم التجارية بانقضاء عشر سنوات من تاريخ حلول ميعاد الوفاء بالالتزام ما لم ينص القانون على مدة اقل.

TRANSLATED “The obligations of traders towards each other concerning their commercial activities, shall not be heard if denied and no legitimate excuse exists
on the lapse of ten years from the date on which the performance of the obligation falls due, unless the law stipulates a shorter period.”

The UAE Commercial Code under Article 95 specifies a time limit of ten years for an action to be commenced in relation to obligations of one party towards the other, regardless of the limits that are described within construction contracts.

Summary of legal interpretation
If the Employer was not denied the opportunity to:

  1. Reconsider any instruction; or
  2. Mitigate the effect of the delay event; and
  3. If the Employer has not suffered any prejudice at all, as a result of the timing of the submission of detailed particulars.

In view of the above, it is the writer’s opinion that in accordance with the provisions of Sharia law, under certain circumstances the contractor’s claim for an Extension of Time and Costs cannot be summarily time-barred and the employer is obligated to evaluate the claim for an extension of time and related costs on its own merits.

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