This article was featured in our 2023 Construction Arbitration Report, which is part of a series of industry-focused arbitration reports edited by Jus Connect and Jus Mundi.
This issue explores the construction industry and presents a goldmine of information based on data available on Jus Mundi and Jus Connect as of May 2023. Discover updated insights into construction arbitration and exclusive statistics & rankings, as well as in-depth global and regional perspectives on construction projects, disputes, & arbitration from leading lawyers, arbitrators, experts, arbitral institutions, and in-house counsel.
THE AUTHORS:
Ahmed Durrani, Senior Associate at Sultan Al-Abdulla & Partners
Umang Singh, Senior Associate at Sultan Al-Abdulla & Partners
Introduction
Contractors in a construction project often have to deal with myriad issues, ranging from the ever-changing landscape of the project, employer’s requirements, non-payments, delays, etc. Construction contracts are often employer-friendly, in that they prescribe a number of time-bound notices which contractors must satisfy in order to trigger their entitlement to claims. Therefore, it is not uncommon for contractors either completely to miss those time-bound notices or not to issue them within the prescribed periods. Ultimately, where disputes cannot be settled via amicable talks, the failure to send such notices, whether within the time period or at all, pose a serious threat to contractors’ claims.
This article will briefly explore the arguments that are available under Qatari law to a defaulting contractor who has failed to satisfy the requirement of issuing mandatory time-bound notices for its claims.
Position under the Qatari Civil Code
Qatar is a civil law country. Law No. 22 of 2004, which is also known as the “Civil Code”, governs the relationship between contracting parties.
The default position under Qatari law is that the contract is the law of the parties. As such, save where other legal provisions provide a carve out, parties are to be held to their contractual bargain (See, Article 171(1) of the Civil Code). Likewise, it is generally considered that failure to adhere to contractual notices does not constitute good faith performance under Article 172(1) of the Civil Code. That said, there are a number of arguments that are open to parties to take to vitiate the need to comply with contractual notices, especially in circumstances where parties have engaged with each other on claims in the absence of such notices.
This article, however, focuses on two particular legal principles which are often used to support a contractor’s failure to adhere to contractual notices: first, the argument based on the prescription periods in law (“Limitation Argument”); and second, the argument based on abuse of right principles in the Civil Code (“Abuse of Right Argument”).
The Limitation Argument
Put simply, it can be argued that time-bound notice provisions in a contract which impact the maintainability of claims (such as for variations and delays) contradict Article 418 of the Civil Code, in that they seek to reduce the statutory prescription periods.
Article 418(1) of the Civil Code provides as follows:
“Limitation may not be waived before the right to it has been established. Likewise, agreement may not be made that limitation will occur within a period that differs from the period specified in the law.”
There is some debate to be had as to the appropriate prescription period for construction claims: whether it is 15 years, further to Article 403 of the Civil Code; or it is 10 years, further to Article 87 of Law No. 27 of 2006 (“the Commercial Transactions Law”).
Article 403 of the Civil Code provides as follows:
“An action for a personal right will lapse by prescription after 15 years, except in those instances for which another period is prescribed by the law and such instances as are stipulated in the following articles.”
Article 87 of the Commercial Transactions Law provides:
“The traders’ liabilities related to the commercial works thereof towards each other shall be barred by prescription upon the lapse of 10 years from the maturity date of the deadline of payment of such liabilities, unless the law provides for a lesser period of time.
The final judgments on the disputes arising from the commercial liabilities referred to in the above paragraph shall extinguish by the lapse of ten years from the date of issuance thereof.”
Irrespective of the prescription period one might consider, the upshot of the Limitation Argument is that the statutory prescription period cannot be reduced to a significantly shorter period (which generally is between 14-30 days from the date of event) within which a party must notify its claims to trigger its entitlement.
However, there is a conceptual difficulty with this argument. A party may argue that a time-bound notice requirements do not go to prescription, in that they do not affect the ability of a party to bring a claim. Instead, whilst a party is fully entitled to bring a claim, the failure to adhere to contractual notices would mean that the claim would be a bad one: the condition precedent to trigger that party’s entitlement was not met. This is a serious impediment to the success of the Limitation Argument. In the authors’ experience, arbitral tribunals particularly those comprising of practitioners from other jurisdictions, do not tend to be persuaded by this position.
The Abuse of Right Argument
The defaulting party can argue that an exercise of the right by the counter-party, requiring the defaulting party to have adhered to the strict requirements of the time-bound notices, constitutes an abuse of right under Article 63 of the Civil Code.
Article 63 of the Civil Code provides:
“The exercise of a right will be unlawful in the following cases:
1. If the benefit it is sought to attain is unlawful.
2. If the only intention is to harm another.
3. If the benefit it is sought to attain is totally inappropriate for the damage it inflicts on another.
4. If by its nature it inflicts excessive, unaccustomed damage on another.”
Out of the various elements of Article 63, it is sufficient for a party to prove any of them, to succeed in its argument that insistence on contractual notices is an abuse of right.
By way of example, a party can argue that the benefit that the other party thereby seeks to attain, and the harm/damage which defaulting party would suffer, is the vitiation of the defaulting party’s right to bring contractual claims after the contractual notice periods. And that such a benefit would be unlawful, because it would violate Article 418 of the Civil Code, which prescribes that the statutory limitation period for bringing such claims cannot be reduced through contract. This position comes with its difficulties, as adumbrated above.
The defaulting party can also contend that the non-defaulting party intends to inflict harm on the defaulting party, by curtailing the defaulting party’s right to bring claims. That is the only purpose of the insistence on the contractual notice periods. It can be argued that such conduct is contrary to the good faith requirements under Article 172(1) of the Civil Code.
That said, the most persuasive argument, which in the authors’ experience has been endorsed by arbitral tribunals, is that the benefit sought by the non-defaulting party and the harm/damage to the defaulting party are inappropriate, excessive and unaccustomed. To this end, if there is a custom or practice between the parties of determination of, or engaging in correspondence on, claims in the absence of contractual notices, such a custom or practice can assist the argument. However, it is not guaranteed that a helpful custom or practice would have been established between the parties.
When assessing this particular argument, the arbitral tribunal must carefully consider whether the non-compliance with the contractual notification requirements caused any harm/loss to the defaulting party, or do they constitute a mere technical requirement. If the arbitral tribunal were to conclude that there was no harm caused to the non-defaulting party, it may find that the non-defaulting party’s insistence of the defaulting party’s strict compliance with the contractual notification requirements would cause a disproportionate harm to the defaulting party, and therefore constitutes an abuse of right under Article 63 of the Civil Code. However, there is no guarantee that every arbitral tribunal will find this argument to be convincing.
Conclusion
Whilst there are helpful legal provisions on which arguments can be founded to defend non-compliance with contractual notices, there is no guarantee that tribunals will find such arguments persuasive, in circumstances where the contract expressly makes contractual notices a pre-condition to entitlement to claims. Therefore, contractors should carefully review their contracts and engage a competent contracts management team which is fully aware of the rights and obligations thereunder, and the various contractual notice requirements. It might even be helpful for contractors to maintain templates for the various notices, such that those templates can be modified accordingly every time a new notice is due to be sent out.
ABOUT THE AUTHORS
Ahmed Durrani is a Senior Associate at Sultan Al-Abdulla & Partners. His practice focuses mainly on commercial and construction arbitrations under the ICC, QICCA, DIAC and LCIA rules. Ahmed is a qualified barrister (NP) and a licensed advocate of the High Courts in Pakistan. He also sits as an arbitrator.
Umang Singh is a Senior Associate at Sultan Al-Abdulla & Partners. He holds an LL.B. from the Nalsar University of Law in India, where he graduated with Honors. Umang is a member of the Bar Council of Maharashtra and Goa. His practice focuses on handling arbitrations and general corporate advisory work. He also sits as an arbitrator.
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