Abu Dhabi Cassation Court ruling: key takeaways for property owners and contractors

Case background in brief

The Abu Dhabi Court of Cassation recently dismissed a property owner’s appeal against an order to pay a contractor AED 332,990 plus interest, legal fees, and costs. The dismissal was made on procedural grounds under Article 175(1) of Federal Law No. 42 of 2022 on the Civil Procedure Law, which limits cassation review to claims exceeding AED 500,000.

Since the amount in dispute fell below this threshold, the earlier judgment was upheld. Importantly, a technical expert’s report confirmed that about 89% of the contracted works had been completed, strengthening the contractor’s position.

Businesses reviewing payment risk and project documentation often involve construction lawyers in Dubai before disputes escalate.

Why this ruling matters

For contractors

The judgment highlights that substantial, even if not full, completion of works can justify enforcement of payment, provided expert evidence backs the claim and contractual terms on milestones are precise.

For property owners

The case underscores the importance of clearly drafted contracts. Well-defined performance standards, payment schedules, and escalation procedures can help protect against being compelled to pay for incomplete or unsatisfactory work.

Overall, the ruling illustrates how procedural rules and contractual clarity can directly influence the outcome of disputes.

Clauses to watch in construction contracts

Certain provisions often determine the strength of a party’s legal position in case of conflict:

Milestone-driven payments and security

Completion stages, payment triggers, and retention release periods must be clearly defined. Security instruments such as performance guarantees, advance payment guarantees, or security cheques should specify exact conditions for release or encashment.

Liquidated damages

Permitted under Article 390 of the Civil Transactions Law, liquidated damages clauses are enforceable, but courts may adjust them to reflect the actual loss sustained.

Back-to-back payment

“Paid when paid” clauses are common but subject to Article 246 of the Civil Code, which requires good faith. Clauses that indefinitely delay payment or operate unfairly may not be enforced.

Defects liability period and insurance

Under Article 880 of the Civil Code, contractors are liable for structural defects for 10 years post-handover. Contracts should also require comprehensive insurance coverage, with clear policy limits and proof of cover before works begin.

Suspension and termination rights

Contracts should define grounds for suspension or termination, notice requirements, cure periods, and the consequences for final payments and return of security instruments.

Dispute resolution mechanisms

Agreements should establish a structured process for resolving disputes, typically beginning with negotiation, then mediation, and escalating to arbitration or litigation where necessary.

Legal advice may be required to assess how milestone drafting, payment triggers, expert evidence, and completion standards apply to your construction contract.