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.

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 (performance guarantees, advance payment guarantees, 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 match 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 are unfair 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 require comprehensive insurance coverage, with clear policy limits and proof 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 starting with negotiation, followed by mediation, and escalating to arbitration or litigation as needed.

How Kayrouz & Associates can help

At Kayrouz & Associates, we support both property owners and contractors in navigating the complexities of construction law in the UAE. Our services include:

  • Comprehensive contract review to identify risks and close potential gaps.
  • Drafting and negotiation of contracts that comply with UAE law while protecting your commercial interests.
  • Dispute management combining expertise from our litigation, corporate, and compliance teams to give you full-spectrum legal coverage before, during, and after your project.

We ensure your contracts are structured to prevent disputes where possible — and to give you the strongest position if one arises.

Further reading

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