KP insights-6

Decennial liability of contractors, engineers, and designers under Egyptian, Qatari and UAE laws

The biggest risks lie in things that are not written in a contract.

Construction contracts usually stipulate a period during which the contractor is obligated to return to the project to which it was handed over to complete any outstanding or defective work, and if the contractor fails to do so, Employers have the right to claim damages.

Additionally, the contractor may be held liable for deficiencies that will become apparent over the next few years if the client proves they were attributable to the contractor’s breach of contract.?The contractor may not anticipate being held liable for structural defects in a building for ten years, regardless of fault. Even though this 10-year period of liability following handover exists. It's known as "decennial liability”. Decennial liability is a legal concept that is unlikely to be mentioned in a contract.

Decennial liability is a legal concept in construction law. It serves to protect the owner against major defects that occur within ten years after delivery, provided that these defects are attributable to essential components of the building project, constitute total or partial collapse, cessation of bearing capacity and other such problems which threaten its stability. In some jurisdictions, this may also include certain issues related to non-structural elements such as humidity damage caused by lack of waterproofing or sanitation works going wrong due to faulty assembly.

The contractor and designer are generally held responsible for any defects in the work they have produced, while the employer may not be obligated to determine who is liable. In such cases, the contractors and designers need to make sure that their own work meets all necessary requirements of quality before submitting it to the employer. They must also take care of any issues surrounding warranties or other liabilities themselves if needed. The employer can claim against either the contractor or the designer, leaving them to dispute and negotiate any issues between themselves.?Both parties will be liable for the full amount if one becomes insolvent.

Under such circumstances, if the contractor did not have any role in designing a particular aspect of the project, then they would only be liable for any defects arising from their workmanship. This means that if an issue arises due to faulty design rather than due to poor execution of the plan, then it is unlikely that the contractor will be held responsible.

The contractor and designer cannot escape liability even if the employer has approved the works or if the defect arose as a result of the sub-surface conditions (unless the designer was hired by him or the defect in the design should have been obvious to him). If a designer is only responsible for the design and does not supervise the works, they will typically be liable only for defects attributable to their design. This means that mistakes made during the construction of the project or other issues caused by factors outside of their control may not be reflected under this scope of liability.

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Furthermore, the liability cannot be waived, limited, or transferred to subcontractors by the employer, the contractor, or the designer. There is no getting around it. Standard Professional indemnity or Contractor's All Risk insurance does not cover this unmentioned risk, so contractors and designers may want to consider how much it would cost to purchase a specific insurance policy.

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The relevant laws governing the decennial liability in Egypt, Qatar and UAE are the civil law in each jurisdiction. Articles 651, 711 and 880 respectively address Decennial liability in the three jurisdictions. This is the most pertinent mandatory provision under the Civil Code concerning defects liability.?The provisions under this Article cover the defects liability period for defects which “threatens the stability or safety of the building”.?The defects liability period for structural defects is ten (10) years commencing from the date of handover.?This is often referred to as the “Decennial Liability”. Decennial liability is a statutory liability deriving from a contractual relationship. These provisions apply to the architects, engineers and contractors involved in constructing a building or other fixed installations or structures. The language of the three articles is almost the same which read as follows:

“1. The contractor and the engineer shall jointly guarantee for a period of ten years the total or partial collapse or fault?in the buildings they have erected or fixed constructions they have constructed, even if the collapse or the fault?has resulted from a defect in the land itself, or the employer has approved the defective buildings or constructions, and this guarantee shall cover whatever defects shall appear in the buildings or constructions which threaten its sturdiness and safety.

2. ?If the two contracting parties have intended for the buildings or constructions to remain for a period less than ten years, the guarantee shall apply for the lesser period, and the period shall commence in all situations from the date on which the work has been received.

3. The provisions of this article shall not apply to the right of recourse which the contractor shall have against the subcontractors.”

Defects under Decennial Liability

It should first be established what kind of defects come within the ambit of the decennial liability provisions of the above articles.?

The contractor and the engineer jointly guarantee and are jointly liable for the following defects:-

(i)????????Any partial or total collapse of the building or structure.?This could be due to a defect in design or defect in workmanship; and

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(ii)???????Defects which threaten the integrity and safety of the building or structure.?Such a defect can be due to the materials used, for example, bad quality materials or materials which are not in compliance with the specifications, or it can be due to the workmanship.

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Thus, there are 2 conditions to be met in order to establish the defects which are subject to the decennial liability under the three articles:-

(iii)??????The defects must be dangerous to the extent that it threatens the integrity and safety of the building/structure; and

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(iv)??????These defects must be hidden at the time of handover of work to the employer.

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However, it is important to note that this does not mean that such a defect must be an “old” defect, that is, that it existed before handing over to the employer.?The defect can happen after handing over, during the 10 years.

This liability cannot be waived by any agreement between contracting parties. Article 653 (Egyptian Civil Law), Article 713 (Qatari Civil Law) and Article 882 (UAE Civil Law) stipulate that any condition intended to exempt the engineer or the contractor from the guarantee or to limit it shall be void.?The three articles share the same content by providing “Any condition intended to exempt the engineer or the contractor from the guarantee or to limit it shall be void.” Based on the above, we must differentiate between normal defects, latent defects and decennial liability defects.

To recap, decennial liability defects can be the partial or total collapse of a building/structure and can be any defect which threatens the integrity or safety of a building/structure.?It should be hidden at the time of handover. If the defect can be detected by normal inspection at the date of handover and the client/employer accepted it, there will be no guarantee by the contractor under the decennial liability provisions. If the client/employer approved the design or the works and at the time it is handed over to the client/employer, it is not aware of the existence of the defect, then the contractor is still liable for decennial liability.

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Note that in the event the defect is not discovered before hand-over, the fact that the client/employer had approved the defective building/structure, would not excuse the contractor from liability. This is because, when an employer approves a defective building/structure, his approval should not be taken into consideration. After all, the contractor/engineer is the expert carrying out the work. If the client/employer discovered the defect before the handover of works and still accepted it, then it is considered that the client/employer has tacitly accepted the defect, that is, the client/employer has waived its rights in relation to the defect.

Once the client/employer discovers the defect and it is established that such defect comes within the ambit of one of the three articles above, the client/employer has two possible remedies:

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(v)???????The client/employer can request the contractor to rectify the defect – therefore, specific performance. For example, if there is a partial collapse of the building/structure, then the client/employer can ask the contractor to rebuild the collapsed or defective portion of the building/structure and where damages are proven, pay the client/employer compensation; or

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(vi)??????If specific performance is onerous for the contractor, the court might confine the remedy to just compensation instead of ordering specific performance.

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Bear in mind that the client/employer does not have to prove any fault or contractual mistake by the contractor because the existence of the defect itself is a breach (assumed breach). The contractor can try to exempt itself from liability by showing that the defect had resulted from an extraneous cause beyond its control such as Force Majeure or the mistake of the client/employer.?In a judgment from the Egyptian Court of Cassation (case no. 41 issued at the hearing of 23 June 1970), it was held that the engineer will be held liable for these defects if they appear during the 10 years from the handing over – even if they discovered the defect in year 9 and the building collapses in year 12.?

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In addition, articles 654, 714 and 883 of the Egyptian, Qatari and UAE civil codes respectively provide a timeframe for bringing a decennial liability case to court. The warranty case will lapse with the passage of 3 years from the time of the occurrence of the collapse or the discovery of the defect. Thus, if the client/employer discovers the defect in year 9, the client/employer has 3 years to file the case, thus, the client/employer can do so even after the expiry of the 10 years as long as it is within 3 years of the discovery.

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Decennial liability may only be relied upon by employers vis-à-vis the main contractor.?Contractors vis-à-vis their subcontractors are precluded from benefiting from the decennial liability provisions. The rationale behind denying contractors the protection of the decennial liability provisions of the Civil Code against their subcontractors is that contractors and subcontractors are deemed to be professionals knowledgeable and versed in the technicalities of their profession.?Employers, on the other hand, maybe mere lay persons or entities unaffiliated with the profession of construction. Therefore, the raison d'être concerning decennial liability protections is to guard the interest of the unaware employer against defects that may be later discovered as well as to hold the contractor accountable for partial or full collapse of the works undertaken by contractors. As decennial liability is not available to contractors, contractors may only pursue their subcontractors for breach of contract.

Conclusion

a)????????Decennial liability is covered under the provisions of Articles 651, 711 and 880 of the Egyptian, Qatari and UAE Civil Codes respectively. The following questions must be answered to determine whether this article might be cited or not: -

(i)????????Is there a partial or total collapse of the building or structure;

(ii)???????Are the defects dangerous and do they threaten the integrity and safety of the building or structure; and

(iii)??????Were these defects hidden at the time of handover of work to the client/employer.