By Alex Brightman, K&L Gates, Doha and Donal Scott, K&L Gates, Dubai
In a previous blog post, we looked at suspension and termination of a construction contract under a Civil Code system. We focused, in particular, on the FIDIC form of contract and looked at how that would be treated under the Qatar Civil Code.
In this article, we will continue that review, but look at how suspension and termination would operate under the UAE Civil Code.
By Alexander Brightman, K&L Gates, Doha
Introduction
Although “freedom of contract” is a concept that is recognised in both the common law and civil law jurisdictions, the codified and prescriptive nature of a civil law system means that the relevant provisions of the Civil Code may even be implied into robustly drafted contracts, including standard forms. As set out below, such implied provisions could have the undesirable effect of delaying termination whilst a court order is obtained or exposing the terminating party to a claim for breach of contract (and compensation) for unlawful termination. In this article, I will be discussing suspension and termination rights under the FIDIC Contract (Red and Yellow Books), before examining the position under the Qatar Civil Code. In a follow-up blog post, I will look at suspension and termination under the UAE Civil Code.
By Darran J. Jenkins, K&L Gates, Doha
The concept of good faith as applicable in the Civil law jurisdictions of Qatar and the United Arab Emirates (“UAE”) is one that may be unfamiliar to lawyers from a common law background where good faith is applies in a very limited fashion, if at all. [1]
The Position in the Middle East
The position in Qatar is set out in Article 172 of the Qatar Civil Code[2]:
“1. The contract must be performed in accordance with its contents and in a manner which consistent with the requirements of good faith.
2. The contract is not confined to obliging a contracting party to its contents, but also includes its requirements in accordance with the law, custom and equity as per the nature of the obligation.”
The corresponding article in the UAE Civil Code[3] is Article 246 which states:
“(1) The contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith.
(2) The contract shall not be restricted to an obligation upon the contracting party to do that which is (expressly) contained in it, but shall also embrace that which is appurtenant to it by virtue of the law, custom, and the nature of the transaction.”
In Bahrain, Article 127 of the Civil Code[4] requires:
“A contract is not only limited to its expressed conditions, but also as regards everything which according to law, usage and equity is deemed in view of the nature of the obligation, to be a necessary sequel to the contract, taking into consideration custom and usage, requirements of equity, nature of business, good faith and honesty.”
And Article 129 provides:
“A contract must be performed in accordance with its contents and in compliance with the requirements of good faith and honesty.”
Each of these Civil Codes takes an almost identical approach to the treatment of good faith. As a result, a contract will not be interpreted using solely its terms but will be interpreted against the requirements of customs, equity and good faith.
The requirement to act in good faith is a strong, positive obligation on the parties to a contract. It is not merely a requirement not to act in bad faith and not to deceive one another. Each party is instead under a legal obligation to exercise good faith in the performance of its contractual obligations and it is dealings with the other party. In a construction context, the duty of good faith would require an employer to cooperate with the contractor and deal with change requests in a timely and fair manner, whilst a contractor would be obliged to avoid delaying the performance of their works.
It is interesting to note that the obligation within the Qatar Civil Code is to perform the contract in good faith but it does not extend to negotiating the contract in good faith. The parties are free to adopt an adversarial approach to negotiation of the contract to try to obtain the best possible deal for themselves. Only once the contract has been signed does the duty to act in good faith arise.
In relation to insurance contracts, the duty to perform in good faith under the Civil Code does not in any way limit the duty of the insured to act with utmost good faith when placing the policy. This is because the Civil Code also recognizes and enforces a higher standard of care where the parties have agreed it should apply.
[1] Please note, all English extracts in this Article are taken from an unofficial English translation of the Qatar and UAE Civil Code, reference should always be made to the original Arabic text.
[2] Law Number 22 of 2004
[3] Law Number 5 of 1985
[4] Law Number 19 of 2001
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