According to a recent research report by Ventures Middle East, more than $15bn worth of construction contracts are likely to be awarded during 2012 in the UAE, while the total value of construction projects in UAE currently stands at $1.249trn.
Even as the numbers are positive signs for the industry, the high value of construction contracts also eventuate an increase in the number of contract disputes.
In the ‘Global Construction Disputes Index’ released by EC Harris in 2011, the top five causes of dispute in construction projects in the Middle East all point towards shortcomings within the contracts.
Mr. Ahmed Hussain Lootah said: “One of the most common errors is using standard contracts – where only the details of the contracting parties are changed, leaving the terms and conditions as a standard format. There are risks associated with using one standard contract for different parties, as there may be certain specifications that need to be included, which may differ from one contract to the other.”
According to Mr. Lootah, contracts must be diligently drafted with careful consideration given to safeguarding the best interests of the party in the event of a dispute. The possibility of a dispute should never be overlooked and needs to be addressed in the contract.
Some contracts provide for alternative means of dispute resolution other than litigation. It is only at the time of a dispute that a party becomes aware of such agreed provisions. Since some parties prefer litigation, they regret not reading the contract carefully before signing it.
On the other hand, the transnational nature of parties entering into contracts in the UAE often makes a strong point for the preference of alternative dispute resolution such as mediation and arbitration over litigation in the event of a dispute. Mutually agreed means of dispute resolution should be written into each contract in such cases. It is important to note that in the absence of a clause providing for means of alternative dispute resolution, litigation proceedings take precedence.
Mr. Lootah further continued: “There are also instances when parties are confronted, at the time a dispute arises, with an arbitration or mediation provision that contains issues such as determining a jurisdiction other than the UAE as the place of arbitration. This may not go well for the situation of the party and they would probably not have agreed to such provisions had they reviewed the contract carefully at the time of signing.”
In conclusion, Mr. Lootah emphasized that it is highly advisable to have contracts drafted by a legal professional, who is trained to include all the rights and obligations of the contracting parties, as well as terms and conditions, leaving out any room for ambiguity.