Abu Dhabi Judgment on Delay Damages Highlights Importance of When Contract is Terminated

Analysis

The FIDIC 1999 (Red Book) at clause 8.7 provides that in the event completion is delayed the contractor shall pay the employer delay damages equal to a pre-agreed amount specified in the contract as a compensation for the delay (the ‘Delay Damages').

However, the question is: will the employer be entitled to the said Delay Damages if the employer terminated the contract with the contractor? If the answer is no, is there any alternative way under the UAE law to assist the employer to claim compensation for the losses resulted from the contractor's delay?

In a case in which Al Tamimi & Company represented the contractor, the Abu Dhabi Court of Cassation held, in Appeal Case 424 & 483 of 2015, that if the employer terminates the contractor before the completion of the works, the employer is not entitled to sue for the Delay Damages stated in the contract. However, the Cassation Court highlighted that the employer, in such circumstances, is entitled to prove and claim for any damage that may have resulted from the contractor's delay (i.e. claim damages in tort).