Sub-Contracts Management and Administration

Sub-Contracts Management
and Administration
SEMINAR
(Based on FIDIC Standard)
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FOUNDATIONAL KNOWLEDGE
FIDIC SUBCONTRACTORS
UNDERSTANDING THE RELATIONSHIP BETWEEN
MAIN CONSTRUCTION CONTRACTORS
AND VARIOUS TYPES OF SUBCONTRACTORS
WORKING ON CONSTRUCTON SITES
FIDICS APPROACH TO
SUBCONTRACTORS
FIDICs Red Book, Sub-Clause (SC) 4.4, provides
for the basis of Subcontracting under their
provisions.
1. Unless otherwise agreed the Contractor CANNOT subcontract the
whole of the works;
2. The Contractor remains wholly responsible to the employer for the acts
of that subcontractor as if those acts had been carried out by him;
3. The prior consent of the Engineer is required for all subcontractors apart
from suppliers and subcontractors named in the Contract;
4. The Contractor must give the Engineer 28-days notice of both the
intended and actual commencement date of any subcontracts work;
and
FIDICS APPROACH TO
SUBCONTRACTORS (CONT)
5. The subcontract must contain suitable provisions
entitling the employer to require the subcontract to
assigned to him in the event of termination. Sub-
Clause (SC) 4.4(d) states:
each subcontract shall include provisions which would
entitle the Employer to require the subcontract to be assigned
to the Employer under Sub-Clause 4.5 [Assignment of Benefit
of Subcontract] (if or when applicable) or in the event of
termination under Sub-Clause 15.2 [Termination by
Employer]...
FIDICS APPROACH TO
SUBCONTRACTORS (CONT)
FIDICs Sub-Clause 4.4, provides for the basis of
Subcontracting under the Red Book.
6. Whereas Sub-Clause (SC) 4.5 (Assignment of Benefit
of Subcontract) reads:
..If a Subcontractors obligations extend beyond the expiry date
of the relevant Defects Notification Period and the Engineer, prior
to this date, instructs the Contractor to assign the benefit of such
obligations to the Employer, then the Contractor shall do so.
Unless otherwise stated in the assignment, the Contractor shall
have no liability to the Employer for the work carried out by the
Subcontractor after the assignment takes effect
DIFFERENCES ACROSS FIDICS
RAINBOW: SUBCONTRACTORS
Under the Silver Book for example the Contractor only
has to notify the Employer of the appointment of a
subcontractor, but also providing pertinent details about the
subcontractor in question:
Subcontractors past performance and experience
When they intend to begin work on the project;
Other information as required
Red and Pink Book, reference the language under 4.4(d) previously stated;
Gold Book provisions referencing subcontractors state:
If the Subcontractor is entitled to any relief from risk on broader terms than
those specified between Contractor and Employer, then those additional
circumstances shall not serve as an excuse for non-performance by the
Contractor
FIDICS RULE: CONTRACTOR
RESPONSIBLE FOR SUBCON ACTIONS
REMEMBER: No matter what version of FIDIC, THE
CONTRACTOR WILL ALWAYS BE WHOLLY RESPONSIBLE for the
performance (or NON-performance) of the subcontractor.
This includes time, quality and paying the subcontractor in
accordance with (IAW) the contract between the main contractor
and subcontractor regardless of any issue between the main
contractor and the employer.
THIS OBLIGATION extends not only to subcontractors
appointed by the contractor (Domestic), but also to the
subcontractors NOMINATED by the employer in accordance with
clause 5 of the Red Book. (SC 5.1)
SUBCONTRACTORS, CONTRACTORS
& EMPLOYERS
BASIC TERMINLOGY GROUNDING
SUBCONTRACTORS INTO
THE INDUSTRY OF THE UAE
CASE STUDY: SHANKLIN PIER LTD
V DETEL PRODUCTS LTD
Shanklin Pier Ltd (hereinafter called Shanklin or
Claimant) owned a pier and intended to repair it.
(have it repainted);
Detel Products (hereinafter called Detel), warranted
to Shanklin that their paint would provide rust
protection for up to 10 years;
Claimant relied upon this warranty and when
engaging the Main Contractor (MC), instructed the
MC to place an order for this paint.
The paint was judged a total failure after a short
period of time!!!
v DETEL PRODUCTS LTD
Shanklin sought to recover damages direct
from the defendant (Detel) NOT THE MAIN
CONTRACTOR as the MC had not warranted the paint
materials used, primarily because it had been the
subcontractor (Detel) that warranted the goods to the
employer originally;
This despite the fact that the sale of the paint
product had taken place between the MC and
the defendant (Detel)
Shanklin Pier Ltd v Detel Products Ltd [1951]
2 KB 854 remains a leading judgment on the subject
of collateral contracts in English contract law.
In it the High Court of Justice, King's Bench
Division, used the principle of collateral
contracts, to create an exception to the rule
of privity of contract where a contract may be
given consideration by entering into another contract.
Judge McNairs Judgement read as follows.
This case raises an interesting and comparatively novel question whether or
not an enforceable warranty can arise as between parties other than parties to
the main contract or the sale of the article in respect of which the warranty is
alleged to have been given.... I am satisfied that, if a direct contract of purchase
and sale of [the paint] had then been made between the plaintiffs and the
defendants, the correct conclusion on the facts would have been that the
defendants gave to the plaintiffs the warranties substantially in the form alleged
in the statement of claim. In reaching this conclusion, I adopt the principles
stated by Holt CJ in Crosse v Gardner and Medina v Staughton that an affirmation
at the time of sale is a warranty provided it appear on evidence to have been so
intended.
JUDGE McNair concluded his remarks on this
precedent setting case as follows:
If, as is elementary, the consideration for the warranty in the
usual case is the entering into of the main contract in relation to
which the warranty is given, I see no reason why there may not be
an enforceable warranty between A and B supported by the
consideration that B should cause C to enter into a contract with
A or that B should do some other act for the benefit of A... [1]
[1] Beale (2002) p.55
IDENTIFICATION AND DESCRIPTION OF
SUBCONTRACTOR
TYPES
OPERATING AT A WORKS SITE
RELATIONSHIP BETWEEN
MC AND SUBCON - DEFINATIONS
THREE TYPES OF SUB-CONTRACTORS;

Domestic
Nominated
Named
Domestic sub-contractor (SC) is one selected

and employed by the Main Contractor (MC) for whom the
MC is solely and entirely responsible
[Nick Gould, Partner Fenwick Elliott]
RELATIONSHIP BETWEEN
MC AND SUBCON - DEFINITIONS
Nominated Subcontractor is selected by the Employer but
employed by the MC
Named Subcontractor is where the Employer names one or
more preferred sub-contractors. To that list the MC may add
further potential sub-contractors. The cumulative list is then used
for tendering purposes and a sub-contractor is selected by the MC.
The sub-contractor is then treated as a domestic sub-contractor of
the MC, thus avoiding the employer liability disadvantages of
nomination, but still giving the employer some element of
involvement in the selection process.
THIS type of SC derives from JCT forms of contract
SUBCONTRACTING
TYPES
Named
Nominated Sub- Domestic
Contractor Sub-
Sub-Contractor
Contractor
WHY USE NOMINATED SUBCON?
ALLOWS EMPLOYER and/or Employers selected

ARCHITECT to identify a sub-contractor who is supplying a
long lead item or element of the work (example a lift or
elevator, or other specialized equipment), and more
importantly, secures a manufacturing and delivery slot before
the MC has been selected.
Another advantage is the selection of specialist sub-
contractors that is required to carry out some of the initial
works on site (Early Works). Examples of this type work
usually involves foundation works (piling operations).
UAE LAWS
THAT GOVERN
SUBCONTRACTING
CONTRACTORS LEGAL RIGHT TO
SUBCONTRACT UNDER UAE LAW
EMPLOYERS in the UAE typically prefer to enter
into a contract with one (1) Main Contractor for
the whole works rather than to have several
separate contracts for the performance of
separate segments of works.
Main Contractors rarely carry out the whole of
works themselves in the UAE, and generally use
more than one sub-contractor to carry out
portions of the works.
CONTRACTORS LEGAL RIGHT TO
SUBCONTRACT UNDER UAE LAW
Main Contractors are granted the right to sub-
contract their assigned works as derived under article
890(1) of the Federal Law No. 5 of 1985, under the
Civil Transactions Code of the UAE.
Under UAE Law the Main Contractor is lawfully entitled to
entrust the performance of the whole or part of the work to another
contractor (sub-contractor) unless he is prevented from so
doing by a condition of the contract (such as per
FIDIC SC 4.4) or unless the nature of the work
requires the MC to do it in person.
SUB-CONTRACTORS RIGHTS UNDER
UAE SUBCONTRACTING LAWS
Claims for Payment by the sub-
contractor for performance rendered under a
subcontract lies solely with the Main Contractor
(Privity of Contract rule);
Sub-contractor has no legal basis to
institute a claim against an employer for payment
due from the MC for performance rendered under
a subcontract.
Article 891, UAE Civil Transaction Code

prohibits a subcontractor from instituting a
claim against an employer for any amounts that
are claimable from the MC unless the MC has
given the subcontractor an assignment of
its rights against the employer
NOTE:
Article 891, UAE Civil Transaction Code
prohibits a subcontractor from instituting a
claim against an employer for any amounts that
are claimable from the MC unless the MC has
given the subcontractor an assignment of
its rights against the employer
UAE CIVIL
TRANSACTION
CODE(a.k.a., Civil
Code REGARDING
SUBCONTRACTING
SPECIFICALLY
Article 891
NOTE:
Online Access to
Official UAE website for
legal information:
http://www.elaws.gov.ae
Full
Text
UAE GOVERNING
SUBCONTRACTING LAWS
Article 1109(1) of the UAE Civil Transaction Code
provide terms for validity of an assignment of rights is the
consent of the assignor, assignee, and the party in whose
favor the assignment is made.
Unless expressly provided for under the main
contract an Employer would only be entitled to make a
lawful direct payment to a sub-contractor for payment
due under a subcontract in the event that all three parties
(Employer, Contractor and Sub-Contractor) have
consented thereto.
Article 1109 legalese
wording describing
direct payments to a
Subcontractor by the
Employer
Article 1109
1 The validity of a transfer is
conditioned upon the acceptance
of he transferor, the transferee
and the third party beneficiary.
2 The transfer is formed
between the transferor and the
transferee provided it is accepted
by the concerned creditor
UAE GOVERNING
SUBCONTRACTING LAWS
Employers typically expressly provide in

the main contract with its MC, the right
to pay a sub-contractor directly and to
deduct the sums so paid from money due
the MC, particularly where the
subcontractor is a nominated sub-
contractor by the Employer.
UAE GOVERNING
SUBCONTRACTING LAWS
BUYER BEWARE!!!
In the event that such direct payment is in
any way determined unlawful, the Employer
would then remain liable to pay the Main
Contractor for the same work and would have to
pursue the sub-contractor in a separate cause
of action for the recovery of the direct payment
made
FIDIC SUBCONTRACT 2011:
CONDITIONS OF SUBCONTRACT
FOR CONSTRUCTION
OF BUILDING AND ENGINEERING
UNDERSTANDING SUB-CONTRACTORS
RIGHTS UNDER CLAUSE 20 (2011 Subcontract)
Introduction:
Two FIDIC Documents Examined:
1. Subcontract for Construction of Building and
Engineering Works designed by the Employer, 1st
Edition, 2011 (known as the 2011 Subcontract) [1]
2. The Guidance for the Preparation of the Particular

Conditions of Subcontract (the Guidance) [2]
[1] Lexology, November 2012
[2] Ibid
jjj
Guidance for the
Preparation of
Particular Conditions
of Subcontract.
Direct application of Clause 20 of the 2011
Subcontract provides:
An Alternative Dispute Resolution (ADR)
procedures similar to the Main Contract FIDIC Red
Book relief remedies, mainly:
Disputes arising under a subcontract are first referred to
the Subcontracts DAB (Dispute Adjudication Board)
and thereafter (if desired), dispute escalates to an
arbitration panel for final determination.
Under item number two (2) above (Guidance for
the Preparation of the Particular Conditions of
Subcontracts) - there are two (2) optional ADR
provisions;
1. Simple Dispute Resolution Procedures involving only
Arbitration;
2. Complex mechanism intended to make the
Subcontractor bound by Main Contractor DAB
decisions and Arbitration awards on disputes
related to those under the Main Contract.
COURSE GOAL - FORWARD:
Provide a High Level overview to course participants

regarding the second alternative clause 20 provisions
and highlight particular areas which
contractors and subcontractors should
be concerned with.
THE SECOND ALTERNATIVE
CLAUSE 20
as described in
THE GUIDANCE FOR THE

PREPARATION OF THE PARTICULAR
CONDITIONS OF SUBCONTRACTS
(known as the Guidance)
SECOND ALTERNATIVE CLAUSE 20
An Overview:
IMPORTANT POINTS:
The Clause is separated into sub-clauses dealing with
the Subcontractors claims for extension of time (EOT)
and/or additional payment under the Subcontract (sub-
clauses 20.1 20.5) and disputes (sub-clauses 20.6 to
20.8);
For claims for extensions of time and/or additional
payment, the Subcontractor is required to give notice
within 21 days of it becomes (or should have become)
aware of the event or circumstance giving rise to the
claim (sub-clause 20.1)
An Overview:
IMPORTANT POINTS continued:
Such claims are then separated into RELATED
CLAIMS (claims that arise from circumstances which
may also give rise to a claim under the Main Contract or
otherwise concern existing claims or disputes under
the Main Contract) and;
UNRELATED CLAIMS which is any disagreement
between the parties on whether a claim is Related or
Unrelated will ultimately be referred to the ICC pre-
arbitral referee procedure (sub-clause 20.2)
An Overview:
For Unrelated Claims the Subcontractor

puts forward its detailed claim to the Contractor. If
agreement cannot be reached in respect of
the claim, the Contractor is required to
make a fair determination (sub-clause
20.3)
CLAUSE 20, Related Claims
Under sub-clause 20.4, Contractor obligated to submit Related Claims to
the Engineer and Main Contractor must use all reasonable
endeavors to secure claim from the Employer. The Sub-contractor
is entitled to be involved in any meetings with the Engineer which
concerns the Related Claim, although there is no requirement in Red Book
that obligates the Engineer to allow the Subcontractors to be present.
An Overview:
Unless the Subcontractor is
present in those meetings, or
refuses to attend where
permitted to do so, the
Contractor is not allowed to
reach an agreement with the
Engineer on the Related Claim(s)
without prior consultation with
the Subcontractor.
Given that the sub-clause goes on to state that Subcontractors could be bound by that
agreement if they do not serve a notice of dissatisfaction within a prescribed
period, Subcontractors would no doubt want this wording to do further and prohibit the
Contractor form reaching any agreement with the Engineer without its prior, written,
approval.
An Overview:
Sub-clause 20.4 continues to state that, where
the Engineer and Contractor reach agreement on the Related
Claim(s), or the Engineer issues a determination, such that
the Contractor is entitled to an extension of time (EOT)
and/or additional costs under the Main Contract the
Contractor is required to pass the share of benefit(s)
applicable to the Related Claim to the Subcontractor.
HOWEVER; the Contractor is only liable to pass on monetary
benefits if it first receives payment from the Employer, which, is
likely to be controversial.
An Overview:
If the Contractor and Subcontractor disagree

what the Subcontractors share of the
benefit(s) will be, the Contractor will make a
fair determination, which the Subcontractor
will be bound by if it does not issue a notice of
dissatisfaction on time.
IF HOWEVER - the Engineer and Contractor agree, or the Engineer
determines, that no additional payment and/or extension of time (EOT)
is due the Contractor under the Main Contract, then the Subcontractor
will be bound by this unless it serves a notice of dissatisfaction with the
prescribed period.
SUBCONTRACT DISPUTES
Sub-Clause 20.6 20.8
CLAUSE 20 Disputes
An Overview:
Similar to Claims discussed in the last

section
Subcontract Disputes are categorized
into two categorizes:
1. Unrelated Disputes
2. Related Disputes
CLAUSE 20 Disputes
An Overview: Sub-clause 20.7
NOTE: Disputes arising from unrelated claims
and related claims AUTOMATICALY constitute
Unrelated Disputes and Related Disputes.
Accordingly;
Sub-clause 20.7 Unrelated Disputes can be
referred by either the Contractor or the Subcontractor for
adjudication by the Subcontract DAB.
If either party issues a notice of dissatisfaction in relation to the
Subcontract DABs decision the parties shall attempt to amicably
settle the dispute or proceed directly to the ICC Arbitration.
CLAUSE 20 Disputes
An Overview: Sub-clause 20.8
Sub-clause 20.8 Related Disputes are initially
referred by the Contractor to the Main Contract DAB and the
Contractor is required to use all reasonable endeavors to pursue
the claim on the Contractors and Subcontractors behalf and for
both their benefit(s).
The Subcontractor is required to provide information to the
Contractor to pursue the Related Dispute and is to be provided a
reasonable opportunity to be involved in (amongst other things)
preparing written submissions an making oral submissions to the
Main Contract DAB
Related Claims (SC 20.8) Chart
DAB convenes Board and listens to Oral Arguments

from both the MC and the Sub-Contractor
Main Contract attends DAB and presents joint Related

Claim evidence for DAB consideration.
MC & SC share a
similar Claim Subcontractor shares common, related dispute with Main
Contractor. Subcontractor supports the Main Contractor by suppling
relevant and timely information related to the mutual dispute, and is
SC MC included in the all written submissions to the Main DAB. SC is
allowed also to participate in oral arguments before the Main DAB.
CLAUSE 20 Disputes
An Overview: Sub-clause 20.8 (Cont)
Sub-clause 20.8 Related Disputes (continued)
If the Subcontractor is not able to be involved in
the Main Contract procedure in this way then (which, again,
is certainly likely given that, again, there is nothing in the Red Book that obligates
the Employer to agree to this) the Contractor is not entitled to
reach any settlement with the Employer on the
Related Dispute without prior consultation with
the Subcontractor.
Concern for the Subcontractor: Contractor reaching an
agreement with the Employer that might ultimately be binding on
the Subcontractor.
CLAUSE 20 Disputes
The Contractor is required to notify the Subcontractor
of the Main Contract DAB decision, which will in turn be
binding on the Subcontractor unless it provides a notice of dissatisfaction
within 7 days.
If the Main Contract DAB finds in the Contractors favor,
then the Contractor has to use all reasonable
endeavors to secure the relevant benefit(s) form the
Employer, and keep the Subcontractor updated as to its progress. As
with the Related Claims provisions, receipt of payment from the Employer
is a condition precedent to the Contractors liability to the Subcontractor
in respect of the same, and there is a similar provision in relation to
determining the parties respective shares of the benefit received.
CLAUSE 20 Disputes
If the Subcontractor serves a notice of dissatisfaction
(NOD) wit the Main Contract DABs decision, the
Contractor will need to serve a corresponding notice to
prevent the Main Contract DABs decision from
becoming final and binding under the Main Contract.
Under Red Book Conditions of Contract, the
Contractors NOD is a condition precedent to its
entitlement to refer the dispute for final determination
by the ICC arbitration.
CLAUSE 20 Disputes
If the Contractor does not respond to the
Subcontractors NOD, or does not serve a
corresponding notice against the Main Contract DAB
decision to prevent it from becoming final and binding
under the Main Contract then the dispute will be
considered an Unrelated Dispute.
Sub-clause 20.7 will then apply. The Subcontractor will

essentially need to start again and refer the now
Unrelated Dispute to the Subcontract DAB for a
decision.
SC 20.8 RELATED DISPUTE GRAPHICAL
REPRESENTATION
Disputes Adjudication Board (3) Main Contractor, upon
receiving NOD from SC, must
Employer Main Contractor then notify the Employer
and DAB that their mutual
No guidance within FIDIC on timing of notification back decision reached earlier btw
to DAB or Employer of Subcontractor NOD from Main Employer and Contractor,
Contract DAB Decision. Reasonable timing is thought to cannot be implemented.
be same notification timing as Subcontractor 7 days.
(2) However, upon informing
Subcontractor the SC of the decision, the SC is
not content, issues a Notice of
7 Days Max before resolution is final, SC must notify MC Dissatisfaction (NOD) to MC
with NOD during this time (1) Employer and MC come
to resolution on Dispute
Employer Main Contractor presented at the Main Contract
DAB.
CLAUSE 20 Disputes
If the Contractor does issue a NOD under the Main
Contract, it will first try to reach a settlement with the
Employer and if, unsuccessful, will proceed to
commence ICC arbitration proceedings against the
Employer in respect of the Related Disputes under the
Main Contract.
The Subcontractor will be given the opportunity to be
involved in the proceedings. [NOTE: Subcontractor will
NOT be entitled to become party to those proceedings]
CLAUSE 20 Disputes
The award under the Main Contract arbitration is
deemed to be binding on the Subcontractor to the same
extent as it is binding on the Contractor.
The contractual benefit of any award shall be shared
with the Subcontractor to an appropriate extent to be
determined by the Contractor.
Any disagreement as to the level of the share shall be
deemed an Unrelated Dispute to be settled by
arbitration between the Contractor and Subcontractor.
RELATED DISPUTES
Depicted Graphically
ICC Arbitration Decision Favorable Decision

awarded to MC only
Arbitration Decision is
binding on both MC
and SC, unless
monetary award to SC Main Contractor Financial benefits of
ICC Decision shared
is not agreed. In this
between MC and SC
case, a new disputes
as determined by
is recorded as a
MC or previously
unrelated Dispute
Sub-Contractor agreement btw MC
and SC.
CLAUSE 20 Disputes
NOTE: Wording within the 2011 Subcontract Form - is not
clear and contractors are best advised to tighten up their
contract language in respect to ensure that if the
Subcontractor does not give a timely NOD, then it will be
bound by the Main Contract DAB decision,
otherwise the Contractor could find itself bound by the Main
Contract DAB decision but still defending a Subcontract
arbitration in relation to the same dispute (Double-jeopardy).
FIDICS SIMILARITIES WITH OTHER
FORMS REGARDING SUBCONS.
COLLATERAL WARRANTIES:
Usually found in Joint Contracts Tribunal (JCT) contract
forms; Collateral warranties may be formed informally, either
with correspondence or even verbally;
Represents a separate, legally enforceable contract from the
obligations under the main contract.
Collateral warranty exists
where an employer insists upon the main contractor entering
into a subcontract with a particular sub-contractor after the
warranty has been given by the sub-contractor to the
employer
In this type of situation, the employer can sue the sub-
contractor or supplier for any loss caused by breach of
warranty.
COLLATERAL WARRANTIES
In practice - EMPLOYERS may require the

SUBCONTRACTORS to provide a collateral warranty that
the employer can rely upon to seek the subcontractors
direct liability for defective works.
A COLLATERAL WARRANTY is enforceable under

the UAE law.
It is deemed a unilateral act according to Article 276 of
the Civil Transactions Code; thus, the subcontractor is
bound by its terms according to Article 278 of the same
Code.
A COLLATERAL WARRANTY typically contains provisions
for the assignment and step-in rights to ensure that the
employer may assign the obligations set out in the
warranty to other beneficiaries such as subsequent
owners or tenants.
CASE STUDY ASSIGNMENT
LINDEN GARDENS TRUST Ltd vs
LENESTA SLUDGE DISPOSALS LTD and others;
ST MARTIN'S PROPERTY CORPORATION LTD and another vs
SIR ROBERT MCALPINE LTD
HOUSE OF LORDS
(Lord Keith of Kinkel, Lord Bridge of Harwich,
Lord Griffiths, Lord Ackner and Lord Browne-Wilkinson)
22 July 1993.
ASSIGNMENT
UAE CASE STUDY
IN THIS CASE - an assignment of contractual rights in

breach of a prohibition against such assignment was
ineffective to vest the contractual rights in the assignee.
A building owner who had parted with the property could

recover substantial damages for breach of a building
contract.
ASSIGNMENT
UAE CASE STUDY
In 1979, Stock Conversion and Investment Trust plc

entered into a building contract with M & H under which
M & H was to remove asbestos from Stock's property.
The contract was in the Joint Contract Tribunal Standard

Form of Building Contract (1963 ed revised July 1975).
Clause 17 prohibited assignment of the contract.
ASSIGNMENT
UAE CASE STUDY
In 1985, when asbestos which should have been removed

was found on the premises and removed by another
company, Stock Conversion issued a writ.
It disposed of its interest in the property in 1987 to Linden

Gardens. More asbestos was found and further removal
work undertaken. Linden Gardens claimed damages
against M & H.
ASSIGNMENT
UAE CASE STUDY
A party to a building contract could have a genuine

commercial interest in seeking to ensure that he was in
contractual relations only with a person whom he had
selected as the other party to the contract. There was no
policy reason why a contractual prohibition on
assignment of contractual rights should be contrary to
public policy.
ASSIGNMENT
UAE CASE STUDY
The existing authorities established that an attempted

assignment of contractual rights in breach of a contractual
prohibition was ineffective to transfer such contractual
rights. The law was satisfactorily settled in that sense.
It followed that the Linden Gardens claim failed and its

actions must be dismissed.
ASSIGNMENT
UAE CASE STUDY
The existing authorities established that an attempted

assignment of contractual rights in breach of a contractual
prohibition was ineffective to transfer such contractual
rights. The law was satisfactorily settled in that sense.
It followed that the Linden Gardens claim failed and its

actions must be dismissed.
ASSIGNMENT
UAE CASE STUDY
It was submitted that although Corporation retained its

rights under the contract, it was only entitled to nominal
damages as it had suffered no loss and had parted with
the property at the date of the breach. However, the
present case fell within the rationale of the exceptions to
the general rule that a plaintiff could only recover
damages for his own loss.
ASSIGNMENT
UAE CASE STUDY
The property, to the knowledge of both Corporation and

McAlpine, was going to be occupied by third parties. It could
be foreseen that damage caused by a breach would cause loss
to a later owner and not merely to the original contracting
party.
It was proper to treat the parties as having entered the
contract on the footing that Corporation would be entitled to
enforce contractual rights for the benefit of those who
suffered from defective performance but who could no acquire
any right to hold McAlpine liable for breach.
ASSIGNMENT
UAE CASE STUDY
In the prolonged period of recession in the property market

many developments have had to be sold off before
completion, thereby producing the risk that the ownership of
the property might have become divided from the right to sue
on the building contract at a date before any breach occurred.
The original building owner would not be entitled to recover
damages for loss suffered by others who could themselves sue
for such loss.
Therefore, Corporation was entitled to substantial damages for
any breach by McAlpine of the building contract.
Regardless of if a collateral warranty is provided or not,
according to Article 890(2) of the Civil Transactions Code,
the main contractor remains liable to the
employer for the subcontractors
performance.
In many cases, the UAE courts emphasized that the
main contractor remains contractually liable
for the acts or defaults of the subcontractor
even if the subcontractor in reality
performed the employers instructions
during the course of the project.
UAE CASE STUDY
In the well-known decision of the Dubai Court of
Cassation in case No. 266 of 2008, the court held that:
when the subcontractor is selected by the
employer or its consultants, the employer shall be
liable for any delay in the performance of the
subcontracted part and the main contractor shall
not be liable for any delay fines if they can prove
that the delay is caused by such subcontractor
and the main contractor played no part in the
delay
UAE CASE STUDY
The grounds of this decision have been debatable as

the court provided no specific criteria to disregard the
general rule set out in Article 890(2).
Thus, this controversial decision is deemed an

exception to the general rule that the main
contractors liability remains in place even so with
nominated subcontractors.

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Sub-Contracts Management

THREE TYPES OF SUB-CONTRACTORS;

Domestic sub-contractor (SC) is one selected

ALLOWS EMPLOYER and/or Employers selected

Article 891, UAE Civil Transaction Code

Employers typically expressly provide in

2. The Guidance for the Preparation of the Particular

Provide a High Level overview to course participants

THE GUIDANCE FOR THE

For Unrelated Claims the Subcontractor

If the Contractor and Subcontractor disagree

Similar to Claims discussed in the last

DAB convenes Board and listens to Oral Arguments

Main Contract attends DAB and presents joint Related

Sub-clause 20.7 will then apply. The Subcontractor will

ICC Arbitration Decision Favorable Decision

In practice - EMPLOYERS may require the

A COLLATERAL WARRANTY is enforceable under

IN THIS CASE - an assignment of contractual rights in

A building owner who had parted with the property could

In 1979, Stock Conversion and Investment Trust plc

The contract was in the Joint Contract Tribunal Standard

Clause 17 prohibited assignment of the contract.

In 1985, when asbestos which should have been removed

It disposed of its interest in the property in 1987 to Linden

A party to a building contract could have a genuine

The existing authorities established that an attempted

It followed that the Linden Gardens claim failed and its

The existing authorities established that an attempted

It followed that the Linden Gardens claim failed and its

It was submitted that although Corporation retained its

The property, to the knowledge of both Corporation and

In the prolonged period of recession in the property market

The grounds of this decision have been debatable as

Thus, this controversial decision is deemed an

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