COMMON LAW CONCEPTS IN QATARI LAW

CONTRACTS
A COMPARATIVE ANALYSIS OF THE ENGLISH AND QATARI LAW POSITIONS ON A
NUMBER OF COMMON CONSTRUCTION LAW ISSUES

James Bremen, Partner

Herbert Smith Freehills
Mobile (Qatar): +974 6698 6203
Mobile (UK): +44 7717 341 058
Email: james.bremen@hsf.com
 CHOICE OF LAW

• English law - Certainty due to established legal principles

• Many emerging markets - Commercial law less developed
• Choice of law influenced by
– legal system
– certainty
– political reasons
• Issues to consider
– compulsory application of local law
– compulsory resolution by the local courts

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

 COMMON FEATURES OF CIVIL LAW JURISDICTIONS

• No system of binding precedent

• Concepts of fairness and good faith are recognised

• Sharia law - strong influence of customs, practices and usages to fill gaps

• Relationship between tradition and modernisation

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

 COMMON FEATURES OF CIVIL LAW JURISDICTIONS
IN QATAR

• Article 172(1) of the Qatari Civil Code embodies the concept of good faith:
“The contract must be performed in accordance with its contents and in a
manner which consistent with the requirements of good will”

• Article 1(2) of the Qatari Civil Code incorporate the principles of Sharia law:
“If no legislative provision is available, the judge shall decide in accordance with
Islamic Sharia, if he does not find, he shall then decide in accordance with
custom, otherwise, in accordance with the rules of equity”

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

 GOOD FAITH IN ENGLISH CONTRACT LAW

• English contract law does not recognise a general doctrine of good faith in relation to the
creation or performance of contracts.

Bingham LJ stated in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd:

“In many civil law systems, and perhaps in most legal systems outside the common law
world, the law of obligations recognises and enforces an overriding principle that in making
and carrying out contracts parties should act in good faith […] English law has,
characteristically, committed itself to no such overriding principle but has developed
piecemeal solutions in response to demonstrated problems of unfairness.”

• In the context of creation of contracts Lord Ackner held in Lloyds Bank Ltd v Bundy that:

“[…] the concept of a duty to carry on negotiations in good faith is inherently repugnant to
the adversarial position of the parties when involved in negotiations. Each party to the
negotiations is entitled to pursue his (or her) own interest, so long as he avoids making
misrepresentations. To advance that interest he must be entitled, if he thinks it
appropriate to threaten to withdraw from further negotiations in the hope that the opposite
party may seek to reopen the negotiations by offering him improved terms.”

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

GOOD FAITH IN ENGLISH CONTRACT LAW (2)

• In the context of the performance of contracts, Potter LJ stated in James Spencer &
Co Ltd v Tame Valley Padding Co Ltd that:

“there is no general doctrine of good faith in the English law of contract. The [parties]
are free to act as they wish, provided that they do not act in breach of a term of the
contract.”

• Two recent court decisions may indicate a developing view of the English Court’s
approach to good faith:

Compass Group UK and Ireland Ltd (t/a Medirest) v Mid Essex Hospital Services NHS
Trust [2013] EWCA Civ 200

Yam Seng PTE Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB)

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

 ENGLISH / COMMON LAW CONCEPTS

• Freedom of contract • Rule against penalties

• Guillotine clauses • Contra proferentem rule

• Prevention principle • Estoppel

• Without prejudice privilege

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

 FREEDOM OF CONTRACT

• Pacta Sunt Servanda - Roman law principle incorporated into English law

• Civil codes - influence of Egyptian and French law – Article 171(1) of the Qatari
Civil Code

• Sharia law

• Role of public policy exception

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

 GUILLOTINE CLAUSES

• Construction contract notice provisions - conditions precedent to

right to claim

• Strict enforcement under English law (London Borough of Merton

v Stanley Hugh Leach Ltd (1985) 32 B.L.R. 51; Steria Ltd v Sigma
Wireless Communications Ltd [2007] EWHC 3454 (TCC))

• Derives from strict enforcement of pacta sunt servanda

• Position in civil law jurisdictions?

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

PREVENTION PRINCIPLE

• English law principle that one may not insist on performance where
one has made it impossible

• Wider application in construction law where fixed completion dates

and liquidated damages apply

• Owner breach - date for completion falls away and liquidated

damages become inoperable (Peak Construction (Liverpool) Ltd v
McKinney Foundations Ltd (1970) 1 BLR 111)

• Owner must prove general damages and contractor completes

within reasonable time

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

PREVENTION PRINCIPLE (2)

• Overriding principles of fairness and equity applied to situations

where owner has prevented performance
• Owner may still levy liquidated damages for failure to complete on
time
• Court has discretion to reduce award of liquidated damages to extent
owner contributed to losses or obligations partially performed
(Articles 257, 266 and 267 of the Qatari Civil Code)
• Same result as prevention principle:
• completion date effectively falls away
• reduction in damages similar to proving general damages

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

RULE AGAINST PENALTIES – LIQUIDATED DAMAGES

• English law - LDs must be genuine pre-estimate of loss. If not,

unenforceable and owner left to demonstrate general damages
(Dunlop Pneumatic Tyre Co Ltd v New Garage Motor Co Ltd [1915]
AC 79; Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2005]
EWHC 281 (TCC))

• Qatari law – there is a distinction and fundamental difference

between the treatment of liquidated damages in Administrative
Contracts and Civil Contracts

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

RULE AGAINST PENALTIES –
LIQUIDATED DAMAGES IN QATAR

• Administrative Contracts
• Liquidated damages are akin to a fine
• There is no scope for them to be reduced or set aside

• Civil Contracts
• Liquidated damages are enforceable in Qatar (Articles 256 and 265 of
the Qatari Civil Code)
• The court has overriding discretion to reduce the amount of liquidated
damages (Articles 257, 266 and 267 of the Qatari Civil Code)

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

RULE AGAINST PENALTIES –
LIQUIDATED DAMAGES IN QATAR (2)

• Article 256 of the Qatari Civil Code

“If the debtor does not perform the obligation specifically, or is
delayed in its performance, he is obliged to compensate the
damage caused to the creditor; unless it is proved that the non-
performance or the delay was for an extraneous cause for which the
debtor is not responsible.”
• Article 257 of the Qatari Civil Code
“The court may reduce the amount of compensation or not order
any compensation, if the creditor has participated with his mistake
in the occurrence of the damage or increased it.”
• Article 265 of the Qatari Civil Code
“If the subject matter of the obligation is not a sum of money, the
contracting parties may agree in advance to the value of the
compensation whether in the contract or in a later agreement.”

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

RULE AGAINST PENALTIES –
LIQUIDATED DAMAGES IN QATAR (3)

• Article 266 of the Qatari Civil Code

“The agreed upon compensation shall not be due if the debtor
proves that the creditor did not suffer any damage. The court may
reduce the compensation from the one agreed upon if the debtor
proves that the assessment was exaggerated to a high degree, or
that the obligation has been partially performed. Any agreement to
the contrary shall be null and void.”

• Article 267 of the Qatari Civil Code

“If the damage exceeds the amount of compensation agreed upon,
the creditor may not claim more than such an amount, unless he
proves that the debtor committed deceit or gross mistake.”

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

CONTRA PROFERENTUM RULE

• Ambiguous provisions construed against drafter

• “Doubt is to be interpreted in favour of the debtor” (Article 170(1) of

the Qatari Civil Code)

• Rule of construction used as last resort (similar to UK) - courts will

use other means to establish parties’ intention before invoking
provision

• Established custom and practices persuasive

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

REMOTENESS OF DAMAGES

• English law - damages limited to that loss arising naturally from the
breach (i.e. direct loss) or that was in the contemplation of the
parties at time of contract as a probable result of a breach (i.e.
indirect/consequential loss) (Hadley v Baxendale (1854) 9 Exch 341)

• Civil law:
• direct loss?
• indirect/consequential loss?
(Articles 263(2) and 263(3) of the Qatari Civil Code)

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

REMOTENESS OF DAMAGES (2)

• Articles 263(2) of the Qatari Civil Code:

“Compensation shall include the loss sustained by the creditor and
the profit that he lost, provided the same is a natural result of the
non-performance or the delay in performance. Damage shall be
deemed a natural result if the creditor was not able to avoid it by
exerting reasonable effort.”
• Article 263(3) of the Qatari Civil Code:
“Notwithstanding the above, if the source of the obligation was the
contract, the debtor who did not commit any deceit or gross mistake
shall only be liable to compensate for the damage which could have
been expected at the time of contracting.”

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

ESTOPPEL

• English law - estoppel by conduct is defence against claim for failure

to perform
• a party by its conduct
• led the other to believe
• it had waived or relaxed compliance with an obligation
• the other party acted in accordance with that conduct
• to its detriment
• Common defence raised by contractors in claims by employers for
liquidated damages or specific performance

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

 ESTOPPEL (2)

• In both civil and customary law jurisdictions, no requirement for

contracts to be in writing

• Can be concluded orally or by conduct (Article 65(1) of the Qatari

Civil Code)

• Enforcement of “entire agreement”, “no waiver” and “no variations

unless in writing” provisions but balanced against overriding
considerations of fairness and equity

• Can have the same effect as estoppel

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

WITHOUT PREJUDICE PRIVILEGE

• English law - statements or prejudicial disclosure made with the genuine

intention of resolving a dispute may not be disclosed in later proceedings

• Important for success of negotiations and mediation as dispute resolution

mechanisms

• English law – without prejudice documentation is non-disclosable

• Position in civil law jurisdictions?

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

QUESTIONS…

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS

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The contents of this publication, current at the date of publication set out in this document, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific
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© Herbert Smith Freehills Middle East LLP 2013

COMMON LAW CONCEPTS IN QATARI LAW CONTRACTS