TERMINATION OF CONSTRUCTION CONTRACTS AND THE RELATED APPLICATION OF LIQUIDATED DAMAGES
Loading...
Date
2018-07
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
The British University in Dubai (BUiD)
Abstract
This dissertation discusses the concept of the termination of construction contract, and the consequences of the termination, particularly, the application of the penalty clause and/or the liquidated damages clause.
Pacta Sunt Servanda. There is no doubt that the fundamental elements of the contract are that it is binding on the parties thereto. Although there may be some types of contracts that are not binding due to its nature, at least the construction contracts fall under the binding contracts' category.
Upon entering into any binding contract, the parties thereto prepare themselves to be able to perform their obligations set out in this contract. This preparation includes the preparation for the required resources, budget, and etc. In long-term binding contracts, the parties further may put the expected revenue and costs as part of their annual financial sheets. Accordingly, the economic situation of the contracting parties changes once they entered into their contact.
This is why the legislators in civil law countries enumerated in the civil code sever consequences for the termination of the binding contracts if the termination was unjustified. The main target of these consequences is to return the contracting parties to their original economic situation before entering into this contract. But, will it be possible to return the parties to their original position before entering into their contract in all types of contracts, including the construction contracts?
The legislators further provide a certain mechanism for the valid termination, and this mechanism is subject to be reviewed by the competent court to ensure the validity of the termination.
If the termination is unjustified, then one of the most important consequences, which is compensation to the other contracting party, will apply.
Usually, the contracting parties include a penalty clause or liquidated damages clause to apply it, should the other party fail to perform its obligations. But, would this clause survive after the termination of the contract, or these clauses will apply only during the performance of the contract. If so, how the compensation could be determined under the United Arab Emirates law and common law?
Description
Keywords
construction contract, liquidated damages, United Arab Emirates (UAE), law