The Treatments of Liquidated Damages under the English and the UAE Laws
Undesirable delays in construction projects result in needless costs and precipitate aggravated projects durations. Unfortunately, construction project delays are very common, which affect the objectives of the project, the parties` positions, which may lead to disputes between the parties. These difficulties are frequently dealt with by agreeing to a liquidated damage clause under the contract. Liquidated damages provisions are agreed upon between the parties to guarantee the performances from the parties to their contractual obligations. While it often ensures performance, another benefit is to identify a predetermined monetary sum which are to be paid by the performing party in the event of delays in delivering the works, or possibly specific milestones. While liquidated damages are considered to be supplementary contractual provisions, its application and enforcement are conditioned to its applicability under the contract`s applicable law and the other contractual obligations. This research discusses and compares the limitations to enforce liquidated damages under English and the United Arab Emirates (UAE) laws. Both laws impose limitations on recovering liquidated damages when the provision departs from its compensatory and equity nature. Under English law the court’s position will be either allow or limit the award of the liquidated damages, whereas under UAE law the courts exercise the same discretions and may go further by varying the liquidated damages amount that is agreed between the parties. English and UAE Laws stress the importance of honouring and prioritizing the parties` agreement, provided it contradict no mandatory law provision or the public order. The concept of liquidated damages is addressed differently depending on the legal system of the country. There are a few limitations the majority of countries regardless of this though which include the principle of equity and protecting the interests of the parties. However, the Common Law system is generally strict in limiting the award of any form of penalty clause in a contract due to the potential issues that may occur. On the face of it, it appears that UAE`s courts do not differentiate between a pure penalty and a pure liquidated damages provision. It is safe to assume that the importance in differentiating between the two terms made in Common Law jurisdictions is not shared in the UAE, due to the granted power to the courts under Article 390 of the Civil Code.