Provisional Sums and Nominated Subcontracts in Construction Law; A Comparative Analysis of the Rights and Obligations of the Employer Under UAE and Common Laws
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Date
2016-11
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The British University in Dubai (BUiD)
Abstract
Provisional sums are included within construction contracts to allow the employer, at its discretion, to select and nominate its choice of subcontractor to the contractor. Thereafter, the contractor remains generally liable for the performance of the nominated subcontractor.
Provisional sums and nomination has caused significant legal issues under English common law, leading to its demise, whilst in the UAE employers continue to utilize the method extensively.
A comparison of the legal treatment suggests that the UAE has a robust law which allocates liability of a nominated subcontractor’s defective performance to the contractor, however legal decisions under English common law have ruled contrary to this, holding the employer liable for the nominated subcontractor’s default or repudiation or preventing recourse against the nominated subcontractor.
The importance of an unambiguous and comprehensive contract defining a clear mechanism of administration and remedies is of critical importance otherwise the court or arbitration may be left to decide the parties’ intentions. Despite this, widely used contracts such as FIDIC are surprisingly silent regarding rights or obligations following objection or repudiation of a nominated subcontractor.
There are other issues such as the employer’s rights and obligations regarding direct payment to a nominated subcontractor in the event of the contractor’s insolvency, design liabilities under a provisional sum, delays caused by the nominated subcontractor, duties to properly disclose information and prevent misrepresentation in the nomination, unjust enrichment, pre-nomination discussions and objection to nomination by the contractor. The treatment may vary depending on the relevant legal jurisdiction.
This dissertation seeks to carry out a comparative analysis of the employer’s rights and obligations in relation to these and other issues when using provisional sums and nomination under UAE and common law.
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Keywords
provisional sums, nominated subcontracts, construction law, United Arab Emirates (UAE), arbitration, FIDIC, law