Liquidated Damages in the UAE Construction Industry

Abstract

This dissertation examines the legal framework, enforceability, and judicial interpretation of Liquidated Damages (LDs) in the United Arab Emirates construction industry, a jurisdiction uniquely influenced by a combination of civil law principles, Sharia law, and international standards such as FIDIC. The study investigates the application and limits of Article 390 of the UAE Civil Transactions Code, which permits the pre-agreement of compensation for contractual breaches but allows judicial adjustment to ensure alignment with actual losses. The research adopts a doctrinal methodology, analysing statutory provisions, UAE Court judgments, and contractual practices to assess how LDs clauses are applied, challenged, and adjusted in practice. It distinguishes LDs from general damages and delay penalties, clarifying their respective legal consequences and enforceability. Emphasis is also placed on the judicial discretion allowed under UAE law and the ethical principles rooted in Sharia, especially the forbidden of unjust enrichment and excessive penalties “gharar or riba”. Moreover, the dissertation assesses FIDIC’s standard clauses through multiple editions, focusing on Sub-Clause 8.7 and its equivalents, and the procedural complexities for claiming LDs or refusing their enforcement, especially in the context of concurrent delays and Extension of Time (EOT) claims. By providing a comparative legal analysis and practical insights, this study aids legal practitioners, Employers, and Contractors in drafting balanced LDs provisions that align with both legal standards and equitable principles. The findings underscore the importance of clarity, fairness, and judicial oversight in the UAE’s evolving construction law landscape.