What is Article 390 of the UAE Civil Code?

Article 390 of the UAE Civil Code is an essential legal provision that governs the concept of liquidated damages in construction contracts. Liquidated damages, also known as penalties clauses, are widely used worldwide to ensure contractual compliance and provide compensation in case of breach or delay in completing the agreed-upon works.

International contractors from common law jurisdictions are likely to be familiar with the concept of liquidated damages. A typical clause in a construction contract states that if the contractor fails to complete the project within the stipulated time frame, or any extended date, they shall be liable to pay or allow the employer to deduct liquidated damages at a predetermined rate per day or week for the duration during which the works remain unfinished.

The purpose of Article 390 is to establish a framework for enforcing liquidated damages clauses in construction contracts and to ensure fairness and proportionality in the assessment of damages. It provides guidance on the calculation of liquidated damages, the conditions under which they can be imposed, and the remedies available to parties in case of breach or delay.

The Bigger Picture of Liquidated Damages

Liquidated damages clauses play a crucial role in construction projects, especially in the UAE, where the construction industry is booming. These clauses provide a level of certainty and protection for both parties involved in the contract.

For contractors, liquidated damages clauses serve as an incentive to complete the project on time and within the agreed-upon specifications. They create a sense of urgency and accountability, as any delays can result in financial penalties. This can help mitigate the risk of prolonged construction periods and ensure timely completion of projects.

On the other hand, liquidated damages clauses provide a form of compensation for employers in case of delays or breaches by contractors. Construction projects often involve tight schedules, and any delays can have significant financial implications for the employer. Liquidated damages help ensure that employers receive appropriate compensation for the losses incurred due to delays or breaches.

It is important to note that liquidated damages are not intended to be punitive in nature. Their purpose is to provide a reasonable estimate of the damages that the employer is likely to suffer as a result of the contractor's failure to complete the works on time. They are pre-determined and agreed upon by both parties at the time of contract negotiation.

Educational Importance of Article 390

Article 390 of the UAE Civil Code holds educational value for all parties involved in construction contracts. It provides clarity and guidance on the legal framework surrounding liquidated damages, helping contractors, employers, and legal professionals better understand their rights and obligations.

Understanding Article 390 can empower contractors to be more diligent and proactive in meeting project deadlines. By knowing the potential consequences of delays or breaches, contractors can allocate resources and plan their work schedules accordingly to minimize the risk of liquidated damages.

For employers, Article 390 offers a legal basis for seeking compensation in case of delays or breaches. It ensures that employers are not left financially vulnerable due to the contractor's failure to complete the works on time.

Legal professionals benefit from Article 390 as it provides them with a clear framework to interpret and enforce liquidated damages clauses. It helps them advise their clients on matters related to construction contracts and ensures fairness and compliance in resolving disputes related to liquidated damages.

Formal and Millennials

Article 390 of the UAE Civil Code is a formal legal provision that governs the use of liquidated damages in construction contracts. It sets out the legal rights and obligations of parties involved and provides a formal mechanism for seeking compensation in case of breaches or delays.

Millennials, who form a significant part of the current workforce, can benefit from understanding Article 390. As the construction industry continues to grow and evolve, millennials entering the field can familiarize themselves with the legal aspects of construction contracts, including liquidated damages. This knowledge can help them navigate contracts, negotiate terms, and ensure compliance with contractual obligations.

Conclusion

Article 390 of the UAE Civil Code is a crucial provision that governs the use of liquidated damages in construction contracts. It establishes a legal framework for the enforcement of liquidated damages clauses, ensuring fairness and proportionality in the assessment of damages.

Understanding Article 390 is essential for all parties involved in construction contracts – contractors, employers, and legal professionals. It helps contractors meet project deadlines, provides compensation for employers in case of breaches or delays, and offers legal clarity for resolving disputes related to liquidated damages.