What UAE Construction Cases Reveal About Contract Risk
Real Estate & Construction and Hotels & Leisure Focus
Euan Lloyd Partner, Head of Construction & Infrastructure
The construction sector has been central to the rapid growth and global positioning of the United Arab Emirates (UAE), with landmark projects shaping skylines in Dubai, Abu Dhabi, and beyond. From megastructures to major industrial and infrastructure projects, the industry continues to drive innovation and investment across the region.
Yet, as projects become more ambitious and technically complex, the risk of disputes grows in parallel, and the industry is becoming increasingly litigious.
This article highlights a selection of UAE court decisions that are relevant to the construction industry and suggests how these decisions may impact contract drafting.
Union Supreme Court, Case No. 782/2024 – Time-Bar and Actual KnowledgeIn this case, the plaintiff purchased an apartment in a residential tower that was later demolished by government authorities due to serious structural and foundational defects. The plaintiff sued the developer, contractor, and consultant for rescission and compensation. A technical report confirmed that the demolition was necessary due to foundational failures, thus triggering a decennial liability claim.
In this case, the plaintiff purchased an apartment in a residential tower that was later demolished by government authorities due to serious structural and foundational defects. The plaintiff sued the developer, contractor, and consultant for rescission and compensation. A technical report confirmed that the demolition was necessary due to foundational failures, thus triggering a decennial liability claim.
Under Article 880 of the Civil Transactions Law, contractors and designers are strictly liable for structural defects or collapse for ten years from handover, regardless of fault or cause.
The Court of Appeal dismissed the claim as time-barred under Article 883 of the Civil Transactions Law, which provides a three-year limitation for decennial liability claims. However, the Union Supreme Court overturned the decision, holding that the three-year period is activated by the claimant’s actual knowledge of the defect and responsible parties—knowledge which only arose, in this case, upon the issuance of the expert report and demolition order.
What recent UAE court decisions tell us about construction contract riskFrom delay damages to multi-tiered dispute clauses, the UAE courts are sending a clear message: drafting and procedural discipline matter more than ever.
Key Takeaways:
Decennial liability applies for 10 years post-delivery (or handover) under Article 880(1) of the Civil Transactions Law.
The three-year limitation period starts from the date of actual knowledge.
DIFC Court of Appeal, Case No. 80/2023 – Strict Time-Bars
This case involved significant delays concerning a residential tower project, procured under an amended version of the FIDIC 1999 Red Book. The contractor submitted multiple extension of time (EOT) claims, all of which were rejected. The employer (who was advised by Al Tamimi & Company throughout) terminated the contract, levied liquidated damages, and encashed the contractor’s performance securities. The contractor argued that delays were largely employer-caused and sought an EOT and prolongation costs.
The DIFC Court of Appeal enforced the 28-day notice requirement under Sub-Clause 20.1 of the contract as a strict condition precedent, meaning that the contractor lost entitlement to claim (regardless of underlying merit) failed as it failed to comply with this notice requirement (which is a standard FIDIC clause). Arguments based on good faith and the prevention principle were rejected, as the court prioritised strict contractual compliance.
DIFC Courts strictly enforce notice-based condition precedent clauses, thus highlighting the DIFC Court’s position that parties are bound by their contractual bargain.
Procedural failures can defeat substantive entitlements, regardless of underlying entitlement.
Abu Dhabi Court of Cassation, Appeal Cases 424 & 483 of 2015 – Liquidated Damages and Early Termination
Here, the employer terminated a FIDIC-based contract prior to project completion due to the contractor’s delays. The employer sought to impose delay damages (or liquidated damages (LD)) under Sub-Clause 8.7. The Court of Cassation rejected the claim, confirming that LD clauses fall away upon termination of the contract, in which case the employer’s only recourse would be a tort-based damages claim, subject to proof of fault, causation, and actual loss.
LD clauses do not survive termination of the contract unless expressly stated to do so (see below).
Once the underlying contract has been terminated (and assuming liquidated damages have not been levied), an employer, upon whom the burden of proof rests, must rely on tort-based claims.
Abu Dhabi Court of Cassation, Commercial Appeal 790 of 2013 – Liquidated Damages Clauses That Survive Termination
This case provides a critical exception to the previous ruling. Here, the Court of Cassation upheld a LD clause post termination of the underlying contract on the basis that the LDs clause expressly stated it would survive termination of the contract. The court therefore treated the LDs clause as a separate, independent agreement, enforceable even after termination of the underlying contract.
LD clauses can survive termination of the underlying contract if clearly drafted as an independent obligation, although it is prudent (in practice) for LDs to levied prior to termination.
Survival language must distinguish post-termination compensation from execution-phase penalties.
Dubai Court of Cassation, Case No. 606 of 2024 – Enforceability of Multi-Tiered Dispute Resolution
This case concerned a multi-tiered dispute resolution clause requiring negotiation and mediation before arbitration. One party attempted to bypass the preliminary stages and move directly to arbitration. The court found that the agreed pre-arbitration steps were binding and must be followed. Failure to observe each stage breached the contract and rendered the arbitration attempt premature.
The decision reflects the overriding principle that contractual bargains will be upheld. Where parties have agreed on structured pathways to resolve disagreements, the courts will therefore enforce those procedures.
Multi-tiered dispute resolution clauses are enforceable.
All stipulated steps (e.g., negotiation, mediation) must be followed before arbitration.
Dubai Court of Cassation, Case No. 735 of 2024 – Unilateral Arbitration Clauses Deemed Invalid
In this case, a subcontractor brought a claim in the Dubai Court of First Instance seeking payment under two subcontracts. Each contained a dispute resolution clause allowing the main contractor to unilaterally choose between arbitration or litigation in the UAE courts. The main contractor argued that the clause constituted a valid arbitration agreement, thereby excluding the court’s jurisdiction.
The Court of Cassation upheld the lower courts’ findings that the clause was unenforceable. It confirmed that an arbitration agreement under UAE law must reflect mutual consent and be clear in its intention to exclude court jurisdiction. A clause giving only one party the exclusive right to elect arbitration does not meet this threshold and therefore cannot prevent a party from bringing the matter before the courts.
Arbitration clauses must reflect the clear and mutual agreement by both parties to arbitrate (as opposed to litigate). For arbitration agreements to be valid, the parties must expressly agree to arbitration in writing.
Unilateral clauses granting one party exclusive control over the dispute resolution forum are unenforceable.
NH International (Caribbean) Ltd v National Insurance Property Development Company Ltd [2015] UKPC 37- Financial Evidence Obligations and Strict Compliance with Set-Off Provisions
This case concerned the interpretation of Sub-Clause 2.5 of the FIDIC 1999 Red Book, which requires employers to give notice of any claims “as soon as practicable” after becoming aware of the event giving rise to them. During arbitration, the employer attempted to assert various financial counterclaims but had not issued any timely contractual notice. The arbitrator held that the employer’s claims were barred for failure to comply with Sub-Clause 2.5, but the Court of Appeal disagreed.
On final appeal, the Privy Council reinstated the arbitrator’s finding, confirming that the clause imposes a binding procedural obligation—not merely an administrative formality—and that non-compliance could result in a loss of rights. The judgment emphasised that the clause applies broadly to any employer claim under the contract and requires timely, particularised notice. Claims raised late or without notice—whether by way of set-off, cross-claim, or otherwise—may be excluded.\
Sub-Clause 2.5 imposes a binding obligation on employers to notify claims promptly once aware of the relevant event.
Late or unnotified claims may be barred entirely, including set-offs and cross-claims.
Courts and tribunals will uphold procedural time bars that serve the contract’s commercial balance and risk allocation.
Disclosure and Barring Service v Tata Consultancy Services Limited [2025] EWCA Civ 380 – Conditions PrecedentIn this case, the UK Court of Appeal examined whether the employer’s entitlement to delay payments was conditional upon issuing a formal notice (a Non-Conformance Report or NCR) under clause 6.1 of the contract. The contractor had defaulted on project milestones, but the employer failed to serve NCRs before demanding delay payments.
The court held that the contract’s “if–then” structure and the requirement to issue NCRs were not merely procedural but formed a condition precedent to claiming delay payments. Without compliance, the right to such payments could not be exercised.
To claim delay-related remedies, employers must strictly follow contractual notice procedures.
Courts may treat procedural steps as conditions precedent, even without using that exact term.
Drafting should clearly identify whether remedies are subject to procedural conditions—and parties must administer them accordingly.
While not UAE cases, these decisions may offer useful guidance for contracts subject to dispute resolution through the DIFC or ADGM courts, where strict compliance with contractual procedures—such as notice requirements and evidentiary obligations—can be expected to be interpreted in a similar manner.
The above cases emphasize the principle of freedom of contract and therefore the importance of clear terms and strict procedural compliance. Players in the industry should therefore bear this in mind when drafting and administering contracts.
For further information,please contact Euan Lloyd and Rashed Abdel Hadi.
Published in June 2025
