Should a contractor be liable to pay delay damages when the employer has delayed the project by a breach of contract/act of prevention and the contractor has failed to comply with the time-bar clause?

This is a common question across the GCC countries. First of all, we need to differentiate between the legal limitation periods and the time-bar clauses. the former are related to periods provided by express legal provisions for rights to claimed in courts. The right holder must claim the right within this period. the period starts to run when the right becomes due. These periods are a matter of public policy that cannot be agreed against. People may not change such periods by agreements. However, a contractual time-bar is totally different. The time-bar clause is classified as condition precedent. That is to say, the contractual right may not become in existence till such a condition is fulfilled. In FIDIC books, time-bar clauses are condition precedents.

Back to the question, the employer may allege that the contractor’s right has not come into existence due to non-compliance with time-bar clauses. This applies to extension of time requests. However, if the delay was caused by the employer’s breach of contract, several issues may also need to be considered. The first issue is related to the causation principle. The judge / arbitrator will need to know the main cause of the delay by using the phrase ‘but for’. The project was supposed to be completed on time but for X. If X is the employer’s fault, he should not be allowed damages for such a delay. The second issue is related to the good faith principle, which can be found in civil codes across the region. Article 246/1 of the UAE Civil Transactions Code states that “the contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith”. By claiming damages for late completion due to his own fault, the employer cannot be performing the contract in good faith.