Termination Of Construction Contracts And The Qatar Civil Code – Part One

Introduction

Parties entering into a contract must be aware of what will happen if it all goes wrong. To this extent, it is fundamental that each party knows what rights it has to terminate the agreement and the consequences of such termination. Furthermore, each party needs to know that the termination provisions that have been included in the contract are appropriate to the jurisdiction and are going to be enforceable and effective.

The importance of the termination provisions within a contract are often overlooked during contract negotiations, as both parties are focused on commencing (or continuing) a successful, harmonious and profitable relationship. When an unforeseeable event occurs and the relationship breaks down, it is particularly important that the party looking to terminate the contract is not impeded by drafting errors or oversights concerning the local law,. Such issues will often result in the termination process becoming a much more difficult and costly to deal with.

This series will look at the issue of termination in relation to a construction contracts governed by Qatari Law. In particular, we will look at the provisions of Law No (22) of 2004 Regarding Promulgating the Civil Code 22 / 20041 (''the Civil Code'') to identify what rights the parties have in relation to the termination of a contract and highlight important considerations that need to be taken into account when drafting these provisions.

Although a contract can be bought to an end for a variety of reasons, this series will only focus on the following three reasons which are commonly addressed in the contract:

Termination for breach (Part 1); Termination for convenience (Part 2); and Termination in the event of force majeure (Part 2). As discussed in our previous article entitled "Liquidated Damages and Applicability in Construction Contracts in Qatar", Articles 171(1) and 172(1) of the Civil Code set out the general and overarching principles of contact law in the State of Qatar. This can be broadly summarised as a freedom of contract (Article 171(1)) and the requirements of good faith (Article 172(1)). However, as previously noted, the agreed terms of a contract are subject to change where a court finds "reasons as prescribed by law".

In Qatar, termination of a contract can only be effected by an order of a court, the agreement of the parties or as prescribed by law. Furthermore, the Civil Code requires the intention of the parties relating to termination...