Understanding the Contract of Muqawala in the Bahrain Construction Industry
Our Associate, Budoor Al Halwachi throws light on the main legal framework of Muqawala in the construction industry.
Budoor Al Halwachi – Associate ([email protected])
Contracts are governed by Decree-Law (19) of 2001 Promulgating the Bahrain Civil Code, which outlines general rules for contracts for hire of service from Article 584-611, and specifically governs construction contracts from Article 612-620. One such contract is the Contract of Muqawala, which pertains to construction-related issues, including the construction of infrastructure, buildings, and other similar works. In this article, we will explore the main legal framework of Muqawala in the construction industry, the obligations of the contractor and employer, sub-contracting, liabilities, and force majeure.
Definition of Muqawala in the Construction Industry
Article 584 of the Bahrain Civil Code defines the contract of Muqawala as an agreement under which either party undertakes to perform any work for the other party in consideration of a remuneration, without being an agent or representative of such party. The contractor’s obligation may be limited to the performance of the agreed work, provided that the employer provides the required material.
Obligations of the Contractor
The contractor is obligated to perform the work as per the conditions and the period set out for completing the works in the contracting agreement. If the contract does not set a specific time frame, a reasonable period will be determined in accordance with the customs of the industry. If the contract does not set the conditions of carrying out the works, the contractor shall perform the work in accordance with applicable practices in the industry. The contractor is also required to provide at his own expense any workers, tools, and supplies required to perform the works.
However, the obligations of the contractor may be limited to the performance of the agreed work in the contract if the required materials are provided by the employer. If the contractor undertakes to supply all or any of the material, he is obliged to provide material compliant with the agreed specifications.
Should there be a breach of the Contractor’s obligations under the contract or the work has been performed defectively, the employer can send a notice to the contractor to rectify the situation within a reasonable time. If the contractor does not remedy the breach within the given time, the employer can seek recission of the contract or obtaining a leave to perform the work at the contractor’s expense (where possible). The employer can terminate the contract without notice or time limit if the breach is impossible to correct. However, the judge can reject the termination request if the defect or violation of the contract does not significantly impact the work’s value or intended use, without prejudice to the right to compensation if there are grounds for it.
Obligations of the Employer
The employer is obligated to perform the works which requires to be completed in accordance with the contractual agreement and within a specified period. Should the employer fail to comply within the set time frame, the contractor may instruct the employer to perform the works within a reasonable time as determined by the Contractor. If the employer still fails to perform the works, the contractor may seek recission of the contract and may be entitled to damages.
The employer may refuse to take on the works if there is a defect or breach that makes the works unsuitable for its intended purpose, except as specified in Article 614. Article 614 states that if a building or installation on the employer’s land is seriously defective and its removal will cause significant damages, the employer can demand a reduction in payment or require the contractor to repair the work. However, if the defect or breach does not make the work unsuitable, the employer can seek a reduction in payment or require the contractor to remedy the issue within a reasonable time and cost. The contractor can remedy the defect or breach within a reasonable time, provided that it does not cause significant damage to the employer.
Liabilities
Articles 615 – 620 of the Bahrain Civil Code are based on the doctrine of decennial liability, which is a form of statutory liability. It is where the scope of liability includes both the Contractors and engineers who are jointly and severally liable for any collapse or defect, either in whole or in part, of buildings or other fixed structures for a period of 10 years from the delivery of the works. This means that if there is any defect or collapse in the building within ten years from the delivery of the works, the contractor and engineer will be held liable for it.
Architects may also be held liable as a result of a faulty design that threatens the safety or stability of the building, and the architect was responsible for supervising the works. However, if the work of the architect or engineer is limited to the design of the building or structure in whole or part, the contractor shall be liable for such defects but not defects due to the method of construction.
Notably, liability claims against the engineer or the contractor shall not be heard after the lapse of three years from the date of the collapse of the works or discovery of the defect.
Force Majeure
Force majeure is an unforeseen event or circumstance that prevents the parties from fulfilling their obligations under the contract. If the materials are lost or damaged due to an unforeseen incident or force majeure before its delivery to the employer, the contractor cannot demand payment of the agreed consideration or value of the materials lost or damaged. However, if the employer fails to take over the work at the time of the loss or damage of the objects, the contractor may demand payment of the agreed consideration.
Where the materials are provided by the employer, and it is lost or damaged due to an unforeseen incident or force majeure, the employer cannot demand payment by the contractor of the value of materials. However, the employer may demand payment if the contractor is in breach of his obligations to deliver the work provided that the contractor fails to prove that the objects would have been lost or damaged in the possession of the employer.
Enforcement of Force Majeure Clauses
The national courts and arbitral tribunals in Bahrain enforce the force majeure clauses across the construction industry and other sectors. The courts have been faced with force majeure claims due to the restriction on movement of materials, equipment, and personnel. Where the Court of Cassation held in Challenge No. 214 J.Y. 2022 held that “It is decided that if the contractor violates the terms and specifications agreed upon or the conditions dictated by the origins, customs and traditions of the workmanship, and the employer proves that, the contractor was in breach of his obligation and had to be obligated to compensate, without the need for the employer to prove a mistake on the part of the contractor. The violation of these conditions is in itself a mistake, and the contractor cannot get rid of the responsibility, except by proving the foreign cause, i.e. by proving that the violation of the conditions is due to a force majeure or a sudden accident, or the employer’s own fault or the action of a third party.”
Concluding Remarks
In conclusion, the Contract of Muqawala is a crucial agreement in the construction industry in Bahrain that outlines the obligations of both the contractor and employer. To avoid disputes and ensure the successful completion of construction projects, it is important for both parties to clearly define their roles and responsibilities and to take steps to mitigate any risks associated with decennial liability and force majeure clauses.
Contractors should ensure that their subcontractors are qualified and capable of completing the work to the required standard, as contractors remain liable for the work done by their subcontractors. Architects should ensure that their designs are sound and meet the required standards, and contractors should ensure that their construction methods are appropriate and safe. By understanding their obligations and liabilities under the Contract of Muqawala, both parties can work together to ensure the successful completion of construction projects in Bahrain.
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