A surety may take over the project, pay the owner for any liability incurred, find a replacement contractor or deny the claim. The owner should carefully review the terms of the performance bond in order to ensure that all conditions precedent to claiming performance bond coverage have been met.
Second, prior to issuing a termination notice, the owner should consider engaging a qualified construction expert to evaluate the status of the project and to memorialize the existing condition of the project for litigation purposes. A qualified construction expert can advise the owner on the probable cost of completion and the likelihood that the contractor could accelerate or otherwise cure the default.
The expert also can provide effective assistance in securing completion of the project. Under the Civil Code of UAE, a party is qualified for damages equal to "harm, indeed, endured post the occurrence of an event". Without extortion and gross carelessness, certainty and predictability are required so as to recoup damages from breach of the agreement. So as to deal with the procedure following termination, parties every now and again concur on a legally binding component that applies to the change.
For instance, if an Employer terminates by virtue of a Contractor's violation, usually for the Employer to not be forced to make additional payments to the contractor until the expense of finishing the works has been resolved. The expectation of such wording is to guarantee that the Employer is in the loss on account of appointing a replacement contractor. An employer should subsequently hold the right to recover from the contractor the relevant documents of the constructions and the ability to recover anything pertaining to the contract.
A Contractor who terminates by virtue of the Employer's breach is normally qualified for damages under the contract and the out of pocket expenses incurred by the contractor.
At the time of finalizing the contracts, parties should be equally focused on the termination clause compared to other contractual obligations, to be prepared for the worst. Unfortunately, construction projects frequently encounter issues ergo; it is pertinent that parties spend the time to agree well-drafted termination clauses to facilitate the challenging process of termination.
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Learn More Accept. United Arab Emirates. Real Estate and Construction. Your LinkedIn Connections with the authors. To print this article, all you need is to be registered or login on Mondaq. Third, there often is a mechanism for either party to terminate a construction contract if the project is suspended for an agreed period of time due, for instance, to a government-mandated shutdown arising from the COVID pandemic. Fourth, the owner may, at any time, terminate a construction contract, upon prior written notice, for its convenience and without cause.
Often, the parties negotiate a termination for convenience fee to compensate the contractor for, among other things, its lost opportunity costs. Irrespective of the basis for termination, a standard construction contract should provide that the amount to be paid to the owner or the contractor, as the case may be, is an obligation for payment that will survive termination of the contract. A contract is able to be properly terminated when both parties to the contract either expressly or impliedly agree to termination.
An agreement as such may arise in circumstances where the course of the construction project has gone so left that neither party will no longer benefit from the completion. An express agreement to terminate can be made orally but for better security it is recommended to have the agreement evidenced in writing.
A contract can be terminated on the grounds that a term of the contract has been breached. A condition is a promise of such importance that the promisee would not have entered the contract without an assurance of strict or substantial performance of the promise.
A contract can be terminated as a consequence of repudiation. An act of repudiation is where one party demonstrates an intention that they are either unwilling or unable to perform their obligation under the contract. Repudiation can be expressed or implied by the other party. Express repudiation will obviously be when the party tells you that they will not perform their obligations under the contract. Termination can arise by way of an expressed term in the contract that automatically terminates the contract if a specified event occurs.
Otherwise, your right to terminate may arise under the contract as there may be terms that allow for a right to terminate upon a default or specified event occurring. Automatic termination clauses are considerably straightforward and clear. These clauses are more commonly formed as a pre-condition with a time stipulation e.
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