XYZ Construction Company: Dubai Project Analysis and Legal Framework

This MBA assignment report analyzes a construction project undertaken by XYZ Construction Company in Dubai. The report begins with an executive summary and an introduction to the company and the project, which involves constructing a six-story hospital. It then delves into the principles of contracts, specifically focusing on lump-sum contracts, the Design-Build procurement method, and the use of the FIDIC SILVER BOOK. The report examines the sources of contract law in the UAE, including civil codes, Sharia law, and international conventions, and outlines the legal requirements for creating a valid contract, as well as remedies for breach of contract. Furthermore, it discusses the need for an agent in the UAE, allowing the managing director to represent the company. Lastly, the report touches upon the Free Trade Agreement (FTA) between Australia and the UAE, and its impact on construction projects.

MBA Assignment 1
MBA assignment
Class (Course)
Professor (Tutor)
School (University)
City and State
Date

MBA Assignment 2
Executive Summary
This report is an overview of the XYZ Construction company as they plan to engage a
construction project in Dubai which they were awarded through a tender process. The report
starts by providing an explanation of the status of XYZ company and the projects it carries out.
Moving from that, the paper explains the nature of the construction project in Dubai which it
would be executing. It is from here the report demonstrates the scope of the work by analyzing
the types of contracts and the execution plan. An important part of this project is the discussion
of the legal framework in the UAE, where the paper discusses the source of law, the legal
requirements, and remedies for the breach of contracts. Also, the paper discusses an important
concept of agency law which would allow XYZ to manage the project through its managing
director at UAE. Lastly, this report finishes by looking at the issue of Free Trade Agreement
between Australia and UAE, and the specific regulations that apply construction projects in the
country.

MBA Assignment 3
Introduction
XYZ Construction Company is a multi-disciplinary construction firm that offers
Engineering Construction and Project management services to its clients. XYZ prides itself for
the dedicated services it provides to both individuals and organizations seeking construction
services. The company provides its services to clients dealing with power distribution
organizations, oil, gas and pipeline firms, municipalities, public works, commercial, and
residential requirements. We operate in a wide area that encompasses building technology,
Architectural, Civil & Engineering solutions. While executing our work, we work closely with
our customers to ensure that there is an accurate interpretation of drawings and specification as
we endeavor to provide our clients with a solution that matches their needs.
The Business opportunity
On 10th April 2019, XYZ was awarded a project through a tender process by a Dubai
company that intended to construct a hospital that was to be on a six-story building. One month
before, the client, ABC had advertised a tender for this project requiring either a local or
international firm that does design-and-builds projects. It was this time when we applied and was
awarded the project. The hospital was proposed to in area 15KM from Dubai. The owner
intended to construct the hospital on flat land which was to cover an area not exceeding a quarter
of the land which was approximately 205,850 m2. The architectural plans as stated on the tender
included a basement, four stories, a ground floor, and a basement.
Principles of Contracts
The main types of contracts in construction work are lump-sum or fixed contracts, cost-
plus, time and material, and the unit price (Dykstra, 2018, p. 181). In our case, ABC needed a
lump-sum or the fixed price contract which is a single price work for designing and execution.

MBA Assignment 4
Even if it is a lump-sum contract, this price is usually be paid in installments as the work
continues. In addition, the project follows a procurement method Design-Build managed through
the Fédération Internationale des Ingénieurs-Conseils (FIDIC) 2017 SILVER BOOK. According
to (Dykstra, 2018, p. 181), a lump sum contract is mainly used where the owner/owner intends to
have the maximum assurance of the costs at the outset. This arrangement also helps the
contractor come up with fixed sum since all the work is defined. Besides, lump-sum contracts are
mainly used in design-build procurement method. In (Goh Eng Lee Andy v Yeo Jin Kow, 2016),
the High Court reiterated that design and build contracts are lump-sum arrangement unless where
the parties expressly introduce contrary terms. Another advantage of lump-sum contracts is that
the contractor company that is providing work is at a better chance of benefiting from the
increased profit where the actual costs of the project go below the estimated costs. As a norm, the
lumpsum contracts are calculated on an estimated higher value which helps the contracting
company to be on the safe side.
Apart from having the lump-sum contract, the choice of FIDIC and the SILVER BOOK
arrangement was helpful as it would allow us to take the total responsibility for designing and
constructing the facility with little owner’s involvement. According to (Baker et al., 2013, sec.
2.24), a Silver Book is a two-party lump-sum contract which FIDIC offers the conditions suitable
in the management of turnkey projects such as power plants, factories or similar facilities where
the parties require a higher level of certainty of the entire price. The advantage of using FIDIC
Guidance is the format contains 20 Primary clauses which are a key for the management of
construction project (Allen, 2015). The FIDIC format is useful in that it anticipates all the issues
that arise within the construction and offers guidance for each. For example, it has provisions for
risk allocation, errors, contract price, payment and dispute resolution among others.

MBA Assignment 5
Sources of Contract Law in the UAE
The UAE is primarily a civil law jurisdiction which was founded on French, Egyptian
laws and Islamic Shari’a law (Abu Dhabi, 2013; IBP Inc., 2014). However, the Emirati law
contract law draws its principles from Civil codes, Sharia law, and International law. The French
influence in UAE laws is confirmed by the implementation of the civil law system as opposed to
the common law system which is used in the UK. For Egyptian influence, the work of (Hasso,
2011) stated that the Egyptian jurist Wahid Ra'fat was the one who compiled the UAE
Constitution which was adopted from the Kuwaiti Constitution. Besides, (Hasso, 2011) argues
that most of the codified laws in UAE were heavily borrowed from the Egyptian legal system.
On the other hand, matters of commercial transactions are contained in specific
legislation which includes Civil Transaction Law No. 5 of 1985, and the Commercial
Transactions Law No. 13 of 1993. On matters of Contract, the UAE law prevents courts from
interfering with matters under which the parties have agreed. However, at times, the judge may
strike out an unfair term contained in the contract under the provisions of Article 248 of the UAE
Civil Code. Regarding the use of Sharia law, it is imperative to understand that Sharia law is only
used as a reference or a guide where the matter at the court has no definite legislation. In most
cases, Sharia law will appear in commercial matters where there is a need to deal with issues of
Islamic banking.
When it comes to international law as a source of UAE contract law, the International
conventions form the main part of the source. UAE ratified the most essential conventions that
regulate the facets of international trade such as the United Nations Convention on International
Sale of Goods of 1980 (STA Law Firm, 2018), Another important convention is the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (Kronke,

MBA Assignment 6
Nacimiento and Otto, 2010). Also, the UAE ratified the Washington Convention on the
Settlement of Investment Disputes Between States and Nationals of Other States (Godwin, 2012,
p. 128). More specifically, the UAE deals with matters of construction contracts through Articles
872 to 896 of the Civil Code and reference can also be made to principles applying to the
specific situation in the codified commercial law.
Legal requirements for the creation of a valid contract in UAE
The article 125 of the UAE Civil Code describes a contract as the process where one of
the contracting parties makes an offer which is followed by the acceptance of the other party
(Hall, 1985). According to (Grose, 2016), a determination whether there is a valid contract is a
matter of reviewing the surrounding circumstances which mainly looks at the existence of the
offer and acceptance, the existence of sufficient certainty in terms of the essentials of the
consideration, parties’ mutual intentions, and their capacity. Article 131of the Civil code states
that offer and acceptance are parties’ expression of intention to form the contract, and this
process starts with an offer followed by acceptance (Law No. 5 of 1985 (Civil Code), 1985)
Unlike in common law, Article 133 states that gratuitous promises can also lead to enforceable
contracts as far as there is manifestation of the party’s intention (Law No. 5 of 1985 (Civil Code),
1985).
On certainty, article 211 explains that where a party of the contract requires consent, the
consent of that part would be required for the enforceability of the whole contract. Where no
consent is given, only that part which would not be enforceable. In (Federal Supreme Court No.
771/23, 2004), the UAE federal court explained that only contracts that have both parties’ mutual
intention that would be enforced. Also, capacity is described in article 85 as the ability of a

MBA Assignment 7
person of the majority to have the sound mental power intention (Law No. 5 of 1985 (Civil
Code), 1985).
Remedies for breach of contract in UAE
UAE law identifies different remedies in the contract which arise from the loss of profit,
damages arising from direct loss, consequential damages, loss of opportunity, moral damages
and interests. Besides, the law allows parties to add a clause for the limitation of liabilities. In
respect of direct damages, the Civil Code dictates that a party in breach should provide direct
damages which were expected during the formation of the contract. Where no damages were
anticipated, the provisions of Article 389 allow the Court to interpret the contract and provide
some damages (Law No. 5 of 1985 (Civil Code), 1985)
Secondly, the UAE law provides for consequential damages resulting from the breach.
Also, like indirect loss, parties must be clear with their expectation of the losses (Lambert, 2016).
Thirdly, the Dubai Court of Cassation recognizes the loss of profits in the course of contractual
liability. The Civil Code provides for compensation for the lost profit under article 292. Whereas
the provisions are for tortious liabilities, the court may award these damages where the loss of
profit is certain (Dubai Court of Cassation petition no 51/, 2007). The rules for the compensation
for loss of opportunity follow the same principles of the loss of profit. The compensation for
moral damages is provided under article 293 where the law states that a person shall have the
right to have the damages made good. These damages cover all moral issues that involve
violation of someone’s liberty, honor, dignity, social standing reputation, and financial conditions
(Law No. 5 of 1985 (Civil Code), 1985).

MBA Assignment 8
The Need to Have an Agent In UAE
As XYZ is a fully incorporated limited company, the company law and agency law in
Australia allows the company to elect an agent who can have the powers of entering into a
contract on behalf of XYZ. Therefore, the company would have the managing director as the
representative of the company in the UAE. Under SECT 769B of the Australia corporation act,
the law recognizes that a director would have the actual authority as granted by the company to
form contractual relations on its behalf (CORPORATIONS ACT, 2001). Since the board cannot
go by itself to UAE to supervise and authorize the transactions, the managing director can
exercise the express authority given by the board under section 198A to travel to UAE for
matters of contract administration. Also, in (Freeman & Lockyer (A Firm) v Buckhurst Park
Properties (Mangal) Ltd, 1964), the court recognized that the position of someone as a managing
director comes with either actual authority, implied, or ostensible authority to form a legal
relationship on behalf of the company.
Free Trade Agreement (FTA) Between Australia and UAE
According to (Department of Foreign Affairs and Trade[DAFT], 2019), the FTA
negotiations between Australia and the Gulf Cooperation Council (GCC) are still continuing. The
GCC is made up of the Gulf countries which are Saudi Arabia, Bahrain, Kuwait, Qatar, Oman,
and the UAE. According to (DAFT, 2019), the negotiations between Australia and GCC started
in 2007, which followed a bilateral FTA negotiation with the UAE. However, these negotiations
were abandoned to give room to GCC negotiations.
Despite that, both GCC and Australia continue to share close economic ties which
involve trading of goods and services between Australia and GCC countries. For instance,
(Trading Economics, 2017) reported that Australia exported goods and services worth US$1.33

MBA Assignment 9
Billion to UAE in 2017. According to (DAFT, 2019) the March 2014 negotiations were
concluded with the GCC agreeing to proceed with the FTA negotiations, but there was no further
information January 2016 when the GCC declared that it has commenced the FTA negotiations
with China. All other FTA negotiations between GCC and other countries have been pending
including that of Australia. However, the countries still maintain strong economic ties as there
were more there have been subsequent registration of Australian firms and agencies to the free-
zone companies.
Other regulations for Construction Contracts in UAE
Like as mentioned above, the UAE law is codified meaning it is a wide-ranging legal
framework. The system minimizes the court's discretion as they have to stay within the written
law. Nevertheless, Courts may still use previous decisions as guidance when deciding similar
cases, but they are free to divert from those precedents. In UAE, the law that deals with
construction is comprised of both federal law, and regulations, but there is some flexibility in the
contracts where parties to large construction projects can include some foreign law.
The primary federal law in construction projects is the Civil Transactions Code Federal
Law No. 1 of 1985. This Code comprises of general principles of contract formation and a
section of Muqawala Contracts which is more specific to matters of a contract. Apart from the
Federal laws in UAE, Dubai incorporates other principles for construction projects such as
Regulation No. (2) of 2009. The rules stated in this regulation requires all contractors conducting
constructions in the Emirate to follow them. In addition, the Dubai Municipality has standards
and codes of practice, guidelines, and circulars issued by Dubai Municipality which also apply to
the free zones. Among them is the Administrative Resolution No. 125 of 2001 which deals with
matters of Building standards and regulations of technical work. In addition, contractors for in

MBA Assignment 10
Dubai an UAE, in general, have to comply with the health and safety rules contained in the
Federal Law No. 8 of 1980.
Conclusion
The aim of this report was to analyze the law, and its role in international business. In
order to fulfill this role, this report focused on an international construction company that deals
with projects related to Engineering, Construction and the entire construction management. The
paper began with providing background information of the XYZ, which is the construction
company, and later provided the information about the client company ABC. While briefing on
the client company, this report provided the information regarding the Design and Build project
XYZ was to execute for the client. From there, the paper moved to discussing matters of the law
which included the source of law for UAE, they type of contract required for the design and
build, the legal requirements, and the remedies for the breach. Further, this report discussed the
need for an agent in UAE who would be undertaking the administration work on behalf of XYZ.
Finally, this report finished by discussing the issue of trade agreements and the laws that deal
with construction projects in UAE.

MBA Assignment 11
References
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Allen, R. J. (2015) ‘Internationalisation of the Australian Construction Market: Case for Using
FIDIC Contracts’, Group, 804, p. 904.
Baker, E. et al. (2013) FIDIC Contracts: Law and Practice. CRC Press.
CORPORATIONS ACT (2001).
Department of Foreign Affairs and Trade[DAFT] (2019) Australia-Gulf Cooperation Council
(GCC) FTA, Department of Foreign Affairs and Trade. Available at:
http://dfat.gov.au/trade/agreements/negotiations/agccfta/Pages/australia-gulf-cooperation-
council-gcc-fta.aspx (Accessed: 18 April 2019).
Dubai Court of Cassation petition no 51/ (2007).
Dykstra, A. (2018) Construction Project Management: A Complete Introduction. Kirshner
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Federal Supreme Court No. 771/23 (2004).
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Godwin, W. (2012) International Construction Contracts: A Handbook. John Wiley & Sons.
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Sussex, United Kingdom: John Wiley & Sons, Ltd.
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Hasso, F. (2011) Consuming Desires: Family Crisis and the State in the Middle East. Stanford
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at: https://www.vantageasia.com/uae-law-and-construction-contracts/ (Accessed: 18 April 2019).

MBA Assignment 12
Law No. 5 of 1985 (Civil Code), (1985).
STA Law Firm (2018) Court Uncourt | STA Law Firm: Volume V Issue I. STA Law Firm.
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