Legal Remedies that are available When a Contractor Fails to Perform Construction Work

The contractor’s main obligation is to perform the work in the manner and in the period agreed in the contract. If the contractor breaches his obligation, then the employer may either request specific performance (performance in specie) or termination of the contract with compensation in either case if it is justified. He may request performance of the obligation by another contractor at the expense of the first contractor. We will show below when the court may order the contractor to perform in specie, and how to terminate the contract if the specific performance is not possible.

Obligating the contractor to perform the contract

The employer may file a lawsuit against the contractor to compel him to complete the agreed contract work pursuant to Article 258.1 of the Civil Transactions Law which reads. “The debtor shall be compelled to execute his obligation after being served a notice through specific performance if possible”. If it is proven that specific performance is possible, and that it does not require the contractor’s personal intervention to carry out the work, the court shall order the contractor to perform the contract. If the specific performance entails hardship for the contractor, the court shall only oblige the contractor to compensate the employer in accordance with Article 258/2. Omani courts adopted this principle in a number of their judgments. For example, the two judgments No. 476/90 and No. 260/88 rendered by the Public Authority for Settlement of Commercial Disputes.

Appointing another contactor to complete construction work at the contractor’s expense 

The employer has this solution based on the provision of Article 259/2 of the Civil Transactions Law, which reads: “If the debtor fails to perform the work, the creditor may request the permission of the court to perform said work. He may also perform the same without permission when necessary; execution in both cases shall be at the cost of the 

debtor”. It is understood from the above Article that the failure of the contractor to complete the works is not sufficient to appoint another contractor to complete the construction works, but rather the court’s approval must be obtained to appoint another contractor.  Excepted from this, is the case of necessity that allows the employer to appoint another contractor directly without the court’s permission.

The employer can terminate the contract without the contractor’s consent

Courts adopted this principle in several judgments and confirmed that the employer has the right to terminate the contract before its performance regardless of the reasons that prompted him to do so.  This is an exception to the rule that “the contract is the law of the contracting parties”, which states that the contract may not be terminated without the consent of both parties. However, if the employer is found to have exceeded or abused his right to terminate the contract, the court may order the employer to compensate the contractor if he proves that he was harmed by the termination.

In the judgment rendered in lawsuit No 41/95, the Public Authority for Settlement of Commercial Disputes concluded that the contractor did not make a mistake that justifies termination of the  contract and that the employer did not abuse his right to terminate nevertheless, the court decided that the termination decision was correct, but also it decided that the contractor deserved compensation for the expenses he spent and the value of the work done in addition to compensation for the loss of profits if he had completed the work.

Termination of the contract based on a court ruling.

The court may, at the request of the employer, order the termination of the contract due to the contractor’s breach of contract. The judiciary usually monitors the grounds for termination and decides whether to accept or reject the application. The most important matters that the court verifies when examining the application for termination are: (1) Ensuring that the contractor’s performance of the contract is no longer possible, as the percentage of completion of the work may be large compared to the remaining works or that the defects are minor and can be dealt with. In such cases, the court does not respond to the request for termination of the contract but allows the contractor to complete the work or to deal with the defects. (2) Ensuring that there is no external cause for non-performance of the contract because the impossibility of performing the contract for a foreign cause automatically leads to the termination of the contract without the need for a court ruling. This principle was adopted by the Public Authority for Settlement of Commercial Disputes in lawsuit No. 260/95.

Ali Al Rashdi

ali.alrashdi@sandalaw.om

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