Wednesday, June 25, 2008

The Oman Law Digest 2009 - CONTRACTS

Attainment of majority, soundness of mind and no infirmity in relation to the intended commercial transaction are stated to qualify a person for entering into commercial transactions. Persons declared insolvent or convicted of fraud, theft, cheating, breach of trust, forgery, etc. are disqualified from entering into contracts.

There is sufficient latitude to agree to terms of a contract if the purpose of the contract is lawful.

Contracts are binding on parties and, if not in writing, may be proved by any means. If there is no valid contract, provisions of law would apply. If the law does not address a specific aspect of commercial transaction then custom, Shari’ah or principles of equity in that order would prevail.

Electronic Transactions Law [RD 69/08] validates electronic transactions agreed by parties to be conducted electronically. Electronic transaction includes contracts performed or concluded wholly or in part by electronic messages. It excludes from its purview certain transactions such as those pertaining to personal law; court proceedings like service of summons, etc.; and documents required to be attested by a Notary Public.

DAMAGES
Proven direct damages are awarded for breach of contract. Indirect or consequential damages are not excluded as a matter of law but have limited applicability. There must be a nexus between loss suffered and damages claimed. Secondly, there must be a degree of foreseeability, i.e., damage must not be too remote. Consequential loss is generally contractually excluded but Omani courts are known to assess and award loss of profit.

EXCUSE FOR NONPERFORMANCE
Force Majeure and impossibility of performance and, in some projects, government risk events are recognised grounds for non-performance.

APPLICABILITY OF FOREIGN LAW
Contracts may be subject to foreign law applicability. However, an Omani court would generally construe and apply only Omani law. Hence, foreign law applicability if supported by an arbitration clause enhances its enforceability in an Omani court as Oman is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and written agreements providing for arbitration for dispute resolution exclude jurisdiction of Omani courts. Pursuant to Arbitration Law [RD 47/97], Omani courts enforce validly issued arbitral awards.

GOVERNMENT CONTRACTS
Contracting with the Government is subject to Tender Law and its Regulations. A new Tender Law was issued by RD 36/08 repealing and replacing the old law (RD 86/84 as amended). It defines public, international and local tenders and regulates public bid requirements, direct purchases, bid submission rules, contract award rules and also specifies the Tender Board functions. Standard forms of pubic works contracts are used for government and quasi-government contracts. These include Standard Conditions for Construction of Building and Civil Work; Standard Condition for Mechanical and Electrical Works; and Standard Conditions for Civil Consultancy Works. These contracts are modeled on standard FIDIC contracts. Financial signatory powers of ministers and government officials in relation to government contracts are stipulated in RD 48/76 as amended.

Public sector or quasi-government companies (where their Articles of Association provide for it) have internal tender committees, or executive committees for awarding contracts up to specified value. Contracting parties require bid, performance and, where applicable, advance payment guarantees issued by approved local banks.

Oman is not a signatory to Convention on International Sale of Goods.