Monday, November 20, 2017

Decennial Liability for Contractors and Architects in Oman

Many of those familiar with the construction industry in the Middle East region will be familiar with the term “decennial liability.”  In particular, many will be familiar with a requirement that, in relation to works performed under a construction contract:

(a) a contractor and an architect remain legally liable for a period of 10 years after the completion of the works; and

(b) each of the contractor and the architect are required by contract to take out insurance covering the works for that 10-year period.

A number of countries in the Middle East have similar legal provisions in that regard.  Generally, neither a contractor nor an architect can contract out of the liability.  Depending on the circumstances, the liability does not extend to subcontractors, suppliers or subconsultants.  The insurance is readily available in the relevant jurisdictions in the Middle East. 

The liability is a form of strict liability.  There are some differences of opinion among the legal profession as to what extent (if any) a claimant needs to prove fault or causation against a contractor or architect, but it is clear that there is no obligation on a claimant to prove negligence, or a failure to achieve an industry standard, etc.  To put it another way, there is no requirement to demonstrate the contractor or architect was “negligent,” but there are some differing views as to what extent (if any) there is a need to show that some action or inaction by the contractor or architect caused or contributed to the loss and damage.

In most parts of the Middle East, where there is a law imposing decennial liability, it only applies where the relevant structure has collapsed or suffers a major structural defect.  The law in Oman is far more extensive.  Article 634 of Royal Decree 29/2013 (the “Civil Code”) reads:

(1)  Both the engineer and the contractor shall be jointly liable for a period of ten years for any total or partial collapse of the buildings or other fixed facilities constructed thereby, and for any defect which threatens the stability or safety of the building, unless the contract specifies a longer period.  The above shall apply unless the contracting parties intend that such installations should remain in place for a period of less than ten years.

(2)  The warranty set forth in the foregoing Article shall include any defects existing in the buildings and facilities, which endanger the safety and endurance of building.

(3)  The period of ten years shall commence as from the time of delivery of the work.

This Article is typical of what might be found in other jurisdictions in the Middle East, in that liability is limited to total or partial collapse, and defects affecting the stability or safety.  However, Article 22 of the Engineering Consultancy Law promulgated by Royal Decree 27/2016 (the “Engineering Consultancy Law”) provides:

The licensee [i.e., the architect/engineer] shall be jointly liable with the contractor for the faults and flaws that may occur in the project designed by or executed under the supervision of his office, even if such faults and flaws are attributed to the land on which the project is constructed or the owner had approved the flawed installations, for (10) ten years from the date of the handing over of such installations.

If the work of the office is limited to making the designs only without being charged with supervision, the office shall only be responsible for the defects that may be attributed to the design process.  Every agreement and condition meant to exempt the designer and/or the supervisor from this liability or to limit such liability shall be null and void.  Also, claims of responsibility on liability filed after the lapse of (3) three years from the date of discovering the fault or flow without instituting an action within the aforesaid period shall not be considered.

When read literally, the words suggest that decennial liability extends to any defect, not just defects leading to collapse or those affecting stability or safety.  This would suggest that the contractor and the engineer remain liable for ten years for even minor defects.  This wording is not new.  It replaced Article 16 of the old Engineering Consultancy Law, promulgated by Royal Decree 120/1994, which contained near-identical terms. 

We do not know of any reported case that has interpreted Article 22 of the Engineering Consultancy Law to include liability for even a minor defect.  We suspect the Omani courts would be likely to approach the matter from a commonsense perspective, to exclude normal wear and tear, and issues that should be addressed as part of the overall maintenance of a structure.  Also, the limitation period of three years commencing from the discovery of the defect does rule out many likely claims for minor defects, and most that may be visible at the time of completion of the works.  Nevertheless, the law as set out does in principle allow for claims for minor defects.

In summary, decennial liability is broader in Oman than elsewhere in the Middle East, and can cover defects that are not structural or safety-related.  It is important that, when drafting contracts, contractors and consultants consider how best to allocate risk and protect themselves from claims.  It is also critical that parties to construction contracts keep good records to protect themselves from such claims, including photographs of works, and any relevant warranties given by manufacturers and suppliers.