Tuesday, January 2, 2018

Time Limitations - Don't Allow Your Rights to be Extinguished!

Like most jurisdictions, Oman imposes time limitations within which parties must bring any claims before the courts or arbitral tribunals.  Also, as in most jurisdictions the strength of a claim is irrelevant if it has been brought out of time.  Generally, the courts will not examine the merits of a claim if it has been filed or notified outside of statutory or contractually prescribed timeframes.  It is therefore important to gather evidence and speak with legal advisors as soon as a potential claim has crystalised.

What is a time bar limitation?

A time bar limitation is a maximum period of time established by law or contract within which a party may bring a claim or enforce a judgment or right.  Any legal claim will lapse if it is not exercised within this time period.  Time bar limitations exist for reasons of business efficacy and certainty.

Omani law prescribes a variety of time bar limitations in relation to different types of legal matters.  A unique aspect of Omani law is that time limitations are hidden within many different laws, with the Civil Code providing an overall umbrella.  This article highlights several of these time bar limitations which are relevant to businesses, and discusses potential relief to the strict application of time bars by reference to the Civil Code.

The Law of Commerce

Many of the key time bars applicable to business-related claims in Oman are found under the Law of Commerce (Royal Decree 55/90).  Some examples include:
Carriage of goods claims

In case of damage to goods, a consignee must submit a contestation to the carrier immediately after discovering the damage and no later than seven days from the date of delivery.

The right to seek recourse against a carrier due to damage, partial destruction or delayed arrival shall lapse unless the consignee proves the condition of the goods and lodges an action against the carrier within 30 days from the date of delivery.

The time limitation to bring an action arising from a contract for the carriage of goods or persons or a contract of carriage commission agency shall be one year.  This is known as a long stop limitation.

Any claim in respect of a guarantee/warranty of defect-free goods is one year from the date of delivery of the item sold, unless a guarantee for a longer period has been given by the seller.

Bills of exchange
Claims against the person that accepted a bill of exchange must be brought within three years of acceptance.

General long stop limitation for claims between merchants
Ten years as from when the date for performance of such obligations lapses (unless the law provides for a shorter period).

Other Omani statutes

Certain key time bar limitations are prescribed by other Omani statutes.  Most frequently a subject of concern is liability under the Engineering Consultancy Law (Royal Decree 120/94) and the Labor Law (Royal Decree 35/2003) which impose strict decennial liability provisions.  An oft-overlooked issue is that all claims for defects shall lapse after three years from the time of discovery of the defect.

Engineering, procurement, and construction (EPC) contracts

It is a common for EPC contracts to contain time limitations applicable to related claims.  Some contracts will state that a claim must be brought within 28 or 90 days of having a request for an engineer’s decision refused or ignored.

It is all too common for a contractor to neglect to bring a claim in respect of delay and prolongation costs within contractually prescribed periods.  The question then arises as to whether a contractor's failure to notify claims in time in compliance with the EPC contract results in the contractor losing its right to claim.  The answer to this question is that the courts will carefully examine the facts and the course of dealing between the parties. 

When considering how the courts (or an arbitral tribunal properly informed under Omani law) will approach the issue of a claim brought out of time, it is useful to first understand the principles that the Omani courts must apply when interpreting contracts and the enforcement of contractual conditions.  The courts adopt the following hierarchy when deciding a dispute:

(i) Legislative provisions.
(ii) The terms of the contract.
(iii) Rules of custom and practice.
(iv) The provisions of Sharia law (however, usually only in the absence of provisions (i), (ii) and (iii) above is Sharia law considered in any dispute before the Omani courts).

Therefore, when interpreting a contract and its time limitations on related claims, a court or tribunal must examine the express terms of the subject contract.  However, where these are absent, their meaning is inadequate, or the parties’ course of dealing diverges from the contractual terms, the custom and practices established between the parties may also be taken into account.

The Omani courts will normally consider the enforcement of contractual time limits on a case-by-case basis, bearing in mind all the relevant facts and the exact wording of the clause.

The starting point as stated above and under Article 2 of the Law of Commerce is that the courts must recognise and give effect to agreed contractual terms.  However, the courts are prepared to examine whether any prejudice is caused by a failure to comply with contractual time limits.  If the court considered that there was no loss or prejudice caused by failing to comply with a time limit, or that the prejudice of applying the time limit outweighed the prejudice of allowing a claim, then it may decide to allow the claim despite the lapse of a contractual time limit.

The Civil Code makes specific reference to contracts of adhesion, which are standard form contracts that cannot be negotiated; Article 83 thereof provides that contracts of adhesion are to be treated differently.  Article 158 of the Civil Code (Royal Decree 29/2013) is relevant and provides:

If the contract is made by way of adhesion and contains unfair provisions, the court may amend those provisions or exempt the adhering party therefrom in accordance with the requirements of justice, and any agreement to the contrary shall be void.

Standard form construction contracts can potentially be considered contracts of adhesion as they are standard form contracts drafted by one party (the employer) and signed by a relatively weaker contract party (the contractor), who must adhere to the contract and does not have the power to negotiate or modify the terms of the contract.  In these circumstances, the Omani courts (and therefore an arbitrator properly instructed under Oman law) would potentially be entitled to conclude that the prejudice caused to the contractor by applying the strict time limits outweighs the employer’s right to impose the time limits, and apply Article 158, in order to allow justice to be done between the contract parties.  However, each case will be decided on its own merits, which again emphasises the importance of careful project record keeping.  The contractor would be assisted for example if it could identify and evidence instances where the employer has waived contractual time limitations during the course of the life of the contract.

We note that the issue of contractual time limits within contracts is not settled in Oman.  In certain circumstances, Article 158 of the Civil Code permits the court to amend or ignore the time limits if it considers this to be in the interest of justice.  The court may also examine the parties’ conduct during the life of the contract, and if a party has waived its rights or remained silent, then the court can deem this to be an amendment of the contract (Article 74 of the Civil Code).

The courts will however analyse the impact of the limitation, and may ignore a limitation if it leads to a miscarriage of justice, or if there is no prejudice to the parties by ignoring the reduced time limitation.  Finally, it should be noted that there is also a general reluctance under Sharia law to allow a party to benefit from a contractual time limitation.

Time limits underpin all commercial claims, and it is essential to comply with statutory or agreed limits.  Given that time limits are often hidden throughout contracts and legislation, it is a small but very important investment to seek advice from your legal advisor as soon as an issue is encountered which may give rise to legal recourse.