The construction contract is one of the most common and important contracts in business and professional life, as individuals and companies rely on it to complete projects and develop their businesses. This contract has been precisely regulated in the Civil Transactions Law to ensure a balance of rights and obligations between its parties and to prevent disputes that may arise during the execution of the work.
First: What is a construction contract?
According to Article 461 of the Civil Transactions Law, a construction contract is defined as:
“A contract whereby the contractor undertakes to manufacture something or perform work in exchange for payment, without being subordinate to the employer or acting as their representative.”
Second: Who qualifies as a “contractor”?
The legal definition of a contractor applies to any person (natural person, such as individuals, or legal entity, such as companies and institutions) who undertakes to another party to complete a specific task or manufacture a specific product in exchange for payment. A fundamental characteristic that distinguishes a contractor from other contracts (such as employment or agency contracts) is independence, which is evident in two points:
1. The contractor is not subordinate: The contractor is not subject to direct daily supervision and control from the employer (as is the case with an employee in the employment system). Rather, the contractor has the freedom to manage their time and choose their workforce and tools to achieve the required result.
2. The contractor is not an agent: The contractor does not represent the employer before the law, nor does they act on their behalf (as is the case with an agent). Instead, they work in their own name and for their own account to fulfill the intended obligation.
Third: Examples of Contracting Work
The scope of contracting work extends to encompass vast and diverse areas in the market. Some of the most prominent examples include:
* The contracting and construction sector: such as building construction, residential complexes, road paving, well drilling, and laying infrastructure networks (water, electricity, gas).
* Finishing, decoration, and maintenance work: such as painting contracts, flooring installation, electrical wiring, and central air conditioning maintenance for facilities.
* Manufacturing and craft production: such as commissioning a workshop to manufacture furniture to specific specifications, or a factory to produce customized equipment and machinery. * Digital and Technical Contracting: Such as software development contracts, website design, and building cloud systems for companies.
* Logistics and Transportation Services: Such as contracts for transporting and shipping goods, and supply contracts that include installation and operation.
Fourth: Key Points in Regulating the Contracting Agreement
Based on regulatory provisions, we summarize the most important rules and obligations governing this contract in the following points:
* Responsibility for Providing Materials and Tools: Legally, the materials used may be provided by the contractor or the employer. If provided by the contractor, the contractor is responsible for their quality and conformity to specifications or standard practices. If provided by the employer, the contractor is obligated to maintain them with the care of a reasonable person and apply best practices in their use. In all cases, the contractor bears the expenses of the machinery and tools necessary for completion unless otherwise agreed upon.
* Execution According to Standard Practices: The contractor is obligated to complete the work according to the agreed terms and conditions. If the contract does not specify a duration or conditions, the contractor is obligated to work according to “standard practices” (professional standards) and within the reasonable timeframe required by the nature of the work. * Dealing with Contractor Breach During Work: If the employer notices defects or delays during execution, they have the right to issue a warning to the contractor to rectify the work within a reasonable timeframe. If the contractor fails to respond within this period, the employer has the right to hire another contractor to complete the work at the first contractor’s expense, or to terminate the contract.
* Liability for Loss or Damage: If the work is lost or damaged due to an external cause (beyond the contractor’s control) before delivery to the employer, the contractor forfeits their right to claim payment or expenses, unless the employer was late and in breach of their obligation to accept the work at the time of the loss or damage.
* Subcontracting: The main contractor has the right to assign all or part of the work to a subcontractor, unless the contract or the nature of the work prohibits this. In all cases, the main contractor remains fully liable to the employer, and the subcontractor has no right to claim any payments directly from the employer except in the case of a formal assignment of rights.
* * Price Adjustments and Exceptional Circumstances: In contracts with a fixed total fee, the contractor cannot demand a fee increase due to rising material or labor costs. However, if the contractual equilibrium is disrupted by unforeseen general exceptional circumstances (such as a severe global economic crisis), the court has the right to intervene to restore balance; this may involve extending the execution period, increasing or decreasing the fee, or even ruling to terminate the contract.
* How Does the Contract Terminate? A construction contract naturally terminates upon completion of the agreed-upon work. Termination is also permissible due to an unforeseen event affecting one of the parties, with compensation to the other party. The contract may also be terminated upon the death of the contractor if their personal circumstances were a fundamental consideration in the contract. In this case, the heirs are entitled to compensation for the work completed, proportionate to the benefit accrued to the employer.
