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Decennial Liability: A Contractor’s Adversary
September, 2013
 

Decennial liability is a strict form of liability imposed by law on construction contractors and design professionals for the total or partial collapse of buildings they designed or constructed, or for the discovery of latent structural defects that imperil the safety or stability of such buildings, for a period of ten years after their completion and handover. Hani Al Naddaf, Partner and Head of Dispute Resolution and Sarah Kelly, Associate, Al Tamimi & Company speak about the nuances of the product and its uniqueness. 

Concept, origin and rationale: 

The concept of responsabilité décennale originated in the French Civil Code and evolved from a desire to protect building owners, who could not ordinarily possess the technical expertise to identify defects in design or in construction at the point of delivery of a project, particularly when defects were latent. 

Hani Al NaddafPartner & Head of Dispute, Al Tamimi & Company 

Sarah Kelly/ Associate, Al Tamimi & Company 

 

Benefits to owners, risks for contractors: 

Decennial liability offers more security to real estate investors than collateral warranties, which will only be triggered by breach or negligence on the part of the contractor. Furthermore, the breadth of the pool of potential defendants lessens the risk that an owner or investor would be left out of pocket in the event that defects are discovered after one of the parties involved in the construction is adjudged insolvent. Many civil law jurisdictions worldwide – including most Middle Eastern countries – have codified decennial liability in their civil laws; the position in Qatar is set out at Articles 711 to 715 of the Civil Code (Law No. 22 of 2004). 

Despite the topicality of this issue and notwithstanding the high levels of commercial sophistication and industry experience, foreign contractors entering the Qatari market are often ignorant of the potentially devastating implications of decennial liability. Accustomed to standard forms of contract such as FIDIC or JCT and being obliged to address issues arising during the defects liability period following practical completion, contractors may not realise that their existing risk management structures are often insufficient to cover their potential exposure under decennial liability, nor have the significant cost of insuring against that risk been priced into their tender for the works in Qatar. Where the contract and the structure it produces are of high value, the application of decennial liability could pose a catastrophic threat to the liquidity of even the most prominent international contractors.

 

Projects covered: 

Decennial liability applies to all buildings and fixed installations constructed in Qatar. While contracts having a Qatari State entity as employer will in most instances be subject to local law (including decennial liability), the position is less clear when parties have chosen to have their contract governed by the laws of another jurisdiction – which may not recognise the concept of decennial liability or may not consider it to be of mandatory application. 

Parties responsible: 

Depending on the type of defect and the extent of their respective involvements in a particular project, decennial liability can apply to main contractors, design consultants (architects) and those acting in a supervisory capacity (such as engineers and project managers). 

 

As liability is imposed on a joint basis, the building owner can proceed against any or all of the parties involved for the full amount of the claim. Accordingly, if one such party becomes insolvent, the other(s) will shoulder the burden of making good all damage incurred by the owner as a result of the defect(s). 

However, a design consultant having no involvement in the execution or supervision of the works will be liable only for defects attributable to his design. Architects who undertake to approve a contractor’s shop drawings should be mindful of the risk that such activities may represent involvement in contract administration. Similarly, contractors will be excused from liability for pure design defects, but only where those defects would not have been apparent to a competent contractor exercising due diligence in the performance of his obligations. 

Contractors or project consultants may not seek to avoid the imposition of decennial liability on the basis that fault in relation to the relevant defect(s) lies with a sub-contractor or sub-consultant. 

Owner’s options: 

Building owners with a claim for decennial liability may demand specific performance by the contractor or designer to repair or rebuild the structure or the damaged part thereof. Alternatively, with the permission of the Court (required in all but urgent cases), the owner could opt to perform the necessary remedial work (or engage a third party to do so) and recover the monies expended from the original contractor or designer. As such, actual loss and any loss of profit incurred will always be recoverable, provided same is a direct and foreseeable consequence of the defect(s) at the time of entering into the contract – for example, personal injuries suffered by a building’s occupant as a result of its collapse or a retail outlet’s loss of profit due to temporary closure. 

If the contractor carries out repairs to any defect discovered during that initial ten-year period, his liability in respect of that element of the structure, will remain in force for a further ten years from completion of those remedial works. 

 

Burden of proof: 

The occurrence of damage or discovery of a defect generates an automatic presumption of liability and there is no onus on the owner or the employer to prove fault or negligence on the part of the contractor. 

Limitation or waiver of liability: 

As decennial liability is a mandatory provision of Qatari law, any contractual attempt to limit its scope or exclude or waive its application will be void and unenforceable as a matter of public policy. However, in accordance with general principles of Qatari law, once the collapse occurs or the defect is discovered – and the right to claim for the resulting damage has crystallised – the building owner can then validly waive that right. 

Liability and prescription periods: 

The liability period commences at project handover and runs for the lesser of ten years or the intended life cycle of the building or structure. If various individual elements of a project are capable of being operated independent of one another – as may be with regard to a power plant consisting of a number of generators constructed on a phased basis – decennial liability will attach to each part separately; if they are linked, the ten year period will begin to run from the delivery of the final phase. 

 

The prescription period for filing claims on the basis of decennial liability in Qatar is three years from the date of occurrence of the collapse or actual discovery of the defect. Thus, in theory, a contractor or consultant could find himself facing a claim under decennial liability some thirteen years after practical completion of the works. 

If the contractor carries out repairs to any defect discovered during that initial ten-year period, his liability in respect of that element of the structure, which required repair or reinforcement, will remain in force for a further ten years from completion of those remedial works. 

Salient points: 

Decennial liability attaches notwithstanding the collapse or defect resulted from geotechnical deficiencies, such as poor soil quality or subsidence. Contractors are therefore advised to carry out thorough site investigations prior to commencing work. 

The building owner’s approval or supervision of the design or method of construction or acceptance of delivery of the building (even with knowledge of the existence of defects) will not protect the contractor unless he can establish that the owner has technical knowledge or industry experience equal or better than his own. Thus, if faced with persistent instructions from an employer to perform the work in a manner which the contractor knows or believes to be ill-advised, the latter should refrain from acquiescing to the former’s demands, as the employer’s consent will not necessarily protect the contractor from the imposition of decennial liability later on. 

No liability will attach where the damage to the building or structure was caused by an extraneous event, such as an event of force majeure

Managing risks: 

In France and Egypt, on whose Civil Codes Qatar’s law is modelled, specific insurance for decennial liability is mandatory and failure to carry appropriate cover is punishable by law; this is not the case in Qatar, where insurance requirements are primarily governed by the contract. However, in light of the risks outlined, contractors and consultants who consider entering the Qatari market should be acutely aware of any shortcomings in the scope of the protection offered by their existing insurance policy. 

Of particular concern to architects and engineers is that fact that traditional Professional Indemnity insurance policies are usually invoked where there is negligence on the part of the insured – rather than having a broader ‘legal or civil liability’ trigger – and thus do not cover decennial liability. 

Contractors looking to add decennial liability to the list of risks insured under their standard Contractors’ All Risks policy may be met with hefty upwards adjustment of their premium, in addition to higher deductibles, extended limitation and exclusion clauses and stricter reporting requirements. Project-specific cover may be available, but often at a prohibitive cost and on the condition that the insurer becomes intimately involved with activities on site during the currency of the works. There have been some developments in recent years in relation to the availability of latent defects insurance; contractors availing of such cover should ensure that it is properly maintained for the full period of liability. 

Harmonisation of the approaches of different jurisdictions to liability for latent defects would provide greater certainty for construction industry participants, reduce the need for extensive collateral warranties and drive down the cost of insuring against such liability, whilst weeding out serial offenders from the market. 

 
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