Damages in UAE Construction Contracts: Dubai Court of Appeal Case Commentary
A practical commentary on a Dubai Court of Appeal judgment concerning delay damages in construction contracts, examining contractor liability, causation, and the importance of documenting delays and project records.
Damages in UAE Construction Contracts: A Dubai Court of Appeal Case Commentary
1. Background
The dispute arose from a construction project involving contractual obligations to complete and deliver the works within an agreed period. During the project, a dispute arose concerning the parties’ financial entitlements and, in particular, the delay in completing and delivering the works.
The employer sought to enforce the contractually agreed delay penalty, arguing that the contractor had failed to deliver the works within the agreed timeframe. The contractor disputed liability, maintaining that the delay was attributable, wholly or partly, to the employer or its representatives.
The dispute also involved substantial financial claims and bank guarantees, with the total amount in dispute exceeding AED 93 million.
Following the first-instance judgment, the matter was appealed in Commercial Appeals Nos. 910 and 886 of 2025. On 9 March 2026, the Dubai Court of Appeal amended the judgment and ordered one limited liability company to pay AED 36,051,040.23, plus 5% interest from the date of the claim, while upholding the remainder of the judgment.
The judgment addressed an important question concerning whether a contractor’s failure to meet the contractual delivery date, by itself, is sufficient to trigger a contractual delay penalty. The judgment was subsequently Delay challenged before the Dubai Court of Cassation in Commercial Cassation Appeal No. 590 of 2026, which was dismissed on 8 July 2026.
2. Key Issue
The key issue was whether the mere failure to meet the contractual completion date is sufficient to establish the contractor’s liability for delay damages, or whether the cause of the delay must also be established.
3. Court’s Decision & Reasoning
The Dubai Court of Appeal held that entitlement to an agreed delay penalty requires proof that the contractor failed to complete and deliver the works within the contractual period and that the delay was attributable to the contractor.
Where the delay results from a breach, act or omission attributable to the employer or its representatives, the contractor should not automatically be held liable for the delay penalty. The Court therefore treated causation and responsibility for delay as essential elements in determining whether contractual delay damages are recoverable.
4. Practical Implications
The judgment highlights that the contractual completion date alone does not establish liability for delay.
Employers should maintain records of the agreed programme, completion date, contractor’s progress, instructions, variations and other events affecting completion.
Contractors should likewise document employer-caused delays, including late approvals, instructions, variations and changes to the scope of works, together with their impact on the programme.
In practice, contemporaneous project records are critical to establishing when the delay occurred, what caused it, who was responsible, and its effect on the contractual completion date.
5. Conclusion
The judgment confirms that construction delay disputes require more than proof that the contractual completion date was missed. The parties must also establish the cause of the delay and the party responsible for it.
Effective contract administration and contemporaneous documentation therefore remain essential to determining liability for delay and the resulting contractual consequences.