Subcontractor Liability for Construction Defects After Handover under UAE Law

The Subcontractor’s Liability for Defects in Works After Handover under UAE Law: A Study of Dubai Court of Cassation Judgment in Commercial Cassation Appeals Nos. 577 and 628 of 2025

1. Legal Question To what extent is a subcontractor required to compensate the main contractor for the costs of repairing defects that appear in the works executed by the subcontractor after handover, where the subcontractor’s liability for those defects has been established and the main contractor has been compelled to pay the repair costs to the project owner pursuant to a final court judgment? May the subcontractor rely on the expiry of the maintenance warranty period or the absence of fault on its part to avoid liability, notwithstanding that the defects have been technically established and the applicable warranty remains in force?

2. Introduction A contractor’s liability for defects in construction works is an important issue in the construction industry, as certain defects may emerge after a project has been handed over, giving rise to disputes concerning the party responsible for bearing the repair costs. This issue becomes particularly significant in projects where the works are divided between a main contractor and subcontractors, as the main contractor may incur financial obligations towards the project owner even though the defects originate from works performed by one of its subcontractors. For example, if a main contractor engages a subcontractor to execute the aluminium façades of a tower, and the contract includes a ten-year warranty against colour changes in the panels, defects may subsequently appear during that period, forcing the main contractor to bear the repair costs for the benefit of the project owner. This raises the question of whether the main contractor is entitled to seek recovery from the subcontractor and whether the expiry of a maintenance period or an argument that no fault was committed affects the establishment of liability.

In this regard, Article 818 of Federal Decree-Law No. 25 of 2025 promulgating the UAE Civil Transactions Law provides as follows: “1. The contractor must complete the work in accordance with the terms of the contract and within the agreed period. If no terms have been stipulated or no period has been agreed upon, the contractor must complete the work in accordance with customary standards and within a reasonable period required by the nature of the work.

2. If it becomes apparent during the execution of the work that the contractor is carrying it out in a defective manner or contrary to the terms of the contract, the employer may formally notify the contractor to comply with those terms and rectify the non-conforming works within a reasonable period specified by the employer. If that period expires without rectification, the employer may, after establishing the condition of the works, rescind the contract or entrust another contractor with completing or correcting the works at the expense of the first contractor.” This provision highlights the contractor’s obligation to comply with contractual terms and the consequences of failing to rectify defects. The analysis also requires distinguishing between contractual warranties, maintenance warranties and decennial liability, while emphasising the role of technical expertise in identifying defects, determining responsibility and assessing repair costs.

In this context, the Dubai Court of Cassation addressed this issue in its judgment delivered on 26 June 2025 in Commercial Cassation Appeals Nos. 577 and 628 of 2025, concerning a subcontractor’s liability for defects in the works and the repair costs borne by the main contractor pursuant to a final court judgment.

3. Facts of the Case The dispute arose between a main contractor and a subcontractor concerning the costs of repairing workmanship defects that appeared in works associated with a tower construction project, under three construction contracts. The central issue was the extent of the subcontractor’s liability for defects in the works it had executed and whether it was required to compensate the main contractor for amounts paid to the project owner pursuant to a final court judgment.

The dispute involved a contractual warranty against colour changes in aluminium panels for a period of ten years, together with consideration of the continued applicability of the decennial liability regime. The subcontractor raised several defences concerning the absence of liability on its part, the expiry of the warranty period, the inadmissibility of the claim on the grounds of res judicata, and challenges to certain elements of the compensation claimed.

The main contractor, in turn, relied on the establishment of defects in the works executed by the subcontractor and on the fact that it had borne the costs of repairing those defects for the benefit of the project owner pursuant to a final court judgment. Its claim sought recovery of the costs that it considered attributable to defects falling within the subcontractor’s scope of responsibility.

Under the current UAE legislation, these facts are also relevant to Article 819 of the Civil Transactions Law, which provides: “The contractor shall guarantee any damage or loss arising from its acts or workmanship, whether resulting from its misconduct or negligence or otherwise. Such guarantee shall cease to apply if the damage or loss results from an unavoidable incident.”

This provision concerns the contractor’s liability for damage or loss arising from its acts or workmanship and is relevant when examining liability for defects and the associated repair costs. Nevertheless, applying it to a claim by a main contractor against a subcontractor requires consideration of the nature of the contractual relationship, proof that the defect is attributable to the works executed by the subcontractor, and verification that the conditions for recourse against the subcontractor have been satisfied.

Article 832 of the same Law further provides: “A contractor may entrust the execution of the entire work or part thereof to a subcontractor, unless prohibited by a contractual condition or unless the nature of the work requires the contractor to perform it personally. The contractor shall remain liable for the subcontractor towards the employer.”

This provision establishes the legal framework for engaging subcontractors and confirms that the main contractor remains responsible to the employer for the subcontractor. However, it does not, by itself, resolve the question of recourse between the main contractor and the subcontractor. That issue must be examined in light of their contract, the obligations contained therein, and the evidence concerning the origin of the defects and the costs of rectification.

The available information does not contain the complete details of all contractual provisions, technical reports or specific statutory provisions relied upon by each party. Accordingly, the analysis is limited to the available facts and judicial principle, without attributing detailed arguments or specific legal provisions to either party in the absence of supporting evidence.

4. Procedural History and Judgments of the Courts First: Judgment of the Court of First Instance The claimant company in Commercial Cassation Appeal No. 577 of 2025 filed a claim seeking payment of AED 3,189,106, in addition to interest, on the basis of three construction contracts relating to works on the Armada Towers project. The Court of First Instance ordered the defendant company to pay the claimed amount.

Second: Judgment of the Court of Appeal The judgment was challenged before the Court of Appeal, which considered Commercial Appeal No. 559 of 2025 and delivered its judgment on 12 May 2025, amending the amount awarded to AED 1,724,237 while upholding the judgment in all other respects.

This amendment indicates that the Court of Appeal determined that an amount lower than that awarded at first instance was payable. However, identifying the specific reasons for this reduction requires reference to the full text of the judgment.

Third: Judgment of the Court of Cassation Both parties challenged the appellate judgment before the Dubai Court of Cassation in Commercial Cassation Appeals Nos. 577 and 628 of 2025. The dispute concerned the establishment of the subcontractor’s liability, the defence of res judicata, and the effect of the applicable warranty and the defects established through technical evidence.

On 26 June 2025, the Court of Cassation dismissed both appeals and ordered each appellant to bear the costs of its appeal, together with AED 1,000 in legal fees. Consequently, the Court of Appeal’s judgment amending the awarded amount to AED 1,724,237 remained in force.

5. Analysis of the Court of Cassation Judgment The principal legal issue concerns whether a subcontractor’s liability for defects that appear after handover continues and whether the subcontractor must compensate the main contractor for the costs of rectification where its responsibility has been established and the main contractor has paid those costs to the project owner pursuant to a final court judgment.

First: The Effect of Handover and the Expiry of the Maintenance Period The judicial principle under consideration indicates that handover of the works does not, in itself, extinguish all warranty-related obligations. If workmanship defects emerge during the applicable warranty period and the subcontractor’s responsibility for those defects is established, merely relying on the fact of handover or the expiry of a particular maintenance period is insufficient to exclude liability without examining the nature of the contractual obligation and the applicable legal rules.

This principle is consistent, in terms of the current legislative framework, with Article 818 of the Civil Transactions Law. That provision requires the contractor to execute the works in accordance with the contractual terms and, in the circumstances specified by the provision, permits the employer to require the contractor to rectify defective works or to engage another contractor to complete or correct them at the first contractor’s expense, subject to compliance with the applicable legal conditions and procedures.

However, this does not mean that every defect appearing after handover automatically gives rise to the contractor’s liability. It remains necessary to establish that the defect is connected to the works executed by the contractor, determine the scope of the applicable warranty and the conditions of liability, and consider whether the claim concerns a contractual warranty or another legal obligation. Second: Distinguishing between Contractual Warranties and Decennial Liability Distinguishing between different types of warranties is a fundamental element of the legal analysis. A contractual warranty is determined by the terms of the contract and the works and defects covered by it, while a maintenance warranty may impose specific obligations in terms of duration and procedures. Decennial liability, by contrast, is subject to its own statutory requirements and concerns the collapse of a building or defects threatening the structural integrity or safety of the building, in accordance with the applicable law.

Accordingly, the mere existence of a workmanship defect or a change in the colour of aluminium panels is not, by itself, sufficient to establish that decennial liability applies. The nature of the defect and whether it satisfies the statutory requirements must be examined. Conversely, the expiry of a shorter maintenance period does not automatically extinguish an independent contractual warranty or another legal liability that remains in force.

It is also necessary to avoid confusing the duration of a contractual warranty with the statutory period associated with a particular form of liability. Determining the applicable regime depends on the nature of the works, the cause of the defect, the contractual terms and the legislative provisions applicable to the case.

Third: The Importance of Technical Expertise in Establishing Liability Technical expert reports play an important role in identifying the nature and causes of defects, determining whether they are attributable to the works executed by the subcontractor, and assessing the costs of rectification. Under the judicial principle available for consideration, liability is based on the technical establishment of the defects through reports accepted by the court.

This requires a distinction between proving the existence of a defect and proving the subcontractor’s responsibility for it. A defect may be established while identifying the responsible party and determining the scope of compensation still require an examination of the contract, the technical evidence and the other circumstances of the case.

In this regard, Article 819 of the current Civil Transactions Law supports the relevance of examining the damage or loss and its relationship to the contractor’s works. Nevertheless, the provision does not eliminate the need to prove the facts necessary to support the claim, nor does it mean that the mere occurrence of damage is sufficient in every case to make the subcontractor liable for the repair costs. Rather, the legal basis of liability must be identified, its applicability to the relationship between the parties must be established, and the effect of any proven external cause or legal defence must be considered.

Accordingly, a mere denial of fault is insufficient to overcome technical evidence accepted by the court and establishing responsibility, provided that the necessary legal conditions have been satisfied.

Fourth: Compensation for Repair Costs and the Limits of Liability The judicial principle under consideration is that a subcontractor is required to compensate the main contractor for the costs of repairing defects that the main contractor was compelled to pay to the project owner pursuant to a final court judgment, provided that the subcontractor’s responsibility for those defects has been established.

This requires verification that the claimed costs relate to defects falling within the subcontractor’s scope of responsibility, that the main contractor actually incurred those costs, and that the claim does not exceed the extent of the damage for which the subcontractor may legally be held responsible. The judicial principle also requires a distinction between costs falling within the subcontractor’s responsibility and amounts shown not to be connected to its works.

Consequently, compensation items should not be excluded merely because their connection to the disputed works is uncertain; equally, the subcontractor should not be charged with costs falling outside its responsibility. The determination of the amounts payable remains subject to the technical evidence and documentary records establishing the nature of the defects and the costs of rectification.

Article 819 provides a current legislative framework for considering a contractor’s liability for damage or loss arising from its acts or workmanship. Article 832, meanwhile, addresses the main contractor’s liability towards the employer in respect of the subcontractor. However, the main contractor’s liability to the project owner must not be confused with the legal basis for recourse against the subcontractor. The latter claim requires examination of the contract between the main contractor and the subcontractor, whether the subcontractor breached its obligations, and whether a connection has been established between its works, the defects and the costs claimed.

Fifth: The Defence of Res Judicata The defence that the claim was inadmissible because the matter had already been adjudicated was raised before the Court of Cassation. Examining this defence requires a distinction between the claim brought by the project owner against the main contractor and the recourse claim brought by the main contractor against the subcontractor to recover the repair costs.

The effect of a previous judgment is determined by reference to the parties to the respective proceedings, the subject matter and cause of each claim, and the scope of the issues conclusively determined by the earlier judgment. It therefore cannot be assumed that a judgment in the first proceedings automatically determines every issue relating to the subcontractor’s liability. The scope of the previous judgment’s res judicata effect must instead be examined under the applicable legal rules.

The available information does not permit a definitive conclusion regarding the full reasoning on which the Court relied in addressing this defence. The complete judgment should therefore be consulted before attributing a detailed interpretation or an independent legal principle to the Court on this issue.

6. Legal Impact and the Principle Derived from the Judgment The following legal principle may be derived from the judgment: A subcontractor is required to compensate the main contractor for the costs of repairing defects for which the subcontractor has been found responsible, where the main contractor has incurred those costs pursuant to a final court judgment, provided that compensation remains limited to amounts falling within the subcontractor’s scope of responsibility under the contract, the law and the technical evidence.

The significance of this principle lies in confirming that handover of the works or the expiry of a particular maintenance period does not necessarily extinguish all warranty obligations. It also emphasises the need to establish the origin of the defects and identify the responsible party, rather than relying solely on the existence of a defect in the project or a financial claim made by the project owner.

In practical terms, the main contractor should retain handover records, technical expert and inspection reports, defect notifications, invoices and documents evidencing the repair costs, together with relevant court judgments. Such records assist in establishing the connection between the defects and the amounts sought to be recovered.

The subcontractor, for its part, should carefully review the warranty provisions, retain technical documents relating to execution and handover, identify the scope of the works for which it is responsible, and respond to defect notifications in accordance with the contractual procedures. The judgment also highlights the importance of clearly drafting subcontracts, particularly in relation to the duration and scope of warranties, the mechanism for notifying defects, inspection and rectification procedures, and the allocation of repair costs where multiple contractors are involved.

Within the limits of the available judicial principle, the judgment underscores the importance of the rules governing warranties for defects in construction works and the role of technical expertise in determining liability and compensation. It cannot, however, be conclusively stated that the judgment established a new line of judicial authority without reviewing the full text of the judgment and comparing it with relevant earlier decisions.

7. Conclusion The Dubai Court of Cassation judgment in Commercial Cassation Appeals Nos. 577 and 628 of 2025 demonstrates that handover of the works or the expiry of a maintenance period does not necessarily release a subcontractor from liability for defects shown to be attributable to its works, provided that the applicable legal and contractual requirements for liability are satisfied.

The dispute highlights the importance of technical expertise in identifying the causes of defects, determining the responsible party and assessing repair costs. Where the subcontractor’s liability is established and the main contractor has been compelled to bear the repair costs pursuant to a final judgment, the main contractor may seek recovery from the subcontractor to the extent that the amounts claimed fall within the subcontractor’s scope of responsibility.

The judgment also highlights the need to distinguish between contractual warranties, maintenance warranties and decennial liability, as each is subject to different conditions and has a different scope. Articles 818, 819 and 832 of the current UAE Civil Transactions Law support this legal framework. It must be noted, however, that the judgment was issued before the new Law came into force; these provisions should therefore not be attributed to the statutory basis applied by the Court at that time.

Accordingly, the principle derived from the judgment is that a subcontractor’s liability depends on establishing its responsibility for the defects and the connection between its works and the repair costs claimed. The subcontractor should not be charged with amounts exceeding the scope of its liability, nor should it be released from an established obligation merely because the works have been handed over or a particular warranty period has expired.