Contractor’s Obligations in Construction Contract

Since the contractor in the construction contract is the essential element through its work the final result and the status of the contract are reflected, and since the construction contract is a binding contract for both parties, given the nature of the contractor's obligation, the contractor shall do its endeavors to fully perform the terms of the contract. Thus, it commits itself to the relevant technical capabilities, adherence to applicable standards and constructional and engineering inputs. As the contractor is entitled to the agreed remuneration for its work, it shall also respect the terms of the contract and meet the deadlines within which the contractor shall complete the contract.

From this point of view, before entering into the elements of this Article, we make it clear that it is based on the clarification of the contractor's obligation and that it is subject to the contractual liability provisions and the exceptions thereto. This also includes the effects of that liability, in particular, the contractor's obligation to ensure the construction work is carried out through it, and, finally, a simple summary of the contractor's obligations. 

Article 646 of the Egyptian Civil Code defines construction contracts as follows: 

A contract is “A contract whereby a party thereto undertakes to do something or perform work for a fee that the other party undertakes to pay.”

The main obligation arising from the contract is to complete the specific work, in accordance with the agreed terms and specifications as well as the conditions required by the standards. For the completion of works, the contractor may subcontract with several subcontractors if the nature of the work involved so permits. The work is deemed completed by the contractor even though it was used another subcontractor to perform it. And, if so, both are contractors within the limits of their assigned work, to which they are bound and to provide a warranty. It is not sufficient to say that there is a subcontract in the event that the main contractor concludes a subcontract. The subcontract shall be linked to the main contract, with the subcontractor participating in the performance of the main contract.  This is explained in Article 661 of the Egyptian Civil Code, which stipulates that: 

"(1) A contractor may entrust the execution of the whole or part of the work to a subcontractor unless he is precluded from so doing by a clause in the contract or unless the nature of the work presupposes reliance on his skill.

(2) In such a case, the contractor remains responsible to the master for his subcontractor.”

From the above Article, it is evident that it is not necessarily a single contractor who carries out the installations and completes the project as a whole. Rather, the employer may entrust several contractors to the work, for example, entrusting a contractor to lay the foundation and other construction work, including floors, roofs, walls, etc., and to another contractor for carpentry, for example, and to a third contractor the blacksmithing works,   etc.

The subcontractor's obligation to guarantee the works shall end once the main contractor receives and examines the work, and detect any defects if any. If hidden defects arise thereafter, the subcontractor shall not be liable for the duration of the contract or standards. Thus, the subcontractor shall not be directly liable to the employer but shall remain liable to the main contractor. 

It should be noted that the contract linking the main contractor to its employees is an employment contract rather than a construction contract and therefore they are not secondary contractors. 

Contractor’s Liability Nature: 

The liability of the engineer and the contractor is a contractual one because it arises from the breach of a contractual obligation, whether or not this obligation is explicitly stipulated in the contract. After all, this obligation entails in every construction contract under the law. Both the contractor and the engineer shall compensate for the damage they can expect if their liability is realized, and commit themselves to compensating the employer for the damage it suffered as a result of the demolition or defect in the construction. Compensation, under general rules, includes the loss and loss of profits. It also includes expenses necessary for reconstruction if all of it has been demolished or for rebuilding the demolished part or repairing the defect. Nevertheless, compensation shall be limited to damage that would normally have been foreseen at the time of the contract, covering unexpected damage only if fraud or serious error were established on the part of the breaching party.   

Nevertheless, the contractor's liability may be a tort liability, if the employer proves that the contractor committed fraud or serious error during the performance of the contract. The latter is subject to tort liability, and their liability exceeds the scope of contractual liability whether agreed upon or released in the contract. 

Also, the employer or third party can direct the tort liability to the contractor if it is established that there is a clear negligence of the contractor to take the necessary technical measures to protect the adjacent buildings, resulting in their partial or total breakdown or collapse. 

 Warranty by Main Contractor and Subcontractor against Construction Defects: 

  Article 651 of the Civil Code stipulates that: 

“1. The engineer and contractor shall be jointly and severally responsible, for ten years, for the total or partial demolition of constructions or other permanent works erected by them, even if such demolition is due to a defect in the ground itself, and even if the employer authorized the erection of the defective construction unless in this case, the constructions were intended by the parties to last for less than ten years.”

2. The warranty imposed by the preceding paragraph shall extend to defects in constructions and erections which endanger the solidity and security of the works.  

 3) The period of ten years shall run from the date of delivery of the works...  This Article may not apply to the rights of action which a contractor may have against his subcontractors.”

In short, each subcontractor is also considered to be an independent contractor within the limits of their work. The subcontractor is also committed to a special warranty within such limits. The contractor is a manufacturer who performs work and may supply the materials used in the construction. It may also provide the labor required to carry out the construction process. It is associated with the employer with a construction contract. The contractor's main task is to set up the installations according to the approved models, drawings, and designs, including work execution management and guarding of materials and tools. A subcontract is a contract under which the contractor entrusts to carry out work with another contractor, to perform this work as a whole or in part.

Works Entailing the Contractor's Liability:

As we have explained, the main obligation of the contractor is to complete the assigned work. This obligation includes duties that the contractor shall perform. If these duties are breached, the penalty for such breach shall be applied as per the applicable law. To fulfill its obligation to complete the work, the contractor shall perform the works properly, with due diligence, since the obligation to complete the work on the construction contract is either an obligation to achieve a goal or an obligation to exercise care. If it is an obligation to achieve a goal, the contractor shall not be exempt from its obligation unless the goal is achieved and the required work is completed. In this case, it is not sufficient to do so with the ordinary person's care or the greatest possible care. As long as the work is not done, the contractor shall remain liable. This liability is only released if the contractor proves that the damage is caused by an external cause. The release of liability in this case comes from the denial of the causation relationship and not from the denial of the error. If the work is carried out following the agreed conditions and specifications and standards, the contractor shall have then fulfilled its obligation and shall complete the work within the agreed period or reasonable period under the terms of the contract. If there are no agreed conditions, the applicable standards, especially workmanship, shall be followed as per the assigned work. That is, the contractor shall commit itself to the completion of the work within the agreed period or the reasonable period as an obligation to achieve a goal rather than a mere obligation of care.   

In light of the provisions of the Civil Code, the contractor's obligations in this regard can be clarified as follows:

1. Responsibility for Quality of Work Material:

 If the contractor undertakes to provide all or some of the work material, which is the raw material, it shall be then responsible for its quality under the terms of the contract or applicable standards and the workmanship.

2. Preserving the Employer's Interest

 If the employer supplies the work material, the contractor shall take care of it and take into account the technical standards in workmanship, and return the remainder to the employer, as it was held as custodian of this material. If the contractor commits negligence or default resulting in loss or damage of such materials, it shall provide a warranty for them.

3. Provision of Equipment and Tools Required to Complete the Work

 The contractor shall provide, at its expense, the equipment and tools required to complete the work, unless the agreement or standards otherwise stipulate.

4. Completion of Work Under the Terms of the Contract

 The contractor shall complete the work under the terms of the contract. If it breaches any provision, the employer may request to terminate the contract immediately if the work cannot be remedied.

However, if the defect can be remedied, the employer may warn the contractor to rectify the defect within a reasonable duration. If that duration expires without the rectification being completed, the employer may petition the court to terminate the contract or authorize the contractor to use a subcontractor to complete the work at the main contractor.

5. Work Execution Within Deadlines Set in the Construction Contract:

This obligation is based on the contractor's obligation to carry out the work within the period agreed upon in the contract without delay. The contractor's obligation in this regard, whether the work is the main work or additional work carried out based on variation orders issued by the employer or his representative. For variation orders, the contractor may request an extension of time in writing from the employer, and may not claim compensation on the ground that the delay is due to the employer. 

On this occasion, we note that the contractor is not entitled to additional fees in the event of variation orders if the contract is a lump sum type on a design basis. Article 658 of the Civil Code provides that: -

"If the contract is a lump sum and based on a design agreed by the employer, the contractor shall not claim a fee increase, even if the design has been modified or added, except as a result of an error by the employer, or as authorized by the employer, and the fee has been agreed upon with the contractor.”

6. Damage or Loss Warranty:

 The contractor shall warrant that any damage or loss that may result from the act or workmanship causing demolition of the construction facilities or buildings, whether by breach or default of the contractor because it is considered a joint worker, i.e. a guarantor of the money received by it.