Execution of works in a defective manner or violation of terms of the contract by the Contractor

No doubt that the agreed works shall be implemented with the expected efficiency and skills. The Employer always aims to reach the best degree of performance and quality of the construction project. No problem arises where the specifications at the time of delivery are those agreed upon and when they conform to the drawings and specifications between the parties to the contract. However, the problem arises when the implementation is carried out in a defective manner leading to real or potential damage and violating the contract terms. Experience always calls for monitoring the implementation process so that the problems arising from such defects do not aggravate at a later time. Such defects may be due to the Contractor’s poor experience or bad faith, which requires a kind of legal protection for the Employer and ways to confront such cases that could affect the project and reputation.

I. Contractor's obligations to the Employer:

The contractual relationship between the Contractor and the owner of the project entails the establishment of the Contractor’s liability for non-performance of contractual obligations agreed upon in the contract. It also results in its liability for the default of its subcontractors and all persons concerning the contract to perform such obligations. Indeed, the Contractor shall hand over the works as completed according to the Employer's specifications, in addition to its liability to guarantee the works, under the law. This means that the Contractor shall be responsible for the following:

1. Implementation of works free from apparent and patent defects:

The Contractor shall deliver the works to the Employer free from any defects. However, if the Contractor breaches its obligations to guarantee defects in workmanship and/or works, it shall be responsible for such defects for the Contractor’s negligence otherwise. In this regard, it should be noted that the principle in the contract is that the Contractor is discharged of apparent defects upon handing over the works to the Employer. However, the Contractor is not discharged of the patent defects, as it remains responsible for them throughout the warranty period.

2. Implementation of works according to specifications and conditions:

It is established that the Contractor shall deliver the works per the recognized standards. If the Contractor breaches its obligation to complete the works under the agreed-upon specifications and conditions, it shall be responsible to the Employer who has the right to claim compensation from the Contractor based on contractual liability (ex contractu). In this regard, it is evident that in all cases the Contractor shall exert possible efforts to implement the instructions of the project engineer, whether about architectural designs or measurements. Indeed, the Contractor, in turn, like the architect, shall alert the Employer to the risks of the project implementation, and give them recommendations thereon and, therefore, work to avoid such risks as much as possible. In jurisprudence, this is called the Contractor's obligation of informing the Employer and direction. The Contractor shall also instruct the subContractor - if there are violations during implementation - to carry out the work in conformity with the contract and warn it, during the implementation of the work, to amend the defective method of implementation as the main Contractor remains liable to the Employer for the faults of its subcontractors.

2. Breach of Contract:

The construction contract is an agreement between the Contractor and the Employer, under which the Contractor shall perform a particular work, i.e. construction work under specific contractual conditions and specifications. This work is carried out for a fee to be paid by the Employer to the contract. , it is a binding agreement subject to the protection and control of the law, whether in its conclusion or implementation, as well as the set of conditions to be completed. In this sense, it is a binding agreement subject to the protection and control of the law, either upon conclusion or implementation of the contract. It also includes a set of conditions under which the construction or building process shall be properly completed. If the contract is a special law contract, the provisions of the construction contract of civil laws apply thereto, in addition to the standard conditions as stipulated in the contract and agreed upon by the two parties. If the contract is for the project of public benefit, the provisions of the administrative law shall apply, in addition to the agreed upon standard conditions. In this case, the contract may include special conditions that are uncommon in the special law, and, as a result, any violation or failure of the contract by the Contractor grants the Employer the right to claim compensation from the contactor including amounts incurred over the contract price for completing the project according to the required specifications. This is in addition to compensation for damage abstained by the Employer as a result of the delay in the project completion. As this damage is difficult to determine, most construction contracts include an agreement in which a delay fine is imposed for each day of delay or suspend the works.

This is called the “liquidated damages”, which is a reasonable amount commensurate with the volume of the project and the damages resulting from that breach, which are difficult to determine when signing the contract. FIDIC contracts, for example, always emphasize that the liquidated damages decided upon by the agreement of the two parties are contractual compensation and not a penalty clause. It is compensation for every day or part of the day that elapses between the specified date and the date of issuance of the completion certificate. The Employer may also obtain its right by decreasing the Contractor’s dues by the amount it is entitled to in compensation, while the “penalty clause” is subject to the discretion of the judge. Also, the burden of proof of actual damage rests with the plaintiff in this case.

Accordingly, the Employer is entitled to take all measures to maintain its rights in the event of such a breach by the Contractor, such as a claim for liquidated damages, if any, or suspension of work as well. Some provisions of the FIDIC Contracts stipulate that "The Engineer may at any time instruct the Contractor to suspend the progress of part or all of the Works. If the reason for the suspension is attributable to the Contractor, no increase in the price or duration of the execution..." 

This means that if the works are suspended as the Contractor implemented them in a defective manner or a breach of the terms of the contract, the violating party, i.e., the Contractor, shall bear the responsibility, as it is inconceivable that the latter would benefit from its default and violation of the terms and conditions of the contract.

3. Execution of works in a defective manner:

Execution of works in a defective manner implies that the Contractor fails to observe the architectural technical principles and professional rules as long as there is no default or a violation of the technical standards or failure to adhere to the laws and regulations. If there is anything vague to the Contractor, it shall consult the engineer, so that they agree properly on the matter. The goal is to achieve the public interest, not just intrigue or obstruction to obtain some gain in bad faith, in addition to the necessity of observing the requirements of the laws regulating this type of activity and the instructions issued by the competent administrative authorities.

Also, if the Contractor, and subContractor if any, fails to observe the standards of architectural art during implementation, we find most laws oblige construction Contractors to respect the profession's technical rules and to perform work or service for which it will not be only accountable for his acts but also its negligence and poor skills and performance. The Contractor shall be liable to the Employer and the subContractor, in turn, shall also be liable to the main Contractor, whether the cause of the breach is error or negligence, and whether due to its bad faith or negligence of the architectural technical rules that it has to respect during the construction works. 

However, despite that the term “industry standards” is broad, the determination of cases of breach or adherence to such obligations of the Contractor is vested in the judicial or arbitration authority in the case of a dispute. Accordingly, that authority shall decide whether the Contractor respected or violated industry standards or activity, based on the opinion of construction experts.

4. The measure to be taken by the Employer against the Contractor in the event of a violation of the contract.

We may initially demonstrate that it is not enough to say that by fulfilling its obligation, the Contractor implemented the work assigned to it, but that this implementation shall be in conformity with the contract, taking into account the applicable technical and engineering standards. The Egyptian Civil Code granted the Employer many measures to be taken if it found that the Contractor is executing the contract in a defective manner.

The first of these measures is that the Employer warns the Contractor to modify the method of execution within a specified period. In this regard, we indicate that the aforementioned obligation is a binding obligation for the Employer if it sees that the Contractor is executing the contract in violation of the provisions and clauses thereof. Also, if the Employer neglects to do so, therefore, the latter is not entitled to compensation for the damages that could have been avoided if the Contractor had been warned at a reasonable period.

The second of these measures is unilaterally terminating the contract, as an exception to the general rule in binding contracts for both parties and in the application of the provisions of civil law, through the Employer’s right to withhold the Contractor’s dues for carrying out the works in violation of professional standards, and finally with the Employer’s request to terminate the contract by legal proceedings if the remedy of the defect in implementation method is impossible.