3 - DR - Walaa Arakeeb

The Vitality Of Construction Contract Provisions
Within The Scope Of The Egyptian Legal System
The Vitality Of Construction Contract Provisions Within

The Scope Of The Egyptian Legal System
Submitted By
Dr. Walaa Arakeeb
L.L.M, S.J.D(PhD) Southern Methodist University, USA
The Faculty of Law-Tanta University, EGYPT
I. INTRODUCTION
The proper law of the contract has great of influence on each and every
contract. The law which governs the contract provides for:
• Concepts, which must be known in order to understand the effects of
the contract and its underlying mechanisms
• Legal language and terminology, which is highly influenced by the law,
and may sometimes prove difficult to translate and understand
• Legal rules which may clarify any remaining gaps
• Mandatory legal rules
• Rules of contract interpretation
As ignorance of the law is usually no excuse, contractors, either local or, in
particular, those coming from abroad, must familiarize themselves with the
applicable law - its concepts and language. Engineers often believe that they
have a "common language", which consists of drawings. However even
drawings must be interpreted and understood in their legal context. Civil law and
common law concepts often also differ from each other to a considerable extent
and a simple translation of words constitutes no sufficient basis for a common
understanding.
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Dr. Walaa Arakeeb
As English has become the leading language for international

construction projects both civil law and common law practitioners must
carefully analyze whether any given wording means exactly what it appears to
mean. However, understanding legal terms also means taking into account the
fact that legal systems differ from each other as to the underlying principles
and in further detailed analysis. The Common law, which the legal system
developed in those nations which trace their legal heritage to Britain, is
primarily contrasted with civil law, which is based on former Roman law.
Both legal systems have over time developed their own traditions and
characteristics. Moreover there is Islamic law also referred to as Shari'a law,
which comprises all of the legal framework within which the public and
private aspects of life are regulated for those living in a legal system based on
Islamic principles of jurisprudence, as well as for Muslims living outside the
domain. The concept of Shari'a consists of the Qur'an and Sunnah. For some,
it also includes classical fiqh. Shari'a is often explained as law based upon the
Qur'an, the Sunna, and classical fiqh derived from consensus (ijma) and
analogy (qiyas). Most Arab countries refer to the Qur'an or Islamic
principles in their existing Constitutions or Civil Codes as a primary source
of enlightenment.(1)
A. HISTORICAL BACKGROUND OVER CONSTRUCTION CONTRACT
It is a common understanding worldwide that contracts are binding
instruments being enforceable at court. The primary duty of a court in
construing a written contract is to endeavor to discover the intention of the
parties from the words of the instrument in which the contract is embodied.
However, the manner of doing so varies from country to country. In Civil Law
countries, such as Egypt, a construction contract will usually be understood as
a nominate contract having its legal background in Roman Law, even though
the specific legal shape of the contract may vary from country to country.
Thus, it is worthwhile to emphasize some basic ideas of Roman law in order
to help us understand the Civil law approach.
In later classical Roman law there were two common types of contract
(emptio-venditio and locatio-conductio). According to Roman law, a
construction contract is a contract of letting and hiring (locatio condiictio
(1)
Compare Art. 1 Egyptian Civil Code and Art. 1 the Algerian Civil Code.
32
operis). Under a locatio conductio operis the conductor operis is normally

obliged to carry out the work which he is engaged to do before the contract
money can be claimed from the locator (the employer). In such a case the
obligation to pay the money is conditional on the pre-performance of the
obligation to carry out the work, but, of course, the converse does not apply.2
The principle of reciprocity would normally apply to such a contract unless
there are indications to the contrary.(2)
The wording of locatio conductio operis is a bit confusing and shall
therefore be explained.(3) The term derives from locatio conductio (letting
and hiring). Locatio conductio may be defined as a contract whereby one
person agrees to give another the use or the use and enjoyment of a thing or his
services or his labour in return for remuneration. Three types of letting and
hiring were distinguished:
• The hire of a thing (locatio conductio rei)
• The hire of services (locatio conductio operarum or locatio operarum)
• The hire of a piece of work (locatio conductio operis or locatio operis
faciendi)
In the third case the person who gives the order for the work, and pays
for it, is the locator (one could say he places the order or the works), whilst it
is the conductor who executes the works. This perplexed terminology is due
to the different meanings of locare. It is therefore useful to give an example:
The work (opus) let out would be the installation of the unit. The lessor
(locator) would be the employer (locator) who let out the work and was
obliged to pay for it, whereas the lessee (conductor) would be the contractor,
who did the installation.(4)
(2)
See, e.g. Kamaludin v. Gihwala, [ 1956] (2) S A 323 (C) at p. 326; de Wet and Yeats
(1978, p. 139).
(3)
Oxonica Energy Ltd v. Neuftec Ltd [2008] EWHC 2127 (Pat) (05 September
2008).'B C Plant Hire cc t/a B C Carriers v. Grenco (SA) (PTY) Ltd (1090/2002) [2003]
ZAWCHC 70 (12 December 2003); see Gaius Institutes 3.147 Institutes 3.24.4 Digest
18.1.20, 19.2.2.1.
(4)
In some Civil Law jurisdictions Roman Law is still an important source of law, like
in South Africa, Scotland or Malta, in others, like Germany or France Roman Law has
been incorporated in the respective Civil Codes. Thus for example under Scottish law
old Roman law is still used in order to determine the obligations of the parties of a
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Dr. Walaa Arakeeb
In Egypt, I assume that the connotations of term locatio conduction

operis still operates, when it is necessary to assess the legal nature of a given
agreement." As defined in article 646 of the Egyptian Civil Code (ECC): " the
“Contract for Work” is a contract where one of the parties (the Contractor)
undertakes to do a piece of work or to perform a service in exchange for the
price that the other side (the Employer) undertakes to pay".
Unfortunately and although Egypt, as other most Civil law countries as
well, derive their current legislation from the old Roman law and although
the locatio conductio operis did not merely cover work on goods but also the
construction of buildings, current legislation largely ignores the specific
requirements and needs of a contract for works to be carried out on land. Also
for a long time the export of construction services was rather the exception
than the rule. Largely distinct local markets have emerged from this fact and
the involved contractors, employers, architects and engineers have widely
developed local self made law of industry which crystallizes in local
standard terms and practices supported by case law.(5)
B. ENTERING A CONTRACT
A contract is the most dominant source of obligation in the Egyptian
legal system. A contract may be defined as “a mutual agreement among
two or several personal wills on establishing, changing, modifying, or
terminating rights and duties that are recognized by law." (6) The Egyptian
contract and even in tort. Thus Scottish courts have said: It a person is employed under
a contract locatio opens faciendi, "for services" rather than "of service", the law does
not hold the employer vicariously liable tor wrongs committed by the contractor in the
course of the employment. Such a person is an independent contractor, and is personally
liable only, not being subject to detailed direction or control from the employer in the
manner of performing the work. His contract is not to serve, but to bring about a
required result in his own way, and if, in so doing, he injures a third party, he alone is
responsible.
(5)
See Axel-Volkmar Jaeger & Gotz-Sebastian Hok, FIDIC- A Guide for Practioners,
(Springer-2009).
(6)
The legal enforceability of a contract is based not on "promise," as is the case under
the Anglo-American common law system, but rather on "agreement" in the tradition
of continental European civil law systems.
34
Code Civil lists three requirements essential for a contract to be valid:

consent, an object certain that forms the material purpose of the agreement,
and a licit cause for the contract.(7)
In order for a contract to exist certain elements should be satisfied
otherwise the contract will be void. These elements are: (A) consent, (B) a
certain object that forms the material purpose of the agreement, and (C) a
licit cause for the contract.(8)
1. Consent to Contract
Contract is based on ‘common intention’ aiming at the same legal
effect. This made through the concept of ‘consent’ and which is so called
‘assent’ of the contracting parties. Consent or an agreement of the parties
exists only when "a complete coincidence between the declarations of the
will of the different parties is reached." Within a consent purview, the
parties’ will must be in accord , or in agreement, as it must be directed to
create a particular legal effect. Generation of legal effects takes any one of
the following types: ‘creation’, ‘modification’, ‘transfer’, or ‘extinction’.
Fore such will to be legally considered, it must be "cognitive, serious,
precise and intelligible," As a will is a psychological matter, its existence
is not only sufficient to fulfill the purpose of a recognized consent, but a
(7)
The French Code Civil lists four requirements essential for a contract to be valid:
consent, legal capacity to contract, an object certain that forms the material purpose
of the agreement, and a licit cause for the contract; Code Civ. art. 1108 (trans.
author) ("Quatre conditions sont essentielles pour la validite d'une convention:
Le consentement de la partie qui s'oblige;
Sa capacite de contracter;
Un objet certain qui forme la matiere de l'engagement;
Une cause licite dans l'obligation.")
(8)
The French Code Civil lists four requirements essential for a contract to be valid:
consent, legal capacity to contract, an object certain that forms the material purpose
of the agreement, and a licit cause for the contract; Code Civ. art. 1108 (trans.
author) ("Quatre conditions sont essentielles pour la validite d'une convention:
Le consentement de la partie qui s'oblige;
Sa capacite de contracter;
Un objet certain qui forme la matiere de l'engagement;
Une cause licite dans l'obligation.")
35
Dr. Walaa Arakeeb
consent is only reached when the parties’ will is manifested (materialized)

or declared in a complete accord manner. Articulations of consent requires
treatment of its different ‘methods of expression’, and ‘exchanging offer
and acceptance’.
a. Expression of Consent
Egyptian Civil Code poses no restrictions on the required form of the
manifestation of a will, as will of a party may be manifested by written or
spoken words, or by signs that is common in use. It may also be made
through the adoption of an attitude in which the conditions of the situation
do not give rise to doubt as to the connotation of the actual meaning of it.(9)
Regardless the way of the manifestation of a party’s will, such
manifestation of a party’s will may be conducted by an explicit or tacit
means. It must be noted that the existence of consent is not only sufficient
to render the desired contract stability. But, consent must be rendered free
of consent defects,(10) and by contracting parties who must have a sufficient
(despositive) capacity to contract. Missing these former requirements
would vitiate consent and make contracts voidable. Important to note is
that the E.C.C. adopted the reception theory as a presumption of the
intended recipient’s knowledge because intent produces its legal effect
when it becomes known to the addressee.
b. Exchanging Offer and Acceptance
In order for the consent to be concluded there should be reciprocal
intention to contract. However, exchange of expressed intentions, does not
necessarily lead to consent since such intentions might be conflicting in
substance. Particularly, coherence between exchanged intentions exists
when a proposal of intention receives a positive reply. Proposal should be
an ‘offer’ and the reply must be an ‘acceptance’ each hat it legal
requirements.
(9)
See E.C.C. § 90(1).
(10)
See E.C.C. §§ 120:30.
36
i. offer
Offer is defined as [a] manifestation of intent that displays the
offerror’s willingness to enter into a contract on specified terms”(11) In
general, no formalities are required for an offer. A declaration of intent, in
order to be qualified as an offer from the Egyptian law point of view, it
should be furnished by the following requirements: (i). willingness to be
bound, (ii) complete, and (ii) definite.
ii. acceptance
Acceptance results in the formation of a contract. Ordinarily,
acceptance must be expressed (pronounced) or communicated by the
offeree to the offeror, in order to manifest mutual assent (consent). A
declaration of intent, in order to be qualified as an Acceptance, from the
Egyptian law point of view, it should be furnished by the following two
requirements: (i) it must be manifested, and (ii) it must be in conformity
with the Offer. Acceptance leads to the formation of contract.
2. Subject-Matter ‘Object’
People form contracts in order to produce obligations to be undertaken
by any of them or both of them. Then, the ‘subject-matter’ of a contract (or
in other words its object) is the obligations which creates. This object can
be property, a debt, a benefit, a pecuniary right, work to be performed, or
abstention from work. In order for a contract to exist, its subject-matter
should be ‘determined or determinable’, ‘possible’, ‘licit’ Absence of any
of these requirements will lead to absence of a contract. Namely, any
claimed contract of such defect will be absolutely null.
3. Cause
A cause can be defined as the reason why a party binds himself. While
an object of a contract address a question related to what is the debtor
obligation, the cause of a contract addresses a question associated with
why is a debtor bound? In civilian systems derived from the French, such
as the Egyptian system of private law, absence of cause, or unlawfulness or
(11)
Egyptian Cassation Court judgment rendered on : June 16th of 1969 , appeal no. 323,
judicial year no. 35, collection of the technical bureue of the court of cassation, year 20, p.
1517.
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Dr. Walaa Arakeeb
immorality of the cause, is a good reason to deprive an obligation of its

legal effect.(12) An obligation with an unlawful cause cannot exist. Article
136 of the E.C.C. stipulates, “ A contract is void when an obligation is
assumed to be without cause or for a cause contrary to public policy or
morality” This provision lays down as the third requirement of a valid
contract that there must be a licit cause in the obligation. An obligation
must not only have a cause, but that cause must be lawful, that is, neither
illegal nor immoral, nor contrary to public policy. (13) An obligation may be
valid even though its cause is not expressed. This doctrine is laid down by
article 137 of the E.C.C. which provides, “(1) An obligation is deemed to
have lawful cause, even if such cause is not expressed in the contract,
unless the contrary is proved.
(12)
See P. Atiyah, The Rise and Fall of Freedom of Contract 463 (1979); see also
Restatement (Second) of Contracts § 71 (1981); See also Restatement (Second) of
Contracts § 90 and caption to §§ 82-90 (1981). “At common law, lack of
consideration is a good reason to deny enforceability of a promise. At common law a
consideration is needed to make a promise binding. That consideration must be
given by the promisee to the promisor as a sort of price for the promise. Moreover,
it does not suffice that the promisee give anything to the promisor. That which is
given is a true consideration only if it has been bargained for as such by the
recipient. In many instances, however, a promise is made for which no
consideration is given, and the promisee, though the promise is not technically
enforceable, relies on it to his detriment. In a proverbial example, a grandfather
gives his granddaughter a promissory note and tells her that he is giving her the note
because he does not want her to have to work for a living. The grandfather does not
ask that the granddaughter give up her employment, nor does he make it a condition
of his promise, which should be taken to mean that he does not request a
consideration for the note. Nevertheless, relying on her grandfather's promise, the
young lady resigns her position with a business concern. As is further proverbial in
situations of that sort, the old gentleman dies without having paid the note, and when
the granddaughter demands payment from the promisor's estate the executor raises
the defense of a lack of consideration. In situations of that kind an American
common law court and, to some extent, an English one also, will conclude that the
promise is enforceable because it induced the promisee's reliance and that reliance
substitutes itself for consideration. In a slightly different approach it is said, also, that
in that kind of situation a promise is enforceable without consideration. ”
(13)
See, e.g.,La. Civ. Code arts. 1966 and 1968.
38
It may happen that the way to conclude a contract is ruled by special

provisions, Some contracts must be concluded in writing, which are
classified as formal contract (for example a gift contract), some must be
made in front of a notary public (for example a real estate sales contract
governed by German law). Other contract which may classified as real
contracts. Real contract is in which consent is not sufficient to conclude the
contract, but the contract arise only upon the delivery of thing (subject-
matter), for example loan contract.
II. CONTRACT FOR WORK ‘CONSTRUCTION CONTRACT’ IN THE
EGYPTIAN LEGAL SYSTEM
The Egyptian legal system is a Civil Law legal system. By this, it is
meant that many of its primary legal principles have been made and
developed by statutory regulations.(14) Construction law as a whole is ruled
by statutory instruments and by case law due to its administrative nature in
some particular circumstance. Thought, construction contract law is mainly
statutory law based, it is not surprising to find it ruled by case law as well,
particularly in the realm of public-work contract. .
According to Art. 89 of the Egyptian Civil Code (ECC), (15) a contract
is an agreement by which one or several persons bind themselves, towards
one or several others, to transfer (e.g. property in the sales of goods), to do
(e.g. contract of manufacture/of employment) or not to do something. A
contract may be synallagmatic (where the contracting parties bind
themselves mutually towards each other), or unilateral (where one or more
persons are bound towards one or several others, without any obligation of the
latter, e.g. loan, gift).
(14)
Modern Egyptian law is therefore an intriguing mixed legal system, blending civilian
rules fashioned, in style, structure and content, on the model of the French Civil
Code of 1804, with the law of Islam and, in family law areas (such as marriage,
divorce, filiation and alimentary obligations), with a variety of religiously-founded
personal laws.
(15)
“A contract is created, subject to any special formalities that may be required by law
for its conclusion, from the moment that two persons have exchanged two
concordant intentions.”
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Dr. Walaa Arakeeb
A construction contract is a contract for work and services subject

to Sections 631 et seq. Civil Code (Egyptian Civil Code -ECC (articles
646-676).), whereby the contractor promises to do the work in
consideration of an agreed remuneration. Art. 646 of the ECC
provides “By a contract for work one of the contracting parties undertakes
to do a piece of work or to perform a service in consideration of
remuneration which the other contracting party undertakes to pay.” A
construction contract will usually be considered as a "contrat de louage
d'ouvrage", whereby one instructs a person to do a work or service whether
it is agreed that he will furnish his work or his industry only, or that he will
also furnish the material (Art. 647 Egyptian Civil Code ). (16)
Through the use of a contract for work and services the contractor is
bound to produce the work or render the service promised and the
customer is bound to pay the remuneration agreed. It is commonplace that
site supervision services as well as design services usually have the nature
of a contract for works and services. Art. 660(1) 0f the ECC provides “An
architect is entitled to a separate fee for the preparation of the plans and
specifications and another for the supervision of the work.” By means of a
German construction contract the Contractor assumes to complete the
Works free from defects. It lays within its discretion how to achieve the
result, as a reader may note in art. 652 of the ECC that states “An architect,
who only undertakes to prepare the plans without being entrusted with the
supervision of their execution, is responsible only for defects resulting
from his plans.”
Unlike in the US and UK there are no local standard forms of
construction contract commonly used in EGYPT, which have been
developed and published by private organizations. Even though a
large number of Egyptian engineering and architects' associations
exist, neither of these have published commonly recognized standard
forms. Thus the terms of a construction contract are usually
determined by current statutory regulations and The Federation
(16)
See Egyptian Civil Code § 647 provides “ (1) The contractor may undertake to
supply his work only, the master of the work being responsible for the supply of
materials which the contractor uses in or for the performance of his work.(2) The
contractor may also undertake to supply the materials as well as his work.”
40
Internationale des Ingenieurs Conciels (International Federation of

Consulting Engineers, or FIDIC)(17) conditions are employed in a great
number of the most important construction and industrial projects carried
out in the course of public-works contracts.(18) For example, the FIDIC
conditions were used in the Greater Cairo Waste Water Project, the Cairo
Metro Project, Demietta Port, and terminal two of the new airport. In
addition, the FIDIC conditions are adopted in all projects that are financed
by the World Bank and by USAID (United States Aid for International
Development), both of which finance a considerable number of major
infrastructure projects in Egypt.(19)
A. SPECIFIC CHARACTERISTICS OF THE CONTRACT FOR WORK
1. Contract for work is a nominated contract, which is regulated by
particular provisions within the scope of the Egyptian Civil Code -ECC
(17)
FIDIC conditions are inspired by the Institute for Civil Engineers (ICE) form, which,
in turn, was based on English law concepts and construction industry practice in the
United Kingdom. Thus, FIDIC conditions are based on U.K. domestic contract law.
The changes made to transform the domestic form (ICE) to an international form
(FIDIC) were, except for a few, insubstantial. n9 Professor Wallace has clearly
pointed out this problem in his comment on FIDIC conditions, stating that: "There
has . . . been far too little internationalization of the contract in this sense, which
remains far too domestically English in character and language."
(18)
A. El Shalakany, The Application of the FIDIC Civil Engineering Conditions of
Contract in a Civil Codes System Country: A Comparison of Legal Concepts and
Solutions, 6 INT'L CONSTRUCTION L. REV. 267 (1989); see also A. Andre-
Dumont, The FIDIC Conditions and Civil Law, 5 INT'L CONSTRUCTION L. REV.
43 (1988); see also Hani Sarie-Eldon, Operation of FIDIC Civil Engineering
Conditions in Egypt and Other Arab Middle Eastern Countries, 28 Int’l Law, 951
(1994).
(19)
The Federation Internationale des Ingenieurs Conciels (International Federation of
Consulting Engineers, or FIDIC) form of contract for civil engineering work is the
most used international standard form for civil engineering projects in Arab Middle
Eastern countries. The first edition of the FIDIC conditions was published in 1957.
Revised forms were introduced in 1969 and 1977 and the latest, the fourth edition, in
1987. According to some commentators, the third edition of the FIDIC forms was
adopted in more than 30 percent of the civil engineering contracts carried out in the
Middle East in the 1980s. n1 Undoubtedly, this percentage has increased under the
current edition.
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Dr. Walaa Arakeeb
(articles 646-676). In regulating the contract for work , the law made the
majority of its rules imperative, for instance, art.653 provides “ Any
clause tending to exclude or restrict the warranty of the architect and the
contractor is void.” Thus, any agreement contrary to the related to these
kind of imperative provisions shall be null and void. Conversely, other
issues may assigned to the will of the contracting parties, even if the law
provides otherwise. For example, art. 656 provides “In the absence of a
custom or an agreement to the contrary the price is payable upon delivery
of the works.”
2. The contract for work is a consensual bilateral contract. It is subject
to the general provision of the ECC that governs all types of consensual
contract ( articles 89-161). Each of its parties is bound to perform an
obligation in favor of the other party. The contractor is obliged to perform
the assigned job or service, while the master-in return- is obliged to pay the
agreed on amount of money. A construction contract by its very nature
creates reciprocal obligations. The reciprocity is one sided in that the
complete performance of his contractual obligation by the contractor and
acceptance of it by the employer is a condition precedent to the performance of
the reciprocal obligation by the employer. In other words the obligations,
though inter dependent, fall to be performed consecutively. Thus the
contractor is normally obliged to carry out the work which he is engaged to
do before the contract money can be claimed. The obligation to pay the
money is conditional on the pre-performance of the obligation to carry out
the work. The remuneration falls due at the time of acceptance of the works.
Art. 656 of the ECC provides “In the absence of a custom or an agreement to
the contrary the price is payable upon delivery of the works.”
Even though it may be stipulated that the payments shall be made in
installments, it arises from the very nature of the contract that nevertheless any
installment shall only become due dependent on the further development of the
transaction.35 Where either the common intention of parties to a contract or its
nature is that there should he a reciprocal performance of all or certain of their
respective obligations the exceptio non adimpleti contractus operates as a
defense for a defendant sued on a contract by a plaintiff who has not
performed, or tendered to perform, such of his obligations as are reciprocal to the
performance sought from the defendant.
42
3. The contract for work has a distinctive character. This contract

differs from the lease of work (employment contract) by the fact that the
remuneration of the worker is fixed according to the importance of the
work, instead of being proportional to the time he is employed. This
difference suffice to set this contract apart from others. It is therefore
wrong for modern legislation, following the defective classification of the
Roman law, to make of this kind of agreement a kind of lease. This does
the Code of Napoleon, which includes it under the same heading in
Sections II and III (Arts. 1782 and 1799).
B. REGULATORY SCOPE
The contract of work by the job or on contract adapts itself to the most
varied work; from work with materials such as the making of a movable
object; or the constructions of building, grading, etc., to the transportation
of persons and merchandise, and the management of public utility services.
The law has specially regulated only two kinds of job contracts: the
contract of for the construction of buildings (Arts. 651-660), and the
concession for management of the public utility service (Arts. 668-673),
and its dispositions on these two point are incomplete.
1. Legislative Sources:
The Egyptian Civil Code (1948); the Tenders Act (1998) and Tenders
Regulations 1998; the Building Act (1976) as amended and Building
Regulations (1998). The Contractors Federation Act (1992); and the Social
Security Regulations for construction workers (1988).
2. Custom:
Moreover, one should pay attention to the customary rules
(regional/international), as according to Art. 1 (2) of the ECC, terms which are
customary shall be supplemented in the contract, even though they are not
expressed there.(20) Other sources are the international provisions that
(20)
See Egyptian Civil Code § 1 (2) provides “In the absence of a provision of a law that
is applicable, the Judge will decide according to custom and in the absence of
custom in accordance with the principles of Moslem Law. In the absence of such
principles, the Judge will apply the principles of natural justice and the rules of
equity.”
43
Dr. Walaa Arakeeb
are part of the French national law, e.g. among others the United
Nations Convention on contracts for the International Sale of Goods
(CISC) is part of Egyptian substantive law and should apply whenever
an international sales agreement is made; the domestic sales are
subject to the national provisions, after being signed and ratified by
the competent authority.
3. Principles of Islamic Law:
Moreover there is Islamic law [also referred to as Shari'a law] which
comprises all of the legal framework within which the public and private
aspects of life are regulated for those living in a legal system based on
Islamic principles of jurisprudence,(21) as well as for Muslims living outside
the domain. The concept of Shari'a consists of the Qur'an and Sunnah. For
some, it also includes classical fiqh. Shari'a is often explained as law based
upon the Qur'an, the Sunna, and classical fiqh derived from consensus
(ijma) and analogy(qiyas). Most Arab countries refer to the Qur'an or
Islamic principles in their existing Civil Codes as a primary source of
enlightenment
4. Case Law:
Two collections of cases are essential to follow Egyptian Case Law.
The first is the collection of Cases of the Egyptian Cour de Cassation, the
second is the collection of Cases of the High Administrative Court cases.
Both are official publications and published in Arabic.
(21)
Whether Shari'a law is sufficiently certain in order to be applied as the proper law of a
contract has been discussed in detail in Musawi v. Re International (UK) and others.[ [2007|
EWHC 2981 (Ch); see also Beximco Pharmaceuticals Ltd & Ors v. Shamil Bank of Bahrain EC [2004]
EWCA Civ 19 (28 January 2004)]. In Sluimil Bank of Bahrain EC v Beximico
Pharmaceuticals Ltd the English Court of Appeal held that a choice of the principles of
Shari'a law was not a choice of law of a country for the purposes of the Rome
Convention["Beximco Pharmaceuticals Ltd & Ors v. Shamil Bank of Bahrain EC [2004]
EWCA Civ 19 (28 January 2004); However see also Halpern & Ors v. Halpern & Anor
[2007] EWCA Civ 291 (03 April 2(K)7) concerning the incorporation of Jewish
law].However and despite this judgment Islamic Law is not an unsophisticated, obscure and
defective system. Instead it is a basic element of the Islamic society.
44
5. Legal Writing:
The basic and main study on the contract for works is Vol. 7/1 of Al
Wassit fi shark' al-Kanoun al-Madani^ (a treaty on Civil Law in ten
volumes, published between 1952 and 1970 by Dar Al-Nahda Al-Arabia,
Cairo, Egypt) written by the drafter of the Egyptian Civil Law and the most
eminent jurist in the Arab World, Abdel Razzaq Al-Sanhouri (1895-1971).
Al-Sanhouri was the most eminent disciple at Lyon University of Edouard
Lambert, the most prominent comparative Law scholar in France in the
1920s and 30s. According to Al-Sanhouri it is Edouard Lambert who
drafted the first version of the section on The Contract for Works and the
Concession of public service contract, of the Egyptian Civil Code (see Al-
Sanhoun, Al-Wassit, Vol. I). (22) For Government Contracts the basic study
is done by Professor Suleiman EL-Tawawy, Al-Okoud al-Idariyah,
Administrative Contracts (last edition), by Dar Al-Fikr Al-Arabi, Cairo,
1991.
C. CLASSIFICATION OF CONSTRUCTION CONTRACT (PRIVATE V. PUBLIC
CONTRACT)
Two basic varieties of construction contracts are recognized by
Egyptian Law. The first is that or privately financed contracts (private- law
contract) regulated two sets of rules under the Egyptian Civil Code (ECC):
(a) the general provisions of the ECC that govern all types of contracts
(articles 89-161); and (b) particular ECC provisions regarding
"construction and building contracts" (articles 646-676).(23) The second is
(22)
AJ-Sanhoun was appointed professor of Civil Law in 1927, and became dean of
the Cairo Law School (1936), Minister of Education (1945-49), Head of the
Conseil d'Eiat (1949-54). In 1954 the Nasserist regime organized a mob attack
against the Conseil d'Eiat during which A]-Sanhouri was assaulted and injured.
Forced to retire for political reasons he concentrated his efforts on completing his
Al-Wasit and helping newly independent Arab countries such as Kuwait and
Bahrain in drafting their constitutions and various codes after having helped Iraq,
Syria and Libya in drafting their codes, in particular their civil codes following his
chef d'oeuvre on the Egyptian Civil Code.
(23)
The differences between American law and Egyptian law are not limited to rules
applied specifically to the contracts for works; they also extend to such differences
as general rules of interpretation and principles of contract drafting. The following
examples may illustrate these differences. Unlike under common law, when the
45
Dr. Walaa Arakeeb
that of publicly financed contracts, known commonly as government

contract (public- works contract) and more specifically in Egypt as
Administrative Contracts, subject mainly to the Tenders Act and other
related Regulations. It is to be noted, however, that case law is to the effect
that if the contract contains clauses contrary to the Tenders Act, the
contract provisions will prevail.
When a construction contract is deemed to be a private- law contract,
all disputes related to this contract go directly to Ordinarily Courts or may
be subject to the Arbitration Law. Conversely, the disputes concerning
public- works contract (Administrative) have been since 1955, of the
exclusive jurisdiction of the High Administrative Court unless (since 1997)
the Arbitration Act applies. The criterion for being an public- works
contract (Administrative contract) is that the contract is concluded by the
Government or one of its entities holding a public authority, having the
imperium, in the pursuit of a public service, and as such the contract gives
the government, through the use of some "exorbitant clauses", special
powers not common in the private sector. The most important of such
special powers is the power of the Government to modify the contract
unilaterally, in the interest of the public service concerned, and the
obligation of the "contractor not to stop the works in order to insure the
continuity of providing the public service or utility, on condition of being
fully compensated for any loss suffered. With the exception of these
special powers, Administrative Contracts are subject to the same rules as
civil contracts, i.e. the provisions of the Egyptian Civil Code (ECC)
concerning contracts for works.(24)
judge or the arbitrator has to interpret a private contract under Egyptian law,
reference is always made to Civil Code principles, rather than looking too closely to
a precedent. Further, the Egyptian judge is entitled to look at the negotiation phase
when construing a works contract, whereas the power of the English judge is more
limited.(23) Finally, when a discrepancy is in dispute, the contract must be interpreted
in favor of the debtor under article 151.1 of the ECC, regardless of whether the
debtor was the maker or the grantor.
(24)
See Borham Atallah, FIDIC “An Anylysies of Inernational Construction Contracts”,
KLUWER LAW INTERNATIONAL and International Bar Association, P.21-35.
46
D. MODE OF FIXING THE PRICE

The price should be fixed according to the nature and importance of
the work, and does not vary with the duration of its execution. But while
respecting this characteristic element of the contract, two different methods
may be used:
(1) Lump Sum Contracts. The price can be fixed outright, that is to say
en block, and estimated at a single figure, which is not to be exceeded
whatever happens. The contract then contains a veritable clause of
insurance, by which the master for whom the work is done is guaranteed
against the chances of insufficient evaluation in the cost of work. Art. 658
(1) of the ECC provides that “When a contract is concluded on a lump sum
basis according to a plan agreed with the master, the contractor has no
claim to an increase of price, even if modifications and additions are made
to the plan, unless such modifications or additions are due to the fault of
the master, or have been authorized by the master and the price thereof
agreed with the contractor.”
Many owners prefer to build by this method: the architect or the
contractor engages to deliver the house for the agreed price, “keys in
hand,” that is completely finished. The danger is that the contractor nay
speculate on the ignorance of the client and on his inability to verify the
work, and employ materials of inferior quality, economizing on the
construction of the work, to the determined of its solidity or duration.
(2) Contracts on Estimate. The price can be established by an
estimate, which is to say on simple guesses, which leaves it susceptible of
varying, and especially of augmenting, by the addition of new details, or
supplementary work. One can say, in this case also, there is contract for
fixed price, but article by article, and not en block: it is each detail of work
which has its [particular price. The total price depends on the quantity of
work really effectuated, and cannot be known until after its execution: it is
fixed afterwards and not in advance as in the lump sum contract. Art 657
(1) of the ECC provides that “When a contract is concluded in accordance
with an estimate drawn up on a unit price basis and it becomes apparent,
during the course of the work, that it will be necessary, in order to
complete the works according to the agreed plan, considerably to exceed
47
Dr. Walaa Arakeeb
the estimated price, the contractor is bound to notify the master thereof
forthwith and to inform him of the anticipated increase in price; if he fails
to do so he forfeits his right to recover the expenses incurred in excess of
the estimate.”
The contract based on “serie des prix” is only a variant of the last
method, in which the schedule applicable to each article instead of being
freely debated by the parties, or according to the usage of the place, is
fixed officially by a tariff called “schedule of prices”, and considered as
obligatory, in the absence of an agreement to the contrary, in the building
industry on the tariffs of the honoraria of architects.
E. ARE THERE ANY FORMAL REQUIREMENTS FOR CONSTRUCTION
CONTRACTS TO BE VALID?
Construction contract is a consensual contract. A principle is driven
and founded upon the autonomy of the will rule which the parties can
freely enter into any binding relationship, as they wish. Consensual
contracts were those of which construction contract would be an example,
which might be perfected by consent, and to which no particular form was
essential, but they are only binding upon consent.(25) Therefore, no
formality prescribed by the law for the construction contract to be
concluded.
In construction contract, writing is only required only as a matter of
proof. If a construction contract is deemed as a civil transaction and the
value of the contract exceeds L.E 1000, a plaintiff must furnish the
(25)
Although most non-lawyers think of contracts as written documents, generally, unless it is
provided by a statute, a formal expression of a contract (written contract) is not necessary for
lawfully creating a contractual obligation and it is merely necessary in order to prove the
existence of a contract. However, some contracts may be executed only in written form and
may need an authentic instrument (e.g. conveyance of real estate, mortgage on real property).
Where a written document is required for the validity of a legal transaction, it may be established
and stored in electronic form; exception to that is made in regard to instruments relating to
family law, to the law of succession and to instruments relating to securities or real charge. Some
contracts may require under French law the handing over of the contract's material object (e.g.
pawn, deposit, loan, called controls reels); if there is promise without handing over, the creditor is
entitled to damages.
48
competent court with a written instrument, provided that there is no

agreement or text that states otherwise.(26) on the other hand, If a
construction contract is deemed as a commercial, the principle of freedom
of evidence prevails. (27)
1. Validity of Construction Contract
The following elements are essential for the validity of an agreement.
1. The consent of the party who binds himself, there is no valid
consent, where the consent was given only be error (erreur), or where it
was extorted by duress (violence) or abused by deception (dol), or rendered
due to exploitation. An agreement entered into by error, duress, deception,
or exploitation is not void by the law, it only gives rise to an action for
annulment or rescission. Thus, if construction contract is vitiated by error,
duress, deception, or exploitation is null, but the nullity is ‘relative.’ It
may be invoked only by the party for whose protection the law has
established this nullity (the victim of deception ‘deceived,’ for example.
2. The capacity to enter a contract: construction contract is deemed to
be a juridical act which belongs to dispositions revolving between
beneficial and detrimental consequences for contracting parties (master and
contractor). Both contracting parties must be furnished with sufficient
capacity (discretionary minor or full capacitated person) in order to
conclude a construction agreement otherwise a contract is deemed voidable
which it gives rise an for annulment or rescission.
3. A definite object which forms the subject-matter of the undertaking:
the object of the construction contract represents the performance due by
each party; it has to be lawful which means it should not derogate from the
mandatory statutory provisions (lois d'ordre public). Under construction
contract, a master is obliged to deliver payment upon delivery of work.
Art. 656 of the ECC provides “ In the absence of a custom or an
agreement to the contrary the price is payable upon delivery of the works.”
While an assigned job by construction contract is the due performance that
must be rendered by the obligated contractor or his sub-contractors.
(26)
Egyptian Evidence Law article 60.
(27)
Egyptian Trade Law No. 17 of 1999, article 69(1).
49
Dr. Walaa Arakeeb
4. A lawful cause in the obligation: the cause represents the reason a

person is engaged for, the mere reason of her consent. The Egyptian doctrine
distinguishes between the "objective cause" (also "cause of the obligation",
which is the same for each category of contracting party) and the "subjective
cause" (also "cause of the contract", which is specific to a party of a given
contract). In synallagmatic contracts, the Egyptian "cause de I'obligation"
corresponds in part to the American concept of "consideration", as both reveal
the expectation of the counter-performance by the other party. One cannot
compare both concepts, as for example a gift is made without consideration,
but it has a cause though (the intention of gratifying a person, I'intention
liberate). Under Egyptian law, an obligation without cause (in
synallagmatic contracts, with a ridiculous counter-performance) or having
a false cause (e.g. taking an insurance for goods already lost) are null and
void (nullite' absolue). Another good example of lack of cause is the lack
of risk in the so-called aleatory contracts (in Civil Law, an aleatory contract
is a mutual agreement, of which the effects, with respect both to the
advantages and losses, whether to all the parties, or to some of them,
depend on an uncertain event, e.g. an insurance). The sole instruments
allowed creating an obligation without having a cause are the so-called actes
abstraits, like cheques, bills of exchange, etc.(all effets de commerce). As to
the "cause du central", it has be "lawful", which means not violating the
ordre public et les bonnes moeiirs, as a contract with an unlawful subjective
cause is also null and void (nullite'absolue) (e.g. selling one's elector vote).
2. Validity of Electronic Construction Contract
In April 2004, Egypt passed the Law Regulating Electronic Signatures
(E-Signature Law). The law consists of thirty chapters reviewed by the
Ministry of Justice and discussed in the 2001-2002 Parliamentary session.
The E-Signature Law was a product of a collaborative effort by a
committee hosted in the Ministry of Communications and Information
Technology.
The purpose of the E-Signature Law is to support E-commerce in
Egypt by enabling Egyptians to use the Internet and to enter into contracts
securely by making the Internet a legally viable medium for online sales
50
without the need to sign the document physically. The law reflects
Egyptian business desire not only to carry out traditional, handwritten
signatures in an electronic environment, but also to ensure that shared data
remains fully secure and under full control.(28)
The current Egyptian E-sign Law has deferred in many occasions to
the evidentiary rules as the main vehicles entitling the legislature to
regulate all evidentiary matters. Egyptian E-sign Law article 14 stipulates
that “within the scope of civil, commercial, and administrative
transactions, E-signatures shall have the same determinative effect that
signatures have under the provisions of the Evidence Law in the civil and
commercial articles, if the creation and completion thereof come in
compliance with the terms stipulated in this Law and the technical and
technological rules identified in the Executive Regulations of this law.”(29)
Also, article 15 includes similar references that state, “Within the scope of
civil, commercial, and administrative transactions, E-writing, and
electronically written messages shall have the same determinative effect
that writings, official, and unofficial messages have under the provisions of
the Evidence Law in the civil and commercial articles . . . .”(30)
The law aim to confer legal validity to electronic signatures, writings,
and duplicates, in order to share the same global view toward conducting
electronic business legally and with high levels of security. Article 15
stipulates that “within the scope of civil, commercial, and administrative
transactions, E-signatures shall have the same determinative effect that
signatures have under the provisions of the Evidence Law in the civil and
commercial articles if the creation and completion thereof is in compliance
with the terms stipulated in this Law and the technical and technological
rules identified in the Executive Regulations of this law.”(31) One should
note that the Egyptian E-Signature Law has tried to remove E-commerce
(28)
See Walaa Arakeeb, ELECTRONIC CONTRACT – BETWEEN PRACTICE AND
THEORY: A CRITIQUE OF THE
CURRENT STATE OF EGYPTIAN LAW (WITH RECOMMENDATIONS FOR
REFORM), SJD’ Thesis- SMU-Dedman School of Law (2007-unpublished).
(29)
Egyptian E-Sign Law No. 15 of 2004, § 14.
(30)
Id. § 15.
(31)
See The Executive Regulations supra note 1; see also Egyptian E-Signature Law §§
14-18.
51
Dr. Walaa Arakeeb
barriers by recognizing the validity of E-signatures and E-writings.

Therefore, nothing in the Egyptian traditional rules would not hinder
construction contract to be concluded or signed by new electronic means
either in private or public realms.
II. EFFECTS OF CONSTRUCTION CONTRACT
According to Art. 147 of the ECC, (32) agreements lawfully entered into
take the place of the law for those who have made them. They may be revoked
only by mutual consent, or for reasons provided by law. As a rule, one may
bind oneself and stipulate in his own name, only for oneself (Art. 145 ECC),
so that agreements produce effect only between the contracting parties; they
cannot harm a third party. An exception to this rule is the representation, e.g.
the mandatary (mandataire) is acting in the name of a third party, the mandant
(Art. 104 ECC).
Under Egyptian law,(33) in contrast with the anglo-saxon concept of the
privity of contract, contracts may create enforceable obligations even for
third parties. For example, under Egyptian Consturction contract
regylations, even if there is no direct relationship between the employer
(master) and the subcontractor (one who has contracted with the original
contractor for the performance of a part of the work), the subcontractor is
entitled to ask payment from the employer in the case the original contractor
refuses to pay (so-called "action directe du sous-traitant", art. 662 of the ECC
(32)
See § 147 –ECC “ (1)The contract makes the law of the parties. It can be revoked or
altered only by mutual consent of the parties or for reasons provided for by law.
(2) When, however, as a result of exceptional and unpredictable events of a general
character, the performance of the contractual obligation, without becoming
impossible, becomes excessively onerous in such way as to threaten the debtor with
exorbitant loss, the judge may according to the circumstances, and after taking into
consideration the interests of both parties, reduce to reasonable limits, the obligation
that has become excessive. Any agreement to the contrary is void.”
(33)
Under French law, An example of action directe is laid down in Art. 1166 Code
Civil: creditors may exercise their debtor's rights and actions, except those which are
exclusively dependent on the person (action oblique); furthermore, they are entitled by Art.
1167 Code Civil to attack on their own behalf transactions made by their debtor in fraud
of their rights (action paulienne). The French law provides another few examples of
action directe: that of the victim against the insurance provider, that of the landlord against
the sub-tenant.
52
concerning the sub-contracting, provides “Sub-contractors and workmen

working for a contractor in the execution of a contract have a direct right of
action against the master but only to the extent of such sums as are due by
the master to the main contractor on the date that action is commenced.
Workmen of sub-contractors likewise have the same right of action against
the main contractor and the master….”
As a contract is a legally binding agreement the parties to it are bound to
perform it. Thus contractual liability is in principle absolute. As such according
to Art. 157 ECC the debtor is condemned, where appropriate, to the payment of
damages, either on account of the non performance of the obligation or on
account of delay in its performance, whenever he does not show that the non
performance is due to an external cause which cannot be imputed to him, even
if there is no bad faith on his part. No doctrine of change of circumstances or
economic impossibility or disappearance of the foundation of the contract
has been adopted by Egyptian law. It is laid down by Art. 1658 (3) that
“The contractor has no claim to an increase of price on the grounds of an
increase in the price of raw materials, labor or any other item of
expenditure, even if such increase is so great as to render the performance
of the contract onerous.” As a rule any unforeseeable circumstances do not
have the nature to result in a modification of a lump sum price.
However, the term of sujetions imprevus has been adopted by the
construction contract for private and public works contracts as well, which
comprises insurmountable obstacles, which had very gravely disturbed the
economy of the contract.. It is laid down by Art. 1658 (4) that “When,
however, as a result of exceptional events of a general character which
could not be foreseen at the time the contract was concluded, the economic
equilibrium between the respective obligations of the master and of the
contractor breaks down, and the basis on which the financial estimates for
the contract were computed has consequently disappeared, the judge may
grant an increase of the price or order the resolution of the contract.”
53
Dr. Walaa Arakeeb
A. PRIMARY ACTORS IN CONSTRUCTION CONTRACT

1. Contractor
a. Who is the Contractor?
This illustrates the importance of having this quality which triggers
the soundness application of this nominated contract. Thus, the issues, are
often on the question as to whether a person is or is not a contractor or
entrepreneur. Usage reserves the title of entrepreneurs for those who
customarily deal with public, on an estimate basis or on a contract basis,
especially in the building industry, for the construction of a work to be
accomplished by personal subject to his orders. They are employers, and
not workmen. TH Code conformed to this custom in the use it makes of the
word “entrepreneur or contractor”. See Articles 646-650 which speak of
contractors not only in connection with construction industry. Also, article
649(2) allusion to the role of custom and usage by stating that “In the
absence of an agreement or trade custom to the contrary, the contractor
shall provide, at his own expense, the tools and accessory appliances
necessary for the performance of the work.”
The quality of contractor is a personal quality; it is a commercial
profession, which depends more on the kind of work in which he is
habitually engaed rather than on the special nature of an isolated contract
entered into by chance. Thus it has be held that an entrepreneur by
profession does not lose his quality because of being charged with small
jobs for the account of a client without estimate nor price made in advance.
Art. 658 of the ECC, provides “ (1) When a contract is concluded on a
lump sum basis according to a plan agreed with the master, the contractor
has no claim to an increase of price, even if modifications and additions are
made to the plan, unless such modifications or additions are due to the fault
of the master, or have been authorized by the master and the price thereof
agreed with the contractor. (2) Such agreement should be made in writing
unless the principal contract was concluded verbally.”
54
b. Registration Requirements
One should here take into consideration Art. 61 of The Tenders
Regulations (1998) which requires that the tenderer should be resident in
Egypt or has or shall have an agent in Egypt.
Also relevant here is Law No. 104 of 1994, establishing the Egyptian
Federation of Construction and Building Contractors (EFCBC),(34)
requiring in Art. 7 that works forming part of contracting activities shall be
entrusted for execution to parties who are active members of the
Federation, if the value of the operation exceeds fifty thousand 'Egyptian
pounds. Exempted from this rule are contracts funded through loans or
grants approved by the People's Assembly. Article 9 of the Regulations of
this Act requires that foreign nationals and corporations exercising in Egypt
an activity of contracting construction and building works shall submit an
application to be a correspondent member of the Federation, provided that
such persons or entities fulfill all conditions required for exercising such
activities in the country to which such persons belong. The period of
membership shall be limited to the period required for exercising the
construction activity in Egypt. No sub-contracting could be done but to
members of the Federation, of the proper category.
c. Workmen Acting as Contractor
Certain workmen on buildings, masons, carpenters, locksmiths,
occasionally make a contract for lump sum for the execution of a large part
of the work; should this make them subject to the soundness application of
work contract rules? Though, the first hand interpretation of current rules
declares them subject to the rules of this section “ceontracts for work”.
Another favorable opinion claim that the quality which it attribute to them
is inadvisable. If we are treat such persons as entrepreneurs because the
nature of the contracts which they make, it would be unjust not to let them
participate in the advantages which this quality would give them,
particularly when they are subject to the obligation imposed.
(34)
See http://www.tasheed.org/english/eng_home.aspx (last visited, 30th of
January,2010)
55
Dr. Walaa Arakeeb
d. Sub-Contractor
The contract of work by the job (construction) can be made by a sub-
contractor. Often the original contractor contracts for a number of works
which exceed by their Varity or by their quantity those he can execute by
himself, and he assigns a part of them to other contractors how undertake
for him to execute certain parts of the work (carpentry, plumbing, painting,
etc.) or certain detached parts of the whole. The latter, not having dealt
directly with the person for whose account the work is done, are-
subcontractors.
Therefore, for the purpose of the rules of the ECC, subcontracting
shall be understood to mean the process by which a contractor entrusts, by
means of a subcontract, and under their responsibility, all or part of the
execution of a works contract or public contract concluded with the client to
another person known as the subcontractor. Also for the purposes of the
aforementioned law subcontractors shall be considered as the main contractor
with regard to their own subcontractors.
Art. 661 of the ECC provides that “(1)A contractor may entrust the
execution of the whole or part of the work to a sub-contractor, unless he is
precluded from so doing by a clause in the contract, or unless the nature of
the work presupposes reliance on his personal skill.(2) In such a case the
contractor remains responsible to the master for his sub-contractor.”
Egyptian law protects subcontractors by the contract of work rules.
According to Art.661 of the ECC subcontractors who have been accepted work
shall be paid directly by the latter for the part of the contract executed by the
former. Pursuant to Art. 662 (1) of the ECC, the subcontractor shall be able
to take direct action against the client, should the main contractor fail to pay
the monies due by virtue of the subcontract. A sub-contractor may demand his
payment against the client (master) directly. Also, In the case of an
attachment served by one of them upon the master or the main contractor,
workmen have a right of privilege on the sums due to the main contractor
or to the sub-contractor at the time of the attachment, in proportion to the
amount due to each of them. These sums may be paid to them directly (art.
662(2) ECC).
56
2. Engineer
The Egyptian Civil Code distinguishes the two functions of the
architect: the design and the supervision. We will see one aspect of this
when we discuss the defects liability. However, Article 660 ECC is worth
quoting:
"An architect is entitled to a separate fee for the preparation of the
plans and specifications and another for the supervision of the work. If
these fees are not specified in the contract they shall be fixed according to
prevailing custom.
If, however, the work is not completed in conformity with the plans
prepared by the architect, the fee shall be assessed on the basis of the time
taken in their preparation, taking into consideration the nature of the work.
"The philosophy behind this provision coincides with Article 659
ECC which states that "when the price in a contract for works has not been
fixed in advance, it must be calculated according to the value of the work
and the expenses of the contractor. " Both provisions are applications to
the rule enunciated in Article 95 ECC. According to this rule, "when the
parties have agreed on all the essential points of a contract and have left
certain details to be agreed upon at a later date without stipulating that
failing agreement on these details, the contract shall not be concluded, the
contract is deemed to have been concluded, and the points of detail will, in
the event of dispute, be decided by the Court according to the nature of the
transaction, to provisions of the law and to custom and equity."(35)
Engineer may not be characterized under Egyptian law as an agent.(36)
Instead the relationship between the engineer and the employer is generally
based on a contract for work governed by ECC articles 646 to 667.(37) It is
essential in the view of Egyptian law to distinguish between two categories
of the engineer's functions: nonjuridical acts (such as drawings,
(35)
It can be seen that the application of these provisions could extend beyond design to
much of the work done by contractors under FIDIC.
(36)
El Kholy, supra note 45, at 3.
(37)
Decision of May 16, 1967, Case No. 150 (18 Judicial Year) at 1005 [Egyptian
Supreme Court], in 7 A. EL SANHURI, EL WASEET 30 (1989).
57
Dr. Walaa Arakeeb
specifications, and examination of the site) and juridical acts (such as

issuance of the custody certificate). With regard to all nonjuridical acts,
there is no agency at all in the view of Egyptian law.(38) The mandate under
Egyptian law is limited to juridical acts .
3. Purchasers/Owners
The typical construction buyer is someone who has never built capital
construction before. Although prudent business persons should generally
seek competent professional legal and design services, through ignorance
or inexperience many one-time or first-time buyers forego these
protections. This always entails considerable risks given the legal and
technical complexities of the process. This is particularly true in light of
today's more complex financing arrangements, diverse delivery systems
and corresponding contractual formats, and the growing plethora of
pertinent laws and regulations.
Major consumers of construction services, on the other hand, are
likely to have not only consulted technical and legal experts, but in recent
years have been more and more likely to develop such resources internally.
Large developers, major manufacturers, and commercial chains often have
a staff that is experienced in competitive procurement, as well as internal
form documents for design and contracting; in addition, they are making
increasing demands of project delivery systems and devoting time to the
vetting of prospective project managers, superintendents and other
contractor personnel.
B. CONSTRUCTION CONTRACT RENDERS DUTY TO ACHIEVE A SPECIFIC
RESULT
According to Art. 646 oo the ECC the contractor promises to the
employer to build the works as denned by the contract against payment of the
agreed fee which becomes due after completion of the works and its acceptance
(38)
El. Kholy, supra note 45, at 4..” [T]he legal relationship with the employer as to
these nonjuridical acts is a relationship based on a contract for work governed by
Arts. 646 to 667 of the Egyptian Civil Code. For this category of nonjuridical acts,
the engineer is an independent contractor who has to perform his obligations in
consideration of the agreed remuneration, but with no agency relationship
whatsoever.
58
by Ihe employer. Thus the Civil Code imposes on the contractor a duty to pre-
perform..
The central characteristic of a contract for works is the obligation to
achieve a specific result (Art. 656 of the ECC). (39) The contractor remains free
to decide how to achieve the result. Thus in principle the individual
responsibility of the contractor and the fact that the contractor is not generally
bound to directives of the employer are constitutive elements of a contract for
works. The responsibility of the contractor includes scrutinizing the
employer's requirements and any materials provided by the employer. In
addition the works must be fit for use together with the existing facilities.
When completed the works must be fit for running. In a summary and in
accordance with Art. 655 ECC the contractor must meet the agreed conditions
or. if not agreed, the mutually assumed purpose. Any of the works is defective
if it is not in accordance with the contract or if there is a functional
discrepancy or a technical deficiency or if it proves that the contractor did not
comply with recognised technical rules. The work is defective irrespective of
its cause. If the work is defective there is breach of contract. (Arts. 148, and 157
ECC). However, although art. 650 apply to defects occur prior to acceptance of
the works, the right to request the remedy of any defect prior to acceptance of the
works is slightly restricted and subject to Art. 209 of the ECC.(40) Art. 650 of the
ECC provides “ (1) If, in the course of execution, it is established that the
contractor is performing the work in a manner that is defective or contrary
to the agreement, the master may formally summon him to alter, within a
reasonable period fixed by him, the manner in which he is performing the
work. If after the expiration of such a period the contractor fails to adopt
the proper manner of working, the master may either demand resiliation of
the contract or the handing over of the works to another contractor at the
cost of the first contractor, in accordance with the provisions of Article
209. (2) Immediate resiliation of the contract may, however, be demanded
(39)
See § 656 –ECC that provides “ In the absence of a custom or an agreement to the
contrary the price is payable upon delivery of the works.”
(40)
See § 209 –ECC that provides “ (1)In the case of non-performance by the debtor of
an obligation to do something, the creditor may apply to the court for an order to
carry out the obligation at the cost of the debtor, if this is possible.
(2) In a case of urgency, the creditor may carry out the obligation at the cost of the
debtor without an order from the court.”
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Dr. Walaa Arakeeb
without it being necessary to grant any delay, when rectification of the

defective manner of performance is impossible.”
C. CONSTRUCTION CONTRACT INTERPRETATION
Contracts shall be construed according to the common intention of the
parties, which is given priority rather than the literal meaning of the terms.
Art. 150(1) of the ECC provides “When the wording of a contract is clear,
it cannot be deviated from in order to ascertain by means of interpretation
the intention of the parties. According to Art. 150(2) of the ECC that states
“When a contract has to be construed, it is necessary to ascertain the
common intention of the parties and to go beyond the literal meaning of
the words, taking into account the nature of the transaction as well as that
loyalty and confidence which should exist between the parties in
accordance with commercial usage.” In general the common literal meaning
is authoritative. Once having determined the literal meaning the interpreter
shall then take into consideration the collateral circumstances. Hence he
shall bear in mind the genesis of the contractual relationship and the
existing interests of the parties. In the event of doubt each interpretation shall
come to a reasonable result. Thus German Courts are willing to look at past
correspondence and conduct in order to ascertain the true intention of the
parties and to come to a most reasonable result of interpretation with regard
to the circumstances. In summary the objective meaning shall be determined
from the perspective of the addressee of the declaration by taking into account
the particular circumstances of the position of the person making the
declaration as far as they were or should have been known to the
addressee.. Also, Interpretation should adopt the meaning which best suits the
subject matter of the contract taking into account the nature of the
transaction as well as that loyalty and confidence which shall prevail
among contracting parties in accordance with commercial usage.
Furthermore, It should be noticed that in case of doubt, an agreement
shall be interpreted against the one who has stipulated (creditor), and in
favour of the one who has contracted the obligation (debtor) (Art. 151 ECC).
It is also provided that interpretation has to be in accordance with good faith
and fair dealing. (Art. 1148 ECC)
60
Similar to French court, Egyptian courts usually first of all qualify or

characterize the nature of the agreement. If the agreement meets the elements
of one of the nominated contracts its content will be largely determined by the
relevant default rules (lois suppletives). And even if it has the nature of an
innominate contract (a contract sui generis) its incidents will be derived from
the nominate contracts to which it is most analogous. Once the legal character
of an agreement has been determined the courts will make a distinction
between an "obligation de moyens" and an "obligation de resultat". The
rationale for this is that in principle liability for non performance is tradition-
ally based on fault. The distinction between "obligation de moyens" and
an.
D. PERFORMANCE
According to Art. 148 of the ECC the obligations resulting from contracts
"must be performed in good faith". The concept of "good faith" is explained neither
by the Egyptian case-law nor by statutes, but obviously means "with the loyalty
inherent to the contractual dealings", without fraud, deception or malevolence.28
Violating the duty of good faith and fair dealing gives rise to a tort action which is
different from the contractual remedies. Likewise, a contract binds the
contracting party not only as regards its expressed conditions, but also as
regards everything which, according to law, usage and equity, is deemed,
in view of the nature of the obligation, to be a necessary sequel to the
contract. The contractor shall with due care and diligence, (to the extent
provided for by the contract), execute, and complete the works and remedy
and any defects therein in accordance with the provisions of the contract.
The contractor shall provide all superintendent, labour, materials, plant,
contractor's equipment and all other things, whether of a temporary or
permanent nature, required in and as the necessity for providing the same
is specified in or is reasonably to be inferred from the contract(art. 649 (2)
ECC). The contractor's duties are to execute, and complete the works in the
agreed time or any extended time. These duties are extended from the date
of commencement of works to the date of completion.
The contractor is obliged to provide labor, materials (if agreed upon),
and plant equipment. In addition, the contractor has to warn the employer,
of any error or other defects that are discovered in the design or
specification of works during the execution of the works. The contractor
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Dr. Walaa Arakeeb
must carry out his duties with due care and diligence, and must complete
works to fit their purposes.
To sum up, a one can claim that the Egyptian law imposes three
implied obligations on the contractor: (1) the contractor is obliged to
complete works with care and skill; (2) the contractor warrants that the
material he uses and works he erects are reasonably fit for the purpose for
which they are required; and (3) the contractor warrants that the materials
he supplies are of good quality.
1. Performance of Security
Relevant to public-work contracts (administrative contract), Art. Of 18
of the Tenders Act and Art. 7 of the Tender Regulation regulate
performance securities. These provisions collectively impose upon bidder
whose tender has been accepted should pay a deposit equivalent to 5%/of
the value of the contract or present a letter of guarantee or a bond issued
by an approved local bank without being subject to any restriction or
condition. The bank will declare its readiness to pay to the contracting
Administration the amount of the letter "of guarantee or bond, upon the
first demand, without taking into consideration any objection that might be
raised by the contractor.(41)
2. What Does Non-performance mean?
Under Egyptian law, the non-performance may occur in different ways: it
may be total (e.g. the contractor who did not build anything), partial (e.g. the
contractor who executed only the masonry works); moreover, a defective
performance (e.g. delayed or malfunctioning works) is equal to a non-
performance. As a matter of fact, the creditor is entitled, alternatively, to seek
proper enforcement (if possible), to perform the debtor's obligation by himself but
at the debtor's costs, or terminate the contract (resolution du contrat). If economic
loss occurs as a result of the non-performance, the creditor may be awarded
damages (dommages-inte'rets).(42)
(41)
It can be seen that these terms contradict some of the provisions of Silver Book
Article 4.2.
(42)
See art. 157 ECC “ (1) In bilateral contracts (contrats synallagmatiques) if one of
the parties does not perform his obligation, the other party may, after serving a
formal summons on the debtor, demand the performance of the contract or its
62
a. Breach of Construction Contract under the ECC Rules

Dissimilar to US and UK laws, Egyptian law prefers specific
performance as a cure for breach of contract. Thus the employer may demand
performance in specie. The contractor then may show evidence for the
defense that performance is impossible without prejudice to innocent party's
other remedies. Breach of contract comprises any breach of a duty including
delay, impossibility and non conformity. The range of remedies is broad,
including the entitlement to terminate or to rescind the contract, the right to
demand conforming performance, the recovery of cost of reinstatement, the
right to reduce the price and the entitlement to damages. Until reception of the
works the employer is entitled to specific performance. As he did not yet
accept the works the contractor must then show evidence that the work is in
accordance with the contract. Thus, If, in the course of execution, it is
established that the contractor is performing the work in a manner that is
defective or contrary to the agreement, the master may formally summon
him to alter, within a reasonable period fixed by him, the manner in which
he is performing the work. If after the expiration of such a period the
contractor fails to adopt the proper manner of working, the master may
either demand resolution of the contract or the handing over of the works
to another contractor at the cost of the first contractor ( art. 650 ECC).
After reception of the works the burden of proof shifts to the employer
who will then be in charge to show evidence that any purported defect exists.
By virtue of a construction contract the contractor promises to build the works
free from physical and legal defects (Section 633 para. 1 Civil Code). Work
is
b. What Are the Available Remedies in Case of Non-performance?
The exceptio non adimpleti contractus or exception d'inexe'cution, under
which a party who has not received the contractual performance to which it is
rescission, with damages, if due, in either case.

(2) The judge may grant additional time to the debtor, if it is necessary as a result of
the circumstances. The judge may also reject an application for rescission when the
part of the contract which the debtor has failed to perform is of little importance in
comparison with the obligation in its entirety; see also art. 163 ECC provides
“Every fault, which causes injury to another, imposes an obligation to make
reparation upon the person by whom it is committed.”
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Dr. Walaa Arakeeb
entitled may withhold its own performance. However, it has to be

proportionate to the non-performance occurred (bonne foi chi cre'ancier). The
contract is not terminated, but just suspended: if the faulty party resumes the
performance, the party withholding its performance should equally resume
the performance.
A remedy for non-performance a contract may be terminated may through
amiable settlement or, if not possible, by judiciary means (Art. 157 ECC),
which is the most frequent way of termination in Egypt. Termination may
occur even if there is no fault of the debtor, without regard to the degree of
the non-performance. The judge has a large discrepancy as to the remedies
he pronounces: he may grant the debtor an extension of time, or refuse to
terminate the contract but to award damages to the creditor, or terminate the
contract partially or totally while awarding or not awarding damages to the
creditor (Art. 157(2) ECC). Otherwise, termination may occur also through a
terminating clause inserted in the contract (clause re'solittoire), or by the virtue
of a law (e.g. in intiiitu personae contracts as mandate or insurance) (Art. 158
ECC). It also must be not that if an obligation arising out of a construction
contract is extinguished by reason of impossibility of performance,
correlative obligations are also extinguished and the contract is rescinded
ipso facto(Art. 159 ECC). When a contract is rescinded, the parties are
reinstated in their former position. If reinstatement is impossible, the court
may award damages(Art. 159 ECC).
c. Damages and Limitation of Liability
i. extent of damages
Damages due to a creditor are, as a rule, for the loss which he has
suffered and the prolit which he has been deprived of (Art. 221 ECC).
Damages may include only what is an immediate and direct consequence of
the non-performance of the agreement. The party entitled to damages may
not be awarded a greater or lesser sum, nevertheless, the judge may even of
his own motion moderate or increase the agreed penalty, where it is
obviously disproportional (Art. 224 ECC).
In all matters, the award of compensation involves interest at the
statutory rate even failing a cliam or a specific provision in the judgment.
Damages are due only where a debtor is given notice to fulfill his obligation
(Art. 218 ECC). As in the case of the penalty clauses (see below), notice of
64
default may follow from a letter missive where a sufficient requisition results
from it.
ii. case of exemption
If the debtor does not prove that the non-performance/the delay in
performing is due to an external cause, he shall be ordered to pay damages even
in absence of bad faith". The corollary of this rule is that damages should not
be due if the debtor was prevented from performing by reason of force majeure
or of a fortuitous event (Art. 1148 Code Civil). According to Art. 165 of the
ECC, " In the absence of a provision of the law or an agreement to the
contrary, a person is not liable to make reparation, if he proves that the
injury resulted from a cause beyond his control, such as unforeseen
circumstances, force majeure, the fault of the victim or of a third party.”
Nevertheless, the concept of force-majeure does not include the
unforeseeable physical conditions, e.g. those related to the ground (risque
du sol). The most important consequence of this rule is that in the case of lump
sum contracts (marche' dforfait), the contract price is quasi-untouchable, as
additional works caused by unforeseeable conditions have to be carried by
the contractor as long they are necessary and do not affect the object and
general economy of the contract.29
According to the sound understanding of rules of construction contract
rules, the responsibility for unforeseeable physical conditions related to the
ground shall be taken by the contractor, who has a general duty of inspecting the
site while working in the so-called secteur prote'ge'. Therefore, under
Egyptian law the employer (master) doesn't have to bear additional costs
related to unforeseeable physical conditions of the soil1".
iii. penalty clause (liquidated damages )
"A penalty is a clause by which a person, in order to ensure performance
of an agreement, binds himself to something in case of non-performance." A
penalty clause is a compensation for the damages which the creditor suffers
from the non-performance of the principal obligation. The penally clauses
with purely punitive aims are usual on the continent, but are prohibited
65
Dr. Walaa Arakeeb
under Common Law and as a result are not enforceable by the courts.(43)
Article 223 of the ECC gives the parties to a contract the right to "fix in
advance the amount of damages either in the contract or in a subsequent
agreement. Article 224 states clearly that "damages fixed by agreement are
not due, if the debtor establishes that the creditor has not suffered any loss.
The Judge may reduce the amount of these damages, if the debtor
establishes that the amount fixed was grossly exaggerated or that the
principal obligation has been partially performed. Any agreement contrary
to the provisions of the two preceding paragraphs is void."
Working the other way, Article 225 ECC provides that "when the loss
exceeds the amount fixed by the contract, the creditor cannot claim an
increased sum, unless he is able to prove that the debtor has been guilty of
fraud or gross negligence".
In the public-work contract realm (administrative contract) , the
Tenders Act has what are known as delay fines, (gharamat el taakheer),
which would not be subject to any reduction and would be applicable
without the need to prove any loss. One typical delay fine clause under the
repealed Tenders Act (no. 9/83) would go like this, paraphrasing the
provision of the Act itself: Without prejudice to any of the rights assigned
to the "owner-employer" under this contract, any delay in the execution of
the works may be assessed a delay fine in the percentages and under the
conditions which follows:
1% The first week or any part thereof The second week or
1.5% any part thereof The third week or any part thereof the fourth
2% week and any part
2.5% thereof For each subsequent month or part
4% thereof
(43)
The difference between the penalty clause and the liquidated damages is that the sum to be
paid when breaking a promise under Common Law has to be reasonably estimated at the
time of contracting, taking into account the actual damage that will probably ensue from
breach. On the contrary, under French Contract Law there isn't any relationship
between the actual damage and the sum to be paid as a penalty. A creditor may not
claim at the same time the principal and the penalty, unless it was stipulated for a mere
delay; instead of claiming the penalty stipulated against the debtor who is under notice of
default, a creditor may proceed with the performance of the principal obligation.
66
The fine, if assessed, will be calculated on the total final price of the
entire contract if the (owner-employer) is of the opinion that the delayed
part directly or indirectly prevents it from benefiting fully from the work
already completed on the specified dates. But, if the (owner-employer)
shall decide that the delayed part of the works shall not prevent making use
of the pans completed, then the final percentage shall apply only to the
value of the delayed parts at the rates and rules specified above.
The fine may be assessed by virtue of the (mere) fact of delay even if
no damage is incurred as a result, with no need for warning or legal
measures to be taken. The fine will be deducted from the amounts due to
the contractor immediately after the contract completion date.
The contractor is responsible in all cases and must bear any increased
fees, taxes, and similar charges during the delay period."
The new Tenders Act (1998) maintained the structure of the delay fine
but with some few important modifications. According to the Regulations,
the rate of the delay fine is 1 % per week or part of the week, and the total
fine shall not exceed 10% of the contract value. In an attempt to pass the
test of constitutionality, the Tenders Act allowed for the exemption from
the delay fine if there is no loss, or the delay was outside the control of the
contractor. Such exemption should be done after consultations with the
competent Section of the Conseil d'Etat. The new Article 23 of the Tenders
Act also allows for arbitration. The last two paragraphs of this Article state
that:
The imposition of the fine shall not prejudice the right of the
Administrative Entity to have recourse against the contractor for full
indemnification for whatever damage done due to the delay. In case of
allegations that the Administrative Entity failed due to its fault to perform
its contractual obligations, the contractor shall be entitled to have recourse
to courts to obtain damages for any loss resulted, unless the two parties
agreed to proceed by Arbitration in accordance with the Arbitration Act
(no. 27/1994) as amended by (Law no. 9/1997).
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Dr. Walaa Arakeeb
iv. specific remedies available against the contractor ‘decennial

liability’
In Egypt and other Arab countries, the contractor is subject to
additional liability called decennial liability.(44) The decennial liability
concerns all defects, whether apparent or hidden. Such liability does not take
place where the builder proves that the damages were caused by an extraneous
event. The application of the decennial-liability provisions is a matter of
public policy; such liability cannot be excluded by the parties and need not
be specified in the contract.(45)
It provides that any builder of a work is liable as of right, towards the
building owner or purchaser, for damages, even resulting from a defect of the
ground, which imperil the strength of the building or which, affecting it in
one of its constituent parts or one of its elements of equipment, render it
unsuitable for its purposes. Are deemed builders of the work any architect,
contractor, technician or other person bound to the building owner by a
contract of hire of work. The basis of the decennial liability can be
summarized as follows:
a- The applying statutory provisions (Arts. 561,(46) 652, (47)653,(48)
and 654(49) ECC) established a coherent system of a Ten year Liability
(44)
Decennial liability is provided by ECC art. 651, which states that ”The architect and
contractor are jointly and severally responsible for a period of ten years for the total
or partial demolition of construction or other permanent works created by them, even
if such destruction is due to the defective construction, unless in this case the
construction were intended by the parties to last for less than ten years. The
warranty imposed by the preceding paragraph extends to defects in constructions and
creation which endanger the solidarity and security of the works. The period of ten
years runs from the date of delivery of the works. This article does not apply to the
rights of action which a contractor may have against his subcontractor.
The same provision is incorporated into other Arab civil codes. See, e.g., art. 870 of the
Iraqi Civil Code; art. 788 of the Jordanian Civil Code; art. 668 of Obligations and
Contracts, Lebanese Code; art. 650 of the Libyan Civil Code; arts. 692 and 695 of
the Kuwaiti Civil Code; and art. 880 of the UAE Civil Code.
(45)
ECC art. 653.
(46)
“(1) The architect and contractor are jointly and severally responsible for a period of
ten years for the total or partial demolition of constructions or other permanent
works erected by them, even if such destruction is due to a defect in the ground
itself, and even if the master authorized the erection of the defective construction,
68
period- hence the name decenial liability - covering contractors and

architects.
b- Decennial liability is imposed on the contractor, architect, and civil
engineer for the benefit of the employer and his private successors (for
example, the purchaser of the factory or the building). This liability is
extended to all works relating to the construction of new fixed
establishments and buildings. Thus, decennial liability does not include
damages resulting from maintenance works and extension of existing
establishments.(50)
c- For ten years the liability covers die destruction of the works
constructed by die constructor and die architect, and it applies to both
privately financed contracts as well as government contracts.
d- The contractor and the engineer guarantee jointly and severally to
the employer responsibility for all damages occurring within a period of
ten years from the date of delivery due to latent defects in the works that
were not apparent at the date of the execution of the taking-over certificate.
Decennial liability covers defects that cause total or partial demolition of
the construction or other permanent works. In addition, decennial liability
covers all defects that either render the works unfit for their purpose or
weaken the strength of the works.
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 extends to defects in
constructions and erections which endanger the solidity and security of the works.
(3) The period of ten years runs from the date of delivery of the works. This Article
does not apply to the rights of action which a contractor may have against his sub-
contractors.”
(47)
“An architect who only undertakes to prepare the plans without being entrusted with
the supervision of their execution, is responsible only for defects resulting from his
plans.”
(48)
“Any clause tending to exclude or restrict the warranty of the architect and the
contractor is void.”
(49)
“Actions on the warranties above referred to are prescribed after three years from the
date of the destruction of the works or the discovery of the defect.”
(50)
A. Yaseen, The Civil Liability of the Engineer and the Contractor: A Comparative
Study 208 (1987) (Ph.D. thesis, Cairo University) (in Arabic)., at 665
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Dr. Walaa Arakeeb
e- It is an absolute liability which means that the joint and several

liability of the contractor and the engineer is a strict liability. Thus, There
will be no need to prove negligence or fault of either the contractor or
architect. Further neither of them can exculpate himself by showing that
he did not commit any fault or negligence. Both the engineer and the
contractor are presumed in default when the demolition or the defect that
endangers the solidarity and security of the work has occurred within ten
years of delivery. The contractor will be responsible for defects occurring
under decennial liability even if such defects arise as a result of unsuitable
soil conditions or when such defects are due to apparent defects in the
design. However, the contractor can set aside his liability in one of the
following events: default of the employer, an event of force majeure, and
third-party interference or interference of another contractor amounting to
force majeure. Finally, the architect or the engineer who only undertakes to
prepare the designs without being entrusted with the supervision of their
execution is responsible only for defects resulting from his designs.
f - Decenial liability is mandatory, and being considered part of
public policy, it cannot be excluded by a clause in die contract.(51)
g- The decenial liability of the contractors and architect starts from
the final reception of the works, not from the temporary reception.
h- The ten years period is considered a period of guarantee; it is not a
period of prescription. Thus it could not be subject to suspension or
interruption by agreement. In addition to this ten year period of guarantee,
there is a period of three years to start the liability action. Such a period is
a prescription period which could be subject to suspension and
interruption. Exceptionally, it could be interrupted by serving a writ even
(51)
The iravaux prepararoires of the Egyptian civil code show that at one stage of the
preparation of the code the first project offered the possibility for the parties to
exclude the decenial liability, in case of force majeure, but this was deleted at the
end, considering that this could be a loophole and a way for contractors to escape
liability and it was decided to leave the matter to general principles of Law and the
applicable rules in the case of force majeure.
It is to be noted also that decenial liability could be excluded only by Act of
Parliament but this has rarely happened. One famous case we know of, was that of
the Cairo sewage contract
70
to a court or tribunal with no jurisdiction. The three year period starts not
from the demolition or deterioration of the works but from the detection of
any defect which might lead to a demolition or deterioration. What is
important is that die defect is discovered during the ten year period.
In cases where a sign of defect is discovered during the ten year
period, then other signs of defects appear, the three year period starts with
the apparition of the new signs of defects, on condition that we are still
within the original ten year period.
k- The Egyptian legislature introduced in 1976 a system of mandatory
decenial liability insurance covering the contractors liability during the
execution period and the ten year period of guarantee. Originally this
insurance covered the contractor's liability towards the employer (i.e. the
owner) as well as third parties. Since a 1983 amendment the mandatory
insurance covers only third parties, victims during the ten year period and
the period of execution of the construction contract.
Now the insurance does not cover the owner in case die construction
works collapse or deterioration as was originally intended in 1976. There
has been a campaign to reinstall die original system. Until a change in
legislation occurs it would not be a bad idea for the contractor to buy a
decenial liability insurance covering die liability of die contractor vis-a-
vis die owner in order to complete die mandatory decenial liability
insurance covering third parties.(52)
E. LIMITATION PERIODS FOR LIABILITY CLAIMS ARISE FROM
CONSTRUCTION CONTRACTS
According to Art. 374 of the ECC , the general limitation period under
Egyptian law lasted 15 years.(53) Claims for tort liability are barred after 3
years from the manifestation of the injury or of its aggravation, and
provided that victim knew of the injury and the identity of the person who
was responsible, worthies general limitation period (15 years) prevails (Art.
(52)
See Borham Atallah, FIDIC “An Anylysies of Inernational Construction Contracts”,
KLUWER LAW INTERNATIONAL and International Bar Association, P.21-35.
(53)
“The term of prescription for obligations is fifteen years with the exception of those
cases for which a special provision is contained in the law and with the exception
also of the following cases.”
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Dr. Walaa Arakeeb
172 of the ECC).(54) Also, claim for the rights of workmen, merchants, and
servants are barred after 1 year form the date of rendering their services
(Art. 378 of the ECC).(55)
Shorter limitation period is provided for claims resulting of
construction contract. Claims for liability directed against contractor and
architect for reason of liabilities and warranties barred after three years from
damaging of the work or discovery of the defect (Art. 654 of the ECC).(56)
(54)
“ (1)An action for damages arising from an unlawful act is prescribed after three
years from the date upon which the victim knew of the injury and the identity of
the person who was responsible. An action for damages is prescribed in any case
after fifteen years from the date on which the unlawful act was committed. (2)
When a claim arises out of a penal offence and the penal action is not prescribed
after the delays set out in the preceding paragraph, the action for damages is only
prescribed when the penal action itself is prescribed.”. It must be also noted that
The French law concerning limitation has recently been reformed. According to Art.
2262 Code Civil (old version), the general limitation period under French law lasted 30
years. Claims for tort liability were barred after 10 years from the manifestation of
the injury or of its aggravation (Art. 2270-1 Code Civil - old version). Since 2008
the general limitation period under French law lasts 5 years (Art. 2224 Code Civil).
The time limit for tort claims is still ten years (Art. 2226 Code Civil).
(55)
The term of prescription is one year for the following rights of action:
a) the rights of action of merchants and manufacturers in respect of things supplied
to persons who do not trade in these articles, as well as the rights of action of hotel
and restaurant proprietors for the cost of accommodation and food and for expenses
incurred by them on behalf of their clients.
b) the rights of action of workmen, servants, wage earners, in respect of their pay,
daily or otherwise, and for the cost of supplies provided by them.
When a person claims this prescription of one year, he must take oath that he has
actually paid the debt. The judge will of his own accord pass the oath. If the debtor is
dead, such oath will be passed to the heirs of the debtor, or, if they are minor, to their
guardians, so that they may declare either that they do not know the existence of the
debt or that they know that the debt has been paid.”
(56)
“Actions on the warranties above referred to are prescribed after three years from the
date of the destruction of the works or the discovery of the defect.”
72
Limitation is suspended by:

- The bringing of an action for performance or for a declaration of the
existence of a claim, for the attachment of an execution certificate or for the
issue of an order for execution(Art. 383 of the ECC).
- The filing of a claim in insolvency proceedings or in proceedings for
the distribution of assets .
- The assertion of a right to set off the claim in the course of a lawsuit.
- The beginning of the arbitration proceedings.
- Any action of a creditor to claim his right in the course of legal
proceedings.
It must be noted that suspension begins anew if one of the parties
pursues the proceedings further. Thus, when limitation is interrupted, by
any of the aforementioned actions, a new limitation period commences to
run from the time that the effect of the act that gave rise to the interruption
has ceased. The term of the new limitation will be of the same duration as
that of the former one (Art. 385of the ECC). As a general rule, Limitation
periods extinguishes the obligation, but leaves a natural obligation upon
the debtor. When a right is extinguished by limitation period, interest and
other accessories to the debt are also extinguished even if the term of the
particular limitation applying to these accessories has not expired (Art. 383
of the ECC)..
III. TERMINATION OF CONSTRUCTION CONTRACT
There are several types of terminations: terminations for cause,
termination by law, and finally termination at will. In all cases of
termination there is a difference between privately financed contracts, and
Administrative Contracts. For this last category of contract, the difference
is great between the right of the Government Authority to terminate at will
and for cause and the absence for the contractor of any such right to
terminate whether at will or for cause.
73
Dr. Walaa Arakeeb
A. TERMINATION FOR CAUSE

There are several cases of possible termination for cause as follows:
a• The first case of termination is that referred to in Art. 657 ECC,
which gives the employer the right to withdraw from the contract if it was
concluded taking into consideration an estimate drawn up on a unit price
basis and it becomes apparent during the course of the work that it will be
necessary in order to complete the work according to the agreed plans, to
exceed the estimate immensely. In such a case the employer is given the
option to terminate the contract, without being obliged to fully compensate
the contractor. According to Article 657, the employer is to pay the con-
tractor only the cost of the work done by him, estimated in accordance with
the terms of the contract, without being liable to compensate the contractor
for the profit he would have realized if he had completed the work."4 (57)
b• The second case of termination is that referred to in Article 157 of
the ECC, where termination could be achieved by court order. As a general
rule, when the contractor does not perform his obligations as described by
the contract, the employer can serve a formal summons on the contractor,
demanding die performance of the contract or its termination, with
damages in either case. However, according to Article 158 of the ECC, the
parties could agree that the contract, in case of non-performance, will be
deemed to have been rescinded "ipso-facto" without a court order. It is to
be noted that the court, in the absence of such a clause could refuse the
demand for termination if a substantial part of the obligation is performed.
It could also allow a grace period to the debtor.
c• Terminations could be done in conjunction with withdrawing the
work from the contractor and completing the work by the employer or by
giving it to another contractor to complete it at the expense of the original
contractor as an application of Articles 209 and 650 of the ECC.
According to article 209 ECC, which states the normal proceeding, in
case of non-performance by the debtor (the contractor) of his obligations
(57)
It is to be noted that it is the duty of the contractor to advise the employer soon
after discovering the anticipated increase in price, otherwise he forfeits his right
to recover the expenses incurred in excess of die estimate." Article 657 of the
ECC.
74
under the contract, the creditor (the employer) can ask the competent court
to issue an order allowing him "to carry out the obligations at the cost of
the debtor (the contractor), if this is possible." Paragraph 2 of article 209,
goes on to say. "In a case of urgency, the creditor (the employer) may
carry out the obligations at the cost of the debtor (the contractor) without
an order from the court." In essence, this possibility is explicitly provided
by article 650 ECC. It provides: "If, in the course of execution, it is
established that the contractor is performing the work in a manner that is
defective or contrary to the agreement, the owner-employer may formally
summon him to alter, within a reasonable period fixed by him, the manner
in which he is performing the work. If after the expiration of such a period
the contractor fails to adopt the proper manner of working, the owner-
employer may either demand resolution of the contract or the handing
over of the work to another contractor at the cost of the first contractor, in
accordance with the provisions of article 209.
Immediate resolution of the contract may, however, be demanded
without it being necessary to grant any delay, when rectification of the
defective manner of performance is impossible."
B. TERMINATION BY LAW
Article 664 of the ECC states that the contract is terminated "if the
performance of the work for which the contract was concluded becomes
impossible." This is the case of frustration of the contract by the
occurrence of a fortuitous event, an act of God, or any cause outside the
power and the will of the parties. The effect of such impossibility to
perform is to be found in the general provisions of articles 159 and 160 of
the ECC: the obligations of the parties are extinguished and the contract is
rescinded by operation of law.
Articles 665 determines the position of the parties in case of
destruction of the works by fortuitous event before the reception of the
works by the employer. According to paragraph I of article 665: "The
contractor has no claim for the price of his work or for reimbursement of
75
Dr. Walaa Arakeeb
his expenses." As to the materials provided for the work, the loss "falls on
the party who supplied them."(58)
C. TERMINATION AT WILL
1. Termination at the Will of Employer
Furthermore another interesting feature of Egyptian construction law is
worthwhile to be empha-sized, which is the right of the employer (master) to
terminate the contract by convenience (Art. 663 ECC). Whilst under English law
the concept of repudiation prevails if either of the parties refuses to perform the
contract, under Egyptian law the employer is not in breach of contract if he
terminates the contract prematurely. However according to Art. 663 ECC, the
contractor then will be entitled to claim for all expenses he has incurred, for
the work that he has done and the profit that he would have made if he had
completed the work as a result of the premature termination of the contract,
which in fact leads to the result that he is entitled to what he failed to earn as a
result of the deliberate termination or omission that is conducted by the
employer. In practice, it is common to find that this amount is pre-estimated and
fixed in the contract. Alternatively, a court sets a discretion compensation. The
court may, however, reduce the compensation due to the contractor for loss
of profit if the circumstances justify such reduction. In particular, the court
shall deduct from such compensation any saving realized by the contractor
as a result of the rescission of the contract by the master and any profit
which the contractor could have made by employing his time otherwise
(Art.663(2) ECC).
2. -Termination and Suspension at the Will of Contractor
Contractors in Government Contracts, having the nature of
Administrative Contracts cannot, according to the established doctrine of
the High Administrative Court, stop the work or raise the defense of the
exceptio non adimpleti contractus. This defense is otherwise regulated by
the Egyptian Civil Code in Article 161, which states that "when, in the case
of a bilateral contract, correlative obligations are due for performance,
(58)
If the destruction of the works has occurred after the contractor has failed to comply
with a formal summons to deliver the works he must indemnify the employer for the
material supplied.
76
either of the contracting parties may abstain from the performance of his
obligations, if the other party does not perform his obligations." Such
defense could be raised in privately financed contracts, but has no
application if we are facing an Administrative Contract stricto sensu. The
recognized doctrine is that the public service is to continue providing its
services to the public and the contractor will be indemnified fully
afterwards.
D. VARIATIONS OF CONSTRUCTION CONTRACT
Variation or change, as used in construction contracts, refers to an
alteration in one or more aspects of the construction of the works from that
required under the contract documents.(59) The general principle in
Egyptian Law is that no modification or variation of the contract can be
done without die agreement of the parties to the contract. This principle is
enshrined in Article 147/1 of the Egyptian Civil Code: "The contract
makes the law of the parties. It can be revoked or altered only by mutual
consent of die parties or for reasons provided by the law." The principle is
also subject to the contract, as that is the law of the parties.
According to the principle of pacta sunt servanda (Latin for
"agreements must be kept"), under Egyptian law, without a variation clause
the employer could only vary the work with consent of the contractor. The
contractor must comply with the engineer's instructions in this respect. In
any event, the power of the engineer to order variation is limited in nature
and time. Thus, the contract should emphasize that these changes are
permitted to the works but not to the other terms of the contract, which
cannot be altered or modified without the prior consent of the contractor.
Also, such variation should be instructed before the completion of works;
hence no variation should be instructed in the event of defect liability.
(59)
Variation orders under the FIDIC conditions are invested in the engineer. The scope
of variation according to clause 51.1 of the FIDIC conditions includes alteration of
the form or the design, quality, or quantity of the works or any part that may be
necessary or appropriate, according to the discretion of the engineer. Changes of
works by addition or omission may also include changes of materials, equipment, or
any goods to be used in the works. In addition, changes of works programs are
deemed to be variations under clause 51.1.
77
Dr. Walaa Arakeeb
On the other hand, the power of the public employer to vary the works
in public-works contracts is restricted by two substantial factors. First, the
additional works should remain within the technical and economic capacity
of the contractor. That is, the alteration should not lead to an economic
non-equilibrium of the contract. (60) Second, the Council of State has ruled
that new works that are alien to the original works cannot be permitted.
The following works have been considered new works: a request to move
construction three kilometers from the site of the original works; an order
to a contractor who is carrying out a maintenance contract to undertake a
construction job; an order to a dredging contractor to carry out a
dewatering job; and an order to follow a new method of execution radically
different from that originally agreed.
Article 78 of the Tenders Regulations, which gives the Administration
in Government Contracts the right to modify the quantities or the volume
of its contracts, for more or less, within the limits of 25% of each item with
the same prices and conditions, the contractor having no rights to ask for
any indemnification whatsoever. In cases of absolute necessity and this
time with the approval of the contractor, the limits of 25% could be
exceeded.
Article 657 of the Civil Code stipulates that the contractor has no
claim to an increase of price, even if the modifications and additions are
made to the plan, when a contract is concluded on a lump sum basis
according to a plan agreed upon by the owner-employer. However, this
rule does not apply if such modifications or additions are due to the fault of
the owner-employer or have been authorized by him and the price thereof
agreed with the contractor. Such agreement should be made in writing
unless the principal contract was concluded verbally.
It is to be noted that Art. 658(3) states that "the contractor has no
claim to an increase in the price of raw materials, labor or any other item of
expenditure, even if such increase in the price is so great as to render the
performance of the contract onerous." The rule is different if the economic
equilibrium of the contract is broken down as we discuss elsewhere. Also
(60)
Decision of Dec. 16, 1956 [Administrative Court].
78
the contractor can protect himself by a special clause like the one taken
from an agreement concluded in the early nineties.
"If after the Tenders opening date there is an increase in the price of
any of governmental subsidized cement, steel and timber or in the
minimum wages of permanent labor through a governmental decree or
order, the contractor shall be reimbursed for any additional cost resulting
from the exception of the contract workers."
E. CLAIMS, DISPUTES AND ARBITRATION
By the late of 1990s, several important changes were evident. Foreign
related litigation in the Egyptian courts was increasing and with the need to
resolve lingering uncertainties on such issues. As jurisdiction over issues
as jurisdiction over foreign-invested Egyptian companies and the
implication the implication for civil litigation stemming from contract
arbitration clause. The Egyptian Arbitration Act (1994), as amended in
1997, adopted generally most of the rules of the UNCITRAL Model Law.
Thus it paved the way for the liberation of the arbitration process. The Act
recognizes the autonomy of the arbitration clause and the principle of
competence. The parties have the right to choose the procedural law, the
substantive law, the place, the language and the Arbitration Institution
handling the dispute. The reference in the Tenders Act (1998) to the
Arbitration Act (1994) as amended in 1997, put an end to the discussion,
once vehement, by the admission of the arbitrability of Administrative
Contracts disputes(61).
(61)
Arbitration of public-works contracts has been strongly challenged in some recent
cases, even when FIDIC conditions were used. The Administrative Supreme Court
decided the exclusivity principle of the administrative courts' jurisdiction relating to
public contracts. This trend was inherited from French law, which prevents
arbitration in local public-works contracts. However, the general assembly of the
advisory opinion department and legislative department of the state council has
decided that arbitration agreements are permitted in public contracts whether such
contract is concluded with a foreign contractor or not; see also Borham Atallah.
"The Egyptian Arbitration Law Ten Years On." International Court of Arbitration
Bulletin. Vol. 14/No. 2/Fall 2003 (13-22).
79

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The Vitality Of Construction Contract Provisions

Within The Scope Of The Egyptian Legal System

The Vitality Of Construction Contract Provisions Within

As English has become the leading language for international

operis). Under a locatio conductio operis the conductor operis is normally

In Egypt, I assume that the connotations of term locatio conduction

Code Civil lists three requirements essential for a contract to be valid:

consent is only reached when the parties’ will is manifested (materialized)

immorality of the cause, is a good reason to deprive an obligation of its

It may happen that the way to conclude a contract is ruled by special

A construction contract is a contract for work and services subject

Internationale des Ingenieurs Conciels (International Federation of

3. The contract for work has a distinctive character. This contract

that of publicly financed contracts, known commonly as government

D. MODE OF FIXING THE PRICE

competent court with a written instrument, provided that there is no

4. A lawful cause in the obligation: the cause represents the reason a

barriers by recognizing the validity of E-signatures and E-writings.

concerning the sub-contracting, provides “Sub-contractors and workmen

A. PRIMARY ACTORS IN CONSTRUCTION CONTRACT

specifications, and examination of the site) and juridical acts (such as

without it being necessary to grant any delay, when rectification of the

Similar to French court, Egyptian courts usually first of all qualify or

a. Breach of Construction Contract under the ECC Rules

rescission, with damages, if due, in either case.

entitled may withhold its own performance. However, it has to be

iv. specific remedies available against the contractor ‘decennial

period- hence the name decenial liability - covering contractors and

e- It is an absolute liability which means that the joint and several

Limitation is suspended by:

A. TERMINATION FOR CAUSE

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