Common law jurisdictions
This type of legal system is found mainly in Commonwealth countries. As
in the UK, there are a number of statutory laws and it is here that the main
History of Construction Contracts and Case Law
Civil law jurisdictions
Whilst this is evident in France and its former colonies, many countries have
developed their own Civil Codes using the French Civil Codes as a model.
In the Middle East, Egypt was the first country to adopt a codified legal
system based on the French Codes. The draftsman of the Egyptian Codes
also drafted the Kuwait Civil Codes and, whilst there have been changes
from the original French versions in both adaptations, in many respects
Egyptian and Kuwaiti law follows French law. In the Far East, Thailand has
its own Codes which are based on the French Codes.
Examples of significant differences between some of the Civil laws and
English common law are:
Termination - In some civil law jurisdictions, regardless of the contrac-
tual provisions, it is not possible to terminate a contract without obtain-
ing an Order from the courts.
Quantum meruit - In many civil law jurisdictions, quantum meruit is
not recognised. The contract price must be agreed or determined by an
agreed method. In contrast, the Kuwaiti Commercial and Civil Code con-
tains the following provisions:
'If no consideration is mentioned in the contract, the Contractor shall be enti-
tled to be paid at the prevailing rate for similar work at the date of conclusion
of the contract'
Consideration -Under English law, consideration is an essential element
of a contract (with certain exceptions). Often, civil law jurisdictions do
not require consideration as an essential element of a contract. A con-
tract can be made without any consideration.
Time for acceptance of offers - Whilst an offer can be withdrawn at
any time before acceptance under English law, some countries have
introduced laws to make it a condition that offers are kept open for a
specified period and cannot be withdrawn before the period has expired
(for example, in Kuwait). Obligations of honesty and good faith are recog-
nised by the courts in civil law jurisdictions. Therefore the revocation of
an offer may be seen as a breach of judge-made law that offers must be
kept open for a reasonable time.
Letters of intent - The original purpose of a letter of intent was only a
statement to the effect that the employer intended to enter into a con-
tract at some later stage and the letter imposed no obligations on the
6 Construction Contract Claims
parties under English law. In many civil law jurisdictions, a letter of intent
is an 'Agreement in Principle'. That is to say that all of the terms may
not have been agreed but the principle of an agreement has. The parties
are required to negotiate in good faith and conclude a contract in due
course.
Liquidated damages and penalties - Under English law, a penalty
clause cannot be enforced. Roman Dutch law recognises penalty clauses
and they can be enforced. Sometimes the law includes the powers given
to the Court to modify a penalty if the amount shall be considered
excessive or derisory. In South Africa, there are limited provisions for
modifying penalties (see 1.4). In many Middle Eastern countries, the dis-
tinction between liquidated damages and penalties is a matter of trans-
lation (there is no Arabic word for 'liquidated damages') and 'penalties'
are construed as if they were liquidated damages.
Local law
Some countries have developed their own laws and have been almost unin-
fluenced by the laws of other countries. In some cases, much of the law is
based on religious teachings. For example, Saudi Arabia law is almost
entirely based on the Shari'a (Islamic Law), in which there are four main
'Sunni Schools' (Hanafi, Maliki, Shafi 'i and Hanbali). The main differ-
ences between the four schools is the priority which is given to the Qur'an.
Some countries have combined Shari'a with modern statutes or codes to
a greater or lesser extent.
Combinations of various laws and legal systems
Combinations vary widely from country to country. Bahrain arid the UAE
have traditionally followed the common law legal systems, with an element
of Shari'a and written regulations. However, Bahrain and the UAE appear
to be moving in the direction of civil law based on the French and Egypt-
ian legal systems. Kuwait have a fully codified legal system and is one of
the most advanced of the Gulf States in that it has been a civil law juris-
diction for many years. Its Civil Code is similar to that of Egypt but some
local laws still apply.
Since 1907, Japan's laws have been developed on a Civil and Com-
mercial Code (of German influence) followed by a degree of American influ-
ence after the Second World War. In spite of this history, complex
contractual arrangements are generally avoided, even for some major pro-
jects. The traditional Japanese philosophy has remained almost unaffected
by recent developments in law.
History of Construction Contracts and Case Law
7
The law of the contract and the procedural law
The law of the contract
This is the law which governs the interpretation and application of the
contract. It is important to establish any impediment to foreign laws which
cannot be enforced in the county in which the contract is made.
This is a law which governs the litigation or arbitration and is normally the
law of the county in which the proceedings will take place. It is not nec-
essarily the same as the law of the contract.
Difficulties can arise if the choice of law is ambiguous. In general, the choice
of law specified in the contract will be upheld unless:
it is contray to public policy of the place where the proceedings are
held;
the choice is not exercised for bona fide and legal reasons;
dicta of Denning LG in Bouissevan v. Weil (1948) 1KB 482 applies -
'I do not believe the parties are free to stipulate by what Law the valid-
ity of their contract is to be determined. Their intention is only one of
the factors to be taken into account.'
Problems can arise if the choice of the law of contract for main contracts
and subcontracts are not the same
This type of legal system is found mainly in Commonwealth countries. As
in the UK, there are a number of statutory laws and it is here that the main
History of Construction Contracts and Case Law
Civil law jurisdictions
Whilst this is evident in France and its former colonies, many countries have
developed their own Civil Codes using the French Civil Codes as a model.
In the Middle East, Egypt was the first country to adopt a codified legal
system based on the French Codes. The draftsman of the Egyptian Codes
also drafted the Kuwait Civil Codes and, whilst there have been changes
from the original French versions in both adaptations, in many respects
Egyptian and Kuwaiti law follows French law. In the Far East, Thailand has
its own Codes which are based on the French Codes.
Examples of significant differences between some of the Civil laws and
English common law are:
Termination - In some civil law jurisdictions, regardless of the contrac-
tual provisions, it is not possible to terminate a contract without obtain-
ing an Order from the courts.
Quantum meruit - In many civil law jurisdictions, quantum meruit is
not recognised. The contract price must be agreed or determined by an
agreed method. In contrast, the Kuwaiti Commercial and Civil Code con-
tains the following provisions:
'If no consideration is mentioned in the contract, the Contractor shall be enti-
tled to be paid at the prevailing rate for similar work at the date of conclusion
of the contract'
Consideration -Under English law, consideration is an essential element
of a contract (with certain exceptions). Often, civil law jurisdictions do
not require consideration as an essential element of a contract. A con-
tract can be made without any consideration.
Time for acceptance of offers - Whilst an offer can be withdrawn at
any time before acceptance under English law, some countries have
introduced laws to make it a condition that offers are kept open for a
specified period and cannot be withdrawn before the period has expired
(for example, in Kuwait). Obligations of honesty and good faith are recog-
nised by the courts in civil law jurisdictions. Therefore the revocation of
an offer may be seen as a breach of judge-made law that offers must be
kept open for a reasonable time.
Letters of intent - The original purpose of a letter of intent was only a
statement to the effect that the employer intended to enter into a con-
tract at some later stage and the letter imposed no obligations on the
6 Construction Contract Claims
parties under English law. In many civil law jurisdictions, a letter of intent
is an 'Agreement in Principle'. That is to say that all of the terms may
not have been agreed but the principle of an agreement has. The parties
are required to negotiate in good faith and conclude a contract in due
course.
Liquidated damages and penalties - Under English law, a penalty
clause cannot be enforced. Roman Dutch law recognises penalty clauses
and they can be enforced. Sometimes the law includes the powers given
to the Court to modify a penalty if the amount shall be considered
excessive or derisory. In South Africa, there are limited provisions for
modifying penalties (see 1.4). In many Middle Eastern countries, the dis-
tinction between liquidated damages and penalties is a matter of trans-
lation (there is no Arabic word for 'liquidated damages') and 'penalties'
are construed as if they were liquidated damages.
Local law
Some countries have developed their own laws and have been almost unin-
fluenced by the laws of other countries. In some cases, much of the law is
based on religious teachings. For example, Saudi Arabia law is almost
entirely based on the Shari'a (Islamic Law), in which there are four main
'Sunni Schools' (Hanafi, Maliki, Shafi 'i and Hanbali). The main differ-
ences between the four schools is the priority which is given to the Qur'an.
Some countries have combined Shari'a with modern statutes or codes to
a greater or lesser extent.
Combinations of various laws and legal systems
Combinations vary widely from country to country. Bahrain arid the UAE
have traditionally followed the common law legal systems, with an element
of Shari'a and written regulations. However, Bahrain and the UAE appear
to be moving in the direction of civil law based on the French and Egypt-
ian legal systems. Kuwait have a fully codified legal system and is one of
the most advanced of the Gulf States in that it has been a civil law juris-
diction for many years. Its Civil Code is similar to that of Egypt but some
local laws still apply.
Since 1907, Japan's laws have been developed on a Civil and Com-
mercial Code (of German influence) followed by a degree of American influ-
ence after the Second World War. In spite of this history, complex
contractual arrangements are generally avoided, even for some major pro-
jects. The traditional Japanese philosophy has remained almost unaffected
by recent developments in law.
History of Construction Contracts and Case Law
7
The law of the contract and the procedural law
The law of the contract
This is the law which governs the interpretation and application of the
contract. It is important to establish any impediment to foreign laws which
cannot be enforced in the county in which the contract is made.
The procedural law
This is a law which governs the litigation or arbitration and is normally the
law of the county in which the proceedings will take place. It is not nec-
essarily the same as the law of the contract.
Difficulties can arise if the choice of law is ambiguous. In general, the choice
of law specified in the contract will be upheld unless:
it is contray to public policy of the place where the proceedings are
held;
the choice is not exercised for bona fide and legal reasons;
dicta of Denning LG in Bouissevan v. Weil (1948) 1KB 482 applies -
'I do not believe the parties are free to stipulate by what Law the valid-
ity of their contract is to be determined. Their intention is only one of
the factors to be taken into account.'
Problems can arise if the choice of the law of contract for main contracts
and subcontracts are not the same
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