Construction under the KSA Civil Code Part 6: Concurrent Delay

An analysis of the provisions of the Saudi Civil Code relating to the apportionment of liability and concurrent delay in construction contracts.

In June 2023, Saudi Arabia announced its new Civil Transactions Law by way of Royal Decree No. M/191 (the Code). The Code came into force in December 2023 and effectively represents the first codification of the laws relating to contract and tort in the Kingdom.

In this series of articles, we explore certain key provisions of the Code relevant to our clients engaged in construction projects in Saudi Arabia. This Part 6 focusses on the extent to which Saudi law will take account of a party’s contributory actions in the causation of harm or loss and how this applies to a hot topic in construction contracts: concurrent delay.

As in our previous entries in this series, we also provide our thoughts on best practices clients should be following when engaging in construction projects in Saudi Arabia.

Except where otherwise stated, translations of the Code are taken from the English translation produced by the Official Translation Department of the Bureau of Experts at the Council of Ministers.

Contributory harm

The Code, like other regional laws, recognises that it is common for there to be more than one cause of harm or contractual breach. In such circumstances, it may be unfair to hold one party solely responsible for the breach or harm consequently suffered. The Code therefore includes provisions allowing for a “rebalancing” of responsibility in certain circumstances.

Article 172 of the Code sets out the starting point for this rebalancing: where, due to its own fault, a party contributes to or aggravates the harm arising from a failure or delay of the other party in performing its obligations, Article 128 of the Code shall apply. Article 128 provides:

If an aggrieved party, by his own fault, contributes to or aggravates the harm, his right to compensation shall be wholly or partially forfeited, in proportion to his contribution to the harm.

This will be a familiar to practitioners in civil law jurisdictions around the Middle East – comparable provisions are found in Article 290 of the UAE Civil Code and Article 257 of the Qatar Civil Code, for example. For common law practitioners, Article 128 of the Code is closely aligned with the common law concept of contributory negligence.

In essence, the effect of Article 128 of the Code is to allow a court of tribunal to apportion liability for a particular event causing harm and reduce the aggrieved party’s compensation accordingly. Article 172 imports this concept into a contractual context.

In practical terms, this means that non-defaulting parties should not assume they have no obligations in the event of default by the other party. Rather, non-defaulting parties are expected to mitigate their losses or the harm suffered.

This can extend not only to refraining from actively exacerbating the detrimental effects of the act or breach, but taking positive steps to reduce those effects, especially where it is within the non-defaulting party’s ability to do so. This is keeping with the general obligation under Article 95 of the Code for parties to act in good faith and in a spirit of mutual collaboration (addressed in Part 3 of this series, here).

A party’s failure to act in good faith and mitigate harm or losses may therefore result in its compensation for the other party’s default or breach being reduced.

Concurrent delay

For construction projects, the apportionment approach adopted under the Code is likely to be particularly relevant when considering delays to projects and, specifically, concurrent delay.

It is, unfortunately, common for the causes of delay to projects to be disputed, with the contractor and employer each blaming each other for programme overruns (and seeking associated remedies and compensation). Particularly contentious are claims of “concurrent delay”.

Definitions of concurrent delay vary, but the description given in the Society of Construction Law Delay and Disruption Protocol, (2nd edition, February 2017) is useful guidance:

True concurrent delay is the occurrence of two or more delay events at the same time (one an Employer Risk Event, the other a Contractor Risk Event) and the effects of which are felt at the same time. For concurrent delay to exist, each of the [events] must be an effective cause of Delay to Completion (i.e. the delays must both affect the critical path).

On this definition, and as recognised in the Protocol itself, true concurrency is rare. Nevertheless, claims of concurrent delay are fertile grounds for disputes. From an employer’s perspective, claims of concurrent delay are often advanced to defend against the contractor’s claims for time-related costs, such as prolongation costs – why should the employer make additional payments to the contract when he was in delay as a result of his own (in)actions anyway. Conversely, contractors will often allege concurrent delay on the part of the employer to shield themselves against the application of liquidated damages – it would be unfair for the contractor to be penalised for delay to the project when completion of the project was always going to be late as a result of the employer’s conduct.

The common law courts have wrestled with the definition of concurrent delay and the basis on which these delays should be addressed as between the parties. Numerous cases have approached the issue from different perspectives and there is no settled approach applicable across all common law jurisdictions. Moreover, many of these judgments are based on principles that have no direct equivalent in civil law jurisdictions – including Saudi Arabia – and any attempts to transpose these common law concepts onto the Code should therefore be resisted.

The apportionment approach in Articles 128 and 172 Code cuts through many of these legal arguments. The parties will each be responsible for costs or losses in the same proportions in which they are responsible for the delay. Where possible, a competent court or tribunal will identify and isolate individual causes of discrete periods of delay, allocating responsibility for those delays as appropriate. Where true concurrent delay exists, the court has wide discretion to apportion liability, taking into account the facts of the case, the actions and intentions of the parties and custom applicable to the nature of the transaction.

There are two further points to note regarding concurrent delay:

a) First, there is nothing in the Code preventing the parties from setting out in their contract how delay – including concurrent delay – is to be addressed and which party shall bear responsibility for it. It is not uncommon for contracts to specify precisely the parties’ respective rights and entitlements in the event of concurrent delay – and indeed provide a bespoke definition of concurrent delay that will apply to the parties’ dealings. Accordingly, parties seeking additional certainty as to where responsibility for delays will fall should consider setting this out clearly in their contracts at the outset of their relationship.

b) Second, it remains to be seen how the apportionment principle will be applied in the context of liquidated damages. As noted in Part 4 of this series (available here), the circumstances in which parties may vary the amount of agreed liquidated damages are limited. More likely, therefore, a Saudi Court or tribunal will apportion responsibility for the number of days of delay for which each party is responsible, leaving the formula for calculation of liquidated damages intact.