Enhanced Remedies for Defective Work under the New UAE Civil Code: Article 818

How Will the New Civil Code Change an Employer's Remedies When a Contractor Performs Defective Work During Construction?

Defective work during a construction project is one of the most common and commercially damaging disputes in the UAE construction sector. Under Federal Law No. 5 of 1985 ("1985 Civil Code"), the employer's remedies for defective work during execution have always been constrained by a requirement for prior court approval.

On 1 June 2026, Federal Decree-Law No. 25 of 2025 ("New Civil Code") will take effect, replacing the 1985 Civil Code in its entirety. Whilst not a mandatory rule, Article 818 fundamentally restructures the employer's remedies, introducing:

• a formal warning and correction period mechanism, and
• for the first time, permitting employers to terminate or appoint a replacement contractor without necessarily requiring prior court approval.

For parties to construction contracts in the UAE, whether based on FIDIC forms or bespoke agreements, this is a significant and practical reform.

The Current Position: Article 877 of the 1985 Civil Code

Article 877 provides that where a contractor performs defective work:

Irremediable defects

The employer may seek immediate rescission from the court.

Defects capable of remedy

The employer must first summon the contractor to rectify within a reasonable time. Only if the contractor fails may the employer apply to the court for rescission or authorisation to engage a replacement contractor at the defaulting contractor's expense.

Critically, both pathways require court approval. The employer cannot unilaterally terminate or engage a replacement without first obtaining a court order.

In practice, this has been a significant impediment to effective mid-project remediation. Court proceedings take time, during which defective work remains unaddressed, the programme suffers, and the employer faces considerable commercial uncertainty. As a consequence, employers will often tolerate substandard work rather than face the cost, delay, and uncertainty of court proceedings mid-project.

Article 818 of the New Civil Code: A Restructured Remedial Framework

Article 818 replaces Article 877 and introduces a materially different approach.

Performance obligations and gap-filling

Article 818(1) requires the contractor to perform in accordance with contractual terms and within the agreed period. Where the contract is silent, performance is governed by customary principles, and completion must occur within a reasonable period having regard to the nature of the works.

The formal warning and correction period

Where defective work is identified, the employer may issue a formal warning specifying the defect and granting a period for correction. If the contractor fails to remedy the defect within that window, the employer may terminate the contract or appoint another contractor at the defaulting contractor's expense. This introduces, for the first time, a structured escalation mechanism: formal notice, defined cure period, and then the right to act.

Reduced requirement for prior court approval

Article 818 does not explicitly require prior approval from the dispute resolution forum before the employer exercises its right to terminate or appoint a replacement following an unheeded warning. This is a significant departure from Article 877. The practical effect is to make mid-project remedies faster and more commercially viable. The removal of the express requirement does not mean employers have an unfettered right to act without judicial oversight. If there is a dispute over whether a defect or breach exists, the contractor can seek the court's input and protection. The shift is in the default position: the employer may act first, and the contractor's recourse is to challenge those actions after the fact.

Expanded grounds for immediate rescission

Article 818(3) expands the circumstances for immediate rescission without a cure period. Under Article 877, this was available only where remedial works were impossible. Article 818(3) adds further grounds:

• where correcting the defects would be contrary to contractual terms;
• where the contractor's delay makes timely completion "absolutely unlikely"; and
• where the contractor's conduct indicates an intention not to perform.

These grounds reflect a more commercially realistic assessment of when employers need to act decisively.

Interaction with FIDIC Contracts

FIDIC contracts contain their own regime for defective work, including the Engineer's power to reject non-compliant work under Sub-Clause 7.5 and the employer's termination rights under Sub-Clauses 15.1/15.2 of the Red Book (1999 edition). It is noted however that Article 818 is not a mandatory rule.

As such, a FIDIC contract governed by UAE law will have both a contractual route and a statutory route to address defective work. The statutory route may be particularly valuable where contractual provisions are unclear, or where the contractor disputes the Engineer's assessment.

Practical Implications

For employers, Article 818 is a welcome reform. The ability to issue a formal warning and, if unheeded, to terminate or appoint a replacement without necessarily requiring prior court approval transforms a historically slow, court-dependent process into a more commercially effective remedy.

For contractors, the formal warning mechanism means an employer's dissatisfaction is now a statutory trigger with defined consequences. Contractors should ensure robust quality management systems, respond promptly to warnings, and document corrective actions thoroughly. There is also a risk that employers may use Article 818 opportunistically, issuing warnings as leverage in commercial disputes. Contractors should ensure any challenge is supported by contemporaneous evidence of compliance.

A practical obscurity in Article 818 is the concept of "appointing another contractor" without first terminating the original contract. On a live construction site, this is only realistic for discrete remedial works carried out by a specialist alongside the original contractor; for more extensive defects, the employer would ordinarily need to terminate before engaging a replacement to complete the works. The provision also leaves open questions of site coordination, insurance, and liability for defects in the replacement contractor's work, which should be addressed contractually.

Conclusion

Article 818 brings a long-overdue reform to employer remedies for defective work. The formal warning mechanism, reduced requirement for prior court approval, and expanded grounds for immediate rescission provide a more effective and commercially practical toolkit. The reform does not create an unrestricted right to terminate; procedural discipline is imposed on the employer, and courts retain an oversight role. The balance is between speed and fairness: enabling employers to act without the delays of prior court approval, whilst preserving the contractor's right to cure and to challenge the employer's decision. All stakeholders should review existing defects provisions and ensure contracts address the Article 818 framework before 1 June 2026.

This article is for general information only and does not constitute legal advice. Independent legal advice should be sought in relation to any specific matter.