Construction Law in Kuwait: Disputes, Liability, and Arbitration

Construction disputes are among the most complex and high-value commercial cases in Kuwait. With multiple parties — owners, main contractors, subcontractors, and consultants — and large sums at stake, understanding your legal rights is essential. In this guide, Attorney Meshari Alenezi explains construction law and dispute resolution in Kuwait.

The Construction Contract Under Kuwaiti Law

The Kuwaiti Civil Code regulates construction contracts (aqd al-muqawala) in Articles 661 onwards. A construction contract is an agreement where the contractor undertakes to complete a specific work for an agreed price:

• Parties: the employer (owner) and the contractor. A supervising consultant (engineer) is usually appointed but is not a party to the contract.
• Subject: construction, renovation, maintenance, or demolition works.
• Price: may be lump-sum (fixed price), unit-rate (price per measured quantity), or cost-plus (actual cost plus a percentage).

Common Types of Construction Disputes

1. Delay in Completion

The most frequent construction dispute:

• Delay penalties (liquidated damages): most contracts impose a daily penalty for each day of delay, typically 0.1–0.5% of the contract value per day, capped at 10%.
• Excusable delay: delays caused by force majeure, owner instructions, or design changes entitle the contractor to a time extension.
• Owner-caused delay: late site handover or payment delays justify the contractor’s own delay and may entitle them to compensation.

2. Defective Work

• Apparent defects: discovered at handover — the owner must object immediately or lose the right to claim.
• Latent defects: appear after handover — the contractor is liable during the warranty period.
• Decennial liability: the contractor and architect are jointly liable for structural collapse or fundamental defects for 10 years from handover (Article 692, Civil Code).

3. Variation Orders

Changes to the original scope of work:

• The owner has the right to modify the design during execution, provided they bear the additional cost.
• The contractor must not execute additional work without a written Change Order approved by the owner.
• The most common dispute: the contractor performs extra work based on verbal instructions, then the owner refuses to pay — lack of written documentation severely weakens the contractor’s position.

4. Late Payment

• The owner must pay the contractor according to the contract terms (typically monthly, based on percentage of completion).
• Persistent non-payment entitles the contractor to suspend work after formal notice.
• The contractor may claim interest on overdue amounts and compensation for resulting delays.

5. Contract Termination

• Termination for contractor default: the owner withdraws the work and completes it at the contractor’s expense, after notice and failure to remedy.
• Termination for owner default: the contractor suspends work and claims compensation for work done and lost profit.
• Termination for convenience: the owner may terminate the contract at any time, provided they compensate the contractor for completed work and anticipated profit.

Decennial (10-Year) Liability

The most powerful protection Kuwaiti law offers to building owners:

• Applies for 10 years from the date of handover.
• Covers: total or partial collapse, and defects threatening the building’s structural integrity or safety.
• The contractor and architect are jointly and severally liable.
• This liability cannot be waived or reduced by agreement — it is mandatory (qawa’id amira).
• The owner’s claim lapses if not filed within 3 years of discovering the defect or collapse.

Arbitration in Construction Disputes

Most major construction contracts include an arbitration clause:

• FIDIC contracts: the international standard forms (Red, Yellow, Silver Books) are widely used in Kuwait and include built-in dispute resolution mechanisms — Dispute Adjudication Boards (DABs) followed by arbitration.
• Kuwait Chamber of Commerce: provides arbitration services for domestic disputes.
• International arbitration: major projects may specify ICC, LCIA, or other international arbitration institutions.
• Advantages: speed, confidentiality, and the ability to select arbitrators with construction industry expertise.

Government Construction Contracts

Public works contracts in Kuwait have additional rules:

• Governed by the Central Tenders Committee Law (Law No. 49 of 2016) and its implementing regulations.
• Mandatory tendering procedures with specific pre-qualification requirements.
• Advance payment guarantees (typically 10% of contract value) and performance bonds (5–10%).
• Disputes with government entities may be subject to special administrative procedures before reaching arbitration or court.

Frequently Asked Questions

What should I do if I discover defects after receiving the building?

Document the defects immediately with photos, video, and an engineer’s report. Send a formal notice (through a notary public) to the contractor demanding repair within a reasonable time. If the contractor fails to respond, file a lawsuit. If the defect threatens structural safety, the 10-year decennial liability applies, and you have 3 years from discovery to file your claim.

Can I withhold payment from the contractor for poor quality work?

You may withhold an amount proportionate to the value of defective or incomplete work. However, withholding the entire payment despite substantial completion may be considered an abuse of right. Best practice: pay for completed work and retain only the amount corresponding to the defects, with written documentation of the reasons for withholding.

Can I sue a subcontractor directly?

Generally, the legal relationship exists only between the owner and the main contractor. However, the owner may sue the subcontractor in tort (not contract) if the subcontractor’s negligence directly caused damage to the owner. The subcontractor may also have a direct claim against the owner for unpaid amounts owed by the main contractor, up to what the owner owes the main contractor.

What is the difference between provisional and final handover?

Provisional (preliminary) handover: the owner takes possession with a punch list of items the contractor must fix. The maintenance period begins (usually one year). Final handover: after the maintenance period ends and all punch list items are resolved, a final handover certificate is issued and retention money is released. Debt recovery procedures are available if the owner refuses to release payment after final handover.

Conclusion

Construction disputes require meticulous documentation and both technical and legal expertise. Written documentation of every change order and correspondence is the best protection for all parties. For consultation on construction disputes and commercial law matters, book an appointment with Attorney Meshari Alenezi’s office or call 22204490.

Disclaimer: This article provides general legal information and does not substitute for professional legal advice tailored to your specific situation.