Most construction projects in the UAE finish later than planned, and that alone isn’t the problem. What decides who pays is whether the delay was notified in time, recorded properly, and tied to a cause. Plenty of contractors with a strong case lose it on paperwork, and plenty of employers weaken a fair deduction because they never documented their own loss.
This guide covers how delay claims and liquidated damages work in the UAE and what changed on 1 June 2026, when the new Civil Transactions Law (Federal Decree-Law No. 25 of 2025) replaced the 1985 law.
What a delay claim actually is
A delay claim asks for time, and sometimes money. The time is an extension of time (EOT) to the completion date. The money covers the extra cost of staying on site longer. Either one only works if the event delayed the critical path, meaning the longest chain of activities that decides the finish date. A delay to an activity with spare time, called float, may not move completion at all.
What you can recover depends on who carries the risk for the event.
| Type of delay | Typical examples | What the contractor gets |
| Employer-caused | Late access, late design, variations | Time and money |
| Neutral events | Force majeure, exceptionally adverse weather | Time only |
| Contractor-caused | Poor planning, short resources, subcontractor failures | Neither, and LDs apply |
When both sides cause delay in the same period, it’s called concurrent delay. UAE law has never had a clear rule on it, and tribunals have usually shared responsibility between the parties.
Notice decides more claims than merit does
Most contracts set a deadline for notifying a delay event. FIDIC-based contracts commonly use 28 days from the moment you became aware of it. Miss it, and your right to time and money can vanish, even if the employer caused the problem.
The new law adds a notice rule of its own. Under Article 816(3), where the contract says nothing different, the contractor must notify the employer immediately of anything that will impede the works and bears the consequences if it doesn’t. Most contracts have their own notice clause, so this works mostly as a safety net for employers.
A few habits make a real difference:
- Send a short written notice straight away. A brief email on day five beats a detailed letter on day 29
- Describe the event first. The full claim can follow
- Keep a register of delay events, with the date you became aware of each
- Check the form your contract requires, because verbal discussions and meeting minutes often don’t count
Liquidated damages under the new law
Liquidated damages (LDs) are a fixed amount, agreed in advance, that the contractor pays for each period of late completion. They spare the employer from proving its loss from scratch.
Under the old Article 390, a court could adjust the agreed sum to match the real loss, and the parties couldn’t contract out of that power. The new law keeps LDs, but Article 340 changes how courts can step in. There’s no longer a general power to vary the amount. Instead, it lists specific situations.
| Situation | What Article 340 allows |
| The agreed sum was exaggerated, or the work was partly performed. | The court may reduce it. |
| The employer’s own fault contributed to or worsened the harm. | The court may reduce it. |
| The employer’s fault wholly absorbed the contractor’s | The court may rule that nothing is due |
| The contractor committed fraud or gross fault. | The employer may claim more than the agreed amount. |
For a contractor facing LD deductions on a job the employer also delayed, the third row is the interesting one. It isn’t automatic. Courts and tribunals will still look at causation and expert evidence on what really drove the delay, and it’s too early to know how freely these tools will be used.
For employers, the lesson is that a heavy LD rate backed by thin records is a weak position. Keep evidence of what the delay actually cost you, such as lost rent, financing costs, and consultant fees. Also remember that if a contract is terminated before completion, liquidated damages may not survive,
LDs compensate for late completion, not for non-completion, and termination can bring the LD clause to an end with the contract. A clause stating that LDs survive termination may therefore not be enough on its own. Employers should take advice on the timing and drafting of any termination notice, and should keep records of their actual losses so that they can still claim general damages for the delay if the LD claim fails.
Does the new law apply to your contract?
Mostly only to contracts entered into from 1 June 2026. Earlier contracts stay under the 1985 law, with one exception: limitation periods that hadn’t expired by that date become subject to the new ones. Questions can arise where an older contract is amended or extended after that date, so check contract by contract. Several provisions, including the notice rule, also apply only where the contract is silent, so what your contract actually says still matters most.
One more change touches lump sum contracts. The price still can’t rise just because materials or labour cost more. But under Article 829, a court can now extend time, adjust the price, or end the contract where exceptional general circumstances, which couldn’t have been foreseen, upset the balance of the deal.
Proving the delay
Whichever law applies, the claimant has to show a clear link between the event and the late finish. Assertions without documents rarely succeed. The evidence that usually carries weight:
- The approved baseline programme and every updated programme
- Site diaries covering labour, equipment, weather, and obstructions
- Letters, emails, and meeting minutes showing who was told what and when
- Dated photos and video
- A forensic delay analysis from a qualified expert, such as a time impact or windows analysis
Emails, messages, and project software records are generally accepted if they’re authentic, so keep backups and metadata. If the dispute goes to arbitration, which many construction contracts require under DIAC or similar rules, expect pleadings with expert reports, a hearing, and a reasoned award. Awards can be enforced through the UAE courts under Federal Law No. 6 of 2018 and abroad under the New York Convention.
What each side should do now
Contractors
- Check which law and which notice clause govern your contract before anything else
- Give notice early and keep delay records current
- If the employer contributed to the delay, say so in writing, since Article 340(3) now gives that argument a clearer footing
Employers
- Set LD rates you can justify, often capped at around 10% of contract value, and write down how you reached them
- Record your actual losses whenever a delay happens
- Update your contract templates for the 2026 law
Facing a delay claim or an LD deduction?
If you’re a contractor holding a delay notice or an employer weighing a deduction, speak to Maaf Legal early. Our team advises on construction contracts and commercial disputes across the UAE, including delay and extension of time claims, liquidated damages, and arbitration. We’ll review your contract, check it against the 2026 law, and tell you where you stand before the deadlines start working against you.
Let Maaf Legal help you assess your position and explore the right legal strategy for your case. Contact our team to discuss your next steps.
Frequently Asked Questions
How long do I have to notify a delay in a UAE construction contract?
It depends on your contract. FIDIC-based contracts commonly require notice within 28 days of becoming aware of the event, and missing that deadline can cost you your claim. Where the contract is silent, Article 816(3) of the new law requires the contractor to notify the employer immediately.
Can a court reduce liquidated damages under the new law?
Yes, but only in the situations Article 340 lists. The court may reduce the sum if the contractor proves it was exaggerated, if the work was partly performed, or if the employer’s own fault contributed to the harm. If the employer’s fault wholly absorbed the contractor’s, the court may rule that nothing is due.
Can an employer claim delay damages if the contract has no liquidated damages clause?
Yes. Without an LD clause, the employer can claim damages for its actual loss, but it must prove the loss and show that the delay caused it. That usually means keeping records of what the delay cost, from lost rent to financing and consultant fees.
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