In the construction world, a project’s success is measured by the quality of execution; however, in courts and arbitration tribunals, success is measured by the strength of documentation. Written documentation constitutes the backbone of legal and financial protection for the contractor. Conversely, relying on verbal agreements or "good faith" represents the primary loophole through which rights are lost and catastrophic losses are incurred.
Based on the provisions of the Civil Transactions Law and the Government Procurement and Competition Law in the Kingdom of Saudi Arabia, this article highlights the top 4 documentation errors committed by contracting companies, and how to avoid them to protect your dues.
1. Executing Additional Works Without a Written "Change Order"
One of the greatest strategic errors contractors make is responding to the employer’s verbal requests to add works or modify designs, based on promises such as: "Execute now, and we will settle the accounts later."
The Legal Predicament:
In Civil and Commercial Contracts: Pursuant to the Civil Transactions Law, a contractor is not entitled to claim any increase in remuneration for modifications or additions to the design, unless such changes arise from an error by the employer, or are executed with the employer's express permission, provided that an prior agreement on the value of such increase has been reached with the contractor.
In Government Projects: The matter is even stricter; it is mandatory that an official authorization is issued, the necessary funds are available, and a written "Change Order" is signed by the authorized official before a single stone is laid in the additional works.
2. Failure to Provide Immediate Notice of Cost Overruns (in Measure-and-Value Contracts)
When a contract is concluded on a "Unit Rate" basis, and actual site conditions arise during execution that require a significant overrun of estimated quantities and costs, some contractors commit a grave mistake by continuing the work without formally notifying the owner.
The Legal Predicament: The Civil Transactions Law is decisive and explicit in this scenario; it obligates the contractor to immediately notify the employer of the expected increase in costs and its underlying reasons. If the contractor fails to provide this notice and continues working, their legal right to claim any expenses exceeding the approved contract estimate is forfeited, and they must bear the financial deficit alone.
3. Neglecting Immediate Logging of Delay Events and Extension of Time (EOT) Claims
In the project environment, contractors frequently face obstructions that slow down execution (e.g., the owner's delay in handing over the site, delayed approval of drawings, or force majeure and emergency circumstances). The common error here is relying on amicable discussions without logging these events at the time of their occurrence.
The Legal Predicament: Overlooking the documentation of these obstructions via official letters and contemporary Extension of Time (EOT) claims places the contractor directly under the guillotine of "delay liquidated damages." Conversely, the law grants you a full exemption from penalties and an extension of the contract period, provided that you prove through official documents and historically logged correspondence that the delay was due to emergency circumstances, reasons beyond your control, or a default by the employer.
4. Complacency in Documenting "Initial Handover Minutes"
Legally, the contractual relationship of a construction contract terminates upon the completion and delivery of the agreed work. Nevertheless, some contractors allow the owner to practically utilize or occupy the project without signing official Initial Handover Minutes (Provisional Acceptance Certificate).
The Legal Predicament: This negligence keeps the contractor legally and financially (insurance-wise) liable for the site and for any damages that may occur as a result of the owner's misuse. Furthermore, this error leads to:
Delaying the release of final progress payments and the discharge of bank guarantees (performance bonds).
Leaving the "Decennial Liability" period or the "execution defects liability period" suspended without a defined start date, thereby extending the contractor's liabilities for uncalculated years.
Professional Legal Advice for Our Partners in Success:
In the construction sector, "What is not written, did not happen." Never rely on verbal words, no matter how much you trust the other party. Always remember that every official email, every signed minutes of meeting, and every written notice of delay is not just a routine procedure—it is the primary legal shield that protects your financial solvency, guarantees the recovery of your dues, and safeguards you against the risks of litigation.