Withdrawal of Project from Contractor: Your Complete Legal Guide to Protect Your Project
Withdrawal of a project from a contractor is considered one of the most prominent legal solutions that project owners resort to when a contractor breaches their contractual obligations. This article is based on a judicial precedent issued by the Commercial Court in Riyadh. We – the team at Mohammed Al-Muzayen Law Firm and Arbitration – have adopted in presenting this topic an analytical approach based on judicial application, with the aim of providing legal content grounded in real facts and rulings issued by the Saudi judiciary. This approach confirms that the opinions and analyses presented in this article are not based on mere theoretical reasoning, but on a solid judicial foundation that enhances the reliability of the content and gives our clients confidence when relying on this guide in making their legal decisions.
Case Facts
The facts of the case can be summarized as follows: the claimant entered into a construction contract with the defendant for the establishment of a fuel station project with a total value of SAR (1,800,000). The claimant paid an amount of SAR (570,000) during the execution period. However, the contractor did not complete the agreed works and stopped working more than once without justification. According to what was stated, the value of the executed works did not exceed SAR (233,262) according to the technical report, which resulted in a significant financial gap. The claimant attempted to resolve the situation amicably, and a contract addendum was signed to complete the project. However, the defendant again stopped execution and withdrew from the site. As a result, the claimant withdrew the project and assigned it to another contractor at the expense of the original contractor, incurring additional costs and losses due to delay, which led him to file a lawsuit claiming compensation and outstanding amounts.
Engineering Expert Opinion on Withdrawal of Project from Contractor
The court decided to appoint an engineering expert due to the existence of a technical dispute between the parties regarding the value of executed works and their extent, as well as the cause of delay and the extent of each party’s compliance with the contract terms. During the discussion before the court, the expert clarified that his evaluation of the works was not based on the claims of either party, but rather relied on an objective standard represented by market prices and the volume of remaining works. He stated that the value of the works executed by the defendant amounted to SAR (593,014) excluding VAT, and if VAT is included, the value would be SAR (681,966), noting that the contract is lump-sum and the cost is estimated.
This means that the expert considered the project as a whole, comparing what was actually executed with what should have been executed under the contract, taking into account that the contract is of a lump-sum nature, meaning that the price does not change with quantities but is estimated as a whole, which explains his description of the cost as estimated.
After completing the expert work, reviewing documents, and responding to the parties’ comments, the expert concluded in his final report that the defendant failed to comply with the contract terms and caused delay, and that the remaining works must be completed at the defendant’s expense, in addition to obligating the defendant to return an amount of SAR 386,448 to the claimant.
This indicates that the expert did not limit his role to determining the value of works, but also resolved the issue of liability, attributing the breach to the contractor and linking it to the resulting financial consequences, which formed the basis on which the court relied in its judgment.
Legal Consultations
Our firm provides specialized legal consultation services and judicial studies for companies, factories, and construction firms, with a particular focus on cases related to withdrawal of project from contractor and the resulting legal and financial implications. We rely on analyzing judicial precedents and carefully reviewing construction contracts, as well as assessing legal risks before disputes arise, helping our clients make decisions based on solid legal foundations. We also provide practical solutions in cases of project failure or withdrawal of project from contractor, through preparing legal opinions and managing disputes in a way that preserves rights, reduces losses, and achieves the best possible outcome.
About Mohammed Al-Muzayen Law Firm and Arbitration
Mohammed Al-Muzayen Law Firm was established by lawyer and arbitrator Mohammed Al-Muzayen, a principal member of the Saudi Bar Association and a member of the Chartered Institute of Arbitrators, with over fifteen years of professional legal experience. The firm specializes in construction disputes, engineering disputes, government contracts, and franchise agreements, in addition to providing legal consultations to companies across various sectors. Mr. Mohammed Al-Muzayen holds a Bachelor’s degree in Law from King Saud University in Riyadh (2009).
He has extensive practical experience through working with several major national companies, including Al-Majdouie Group, Bin Zagr Company, United Mining Investments Company, Al-Mawarid Listed Company, and Golden Petroleum Investment Company.
Reasons for the Judgment of the Commercial Court in Riyadh in Withdrawal of Project from Contractor
The court based its judgment on the fact that the claimant requested obligating the defendant to pay SAR (370,000) as the value of unexecuted works, in addition to SAR (90,000) as delay penalties, and SAR (80,000) as legal fees, due to the contractor’s failure to complete the works. This resulted in withdrawal of project from contractor and assigning it to another contractor. On the other hand, the defendant argued that the delay was due to the claimant’s delay in payments.
Given the existence of a technical dispute regarding executed works and the cause of delay related to withdrawal of project from contractor, the court found it necessary to appoint an engineering expert pursuant to Article (101) of the Law of Evidence to determine the percentage of completion, evaluate the works, and assess each party’s compliance with the contract.
After the expert completed his task and the court reviewed his final report, it concluded that the contractor breached the contract and caused delay, which justifies withdrawal of project from contractor and imposing financial consequences. The court also found that the defendant caused harm to the claimant due to litigation expenses and relied on the legal principle that damage must be removed, as well as Article (164) of the Implementing Regulations of the Commercial Courts Law.
Accordingly, the court decided to partially accept the claim based on the expert report and submitted evidence, with legal consequences resulting from withdrawal of project from contractor.
Judgment of the Commercial Court in Withdrawal of Project from Contractor
The court ruled that the defendant (contractor) must pay the claimant an amount of SAR (118,882.66), in addition to delay penalties of SAR (99,200), expert fees of SAR (10,120), and litigation costs of SAR (21,808), as a result of breach of contractual obligations, which led to withdrawal of project from contractor and imposing financial consequences. This judgment was based on the technical reports and legal reasons that established the contractor’s liability for delay and failure to complete the works, and the damages suffered by the claimant.
What Did the Court of Appeal in Riyadh Decide Regarding Withdrawal of Project from Contractor?
After the issuance of the first-instance judgment, the dispute did not end there. The claimant filed an appeal, and the case was reviewed before the Court of Appeal, which issued its final judgment regarding withdrawal of project from contractor.
To learn more about the details of the appellate judgment and its full legal implications, you may contact us or visit our office, as we provide this service as part of specialized legal consultations offered by Mohammed Al-Muzayen Law Firm and Arbitration, specifically for companies and business professionals.
Our office is located in Riyadh on Anas Bin Malik Road, making it easily accessible from northern Riyadh districts such as Al-Malqa, Al-Yasmin, Al-Narjis, Hittin, Al-Sahafa, Al-Aqiq, Al-Ghadeer, Al-Nafel, Al-Rabee, and Tilal Riyadh, providing professional legal services based on experience and judicial precedents.
The firm receives clients during working hours from 8:00 AM to 5:00 PM. To book a legal consultation or schedule an appointment, you may contact us directly at: 0590098800.
Frequently Asked Questions
What are the main reasons for terminating a construction contract under Saudi law?
The main reasons include breach of contractual obligations, such as unjustified work stoppage, delay in execution, or failure to comply with agreed specifications, all of which justify termination and withdrawal of the project.
Is delay alone sufficient to terminate a construction contract?
Not every delay justifies termination, but if the delay is substantial and affects the project or results from contractor negligence, it may justify termination.
Can a project owner terminate the contract if the contractor stops working?
Yes, if the contractor stops without justification and continues despite notices, this constitutes a material breach allowing termination and withdrawal.
Is it necessary to include a termination clause in the contract?
Not always, but having an explicit clause facilitates proving the right, although termination may still be based on general legal principles upon proof of breach.
Can termination occur due to lack of competence or poor performance?
Yes, if it is proven that the contractor is incapable of executing the project or the quality does not meet specifications, this constitutes valid grounds for termination.
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Mohammed Al-Muzayen Law Firm and Arbitration embodies the meaning of one of the best law firms in Riyadh, through its commitment to professional standards in delivering legal services, supported by a legal entity license issued by the Saudi Bar Association, confirming that the firm is authorized to provide legal services including consultations, litigation, arbitration, and company formation, with a structured professional approach focused on accuracy and reliability.
Related Topics
Legal Summary of Withdrawal of Project from Contractor
Withdrawal of project from contractor under Saudi law is a legitimate action when the contractor breaches obligations. This article analyzed a judicial precedent from the Commercial Court in Riyadh, where the team at Mohammed Al-Muzayen Law Firm examined the reasoning of the judgment in both litigation stages. The analysis shows that the engineering expert report plays a central role in proving breach and determining entitlements, and highlights the importance of precise legal reading of judicial rulings in construction disputes.
