Limitations and exclusions of liability under Qatari Law (Part 1 - Enforceability)

• Qatar

• Litigation - Middle East

23-11-2021

This is part one of a two-part article on limitations and exclusions of liability under Qatari law. Here we explore the enforceability of limitation/exclusion clauses under Qatari law, the types of liability which cannot be contractually limited, and how these clauses can be overturned or invalidated.

Enforceability of limitation/exclusion clauses

Limitation/exclusion clauses are generally enforceable under Qatari law by virtue of Articles 171(1), 259(1) and 265 of Qatar’s Civil Code (Law No. 22 of 2004). However, consistent with other civil law jurisdictions, there is statutory disapproval of contractual provisions which seek to restrict or prevent otherwise good claims.

Article 171(1) provides that binding contractual provisions become the ‘law’ between the parties, except where mandatory provisions of Qatari law apply:

“A contract is the law of the contracting parties, and it may not be revoked or amended, except by agreement of both parties or for reasons prescribed by the law.”

Article 259(1) specifically permits contractual limitation/exclusion clauses, in the absence of deception or gross mistake:

“Agreement may be reached on the exemption of a debtor from any liability arising out of the non-fulfilment of his contractual obligation or delay in fulfilling it, unless it is the result of deception or gross mistake on his part.”

Similarly, contracting parties are permitted to agree on a pre-determined rate of compensation or liquidated damages. These contractual provisions generally provide for a limit on the amount of damages that a contractual party can otherwise recover. Article 265 of the Civil Code permits the inclusion of liquidated damages in a contract:

“Where the obligation is the payment of money, the contracting parties may determine in advance the value of the compensation in the contract or in a subsequent agreement.”

Pursuant to Article 267 of the Civil Code, if the loss exceeds the value of the agreed compensation, a party may not demand more than the agreed amount, unless there is deception or gross mistake. Accordingly, Article 267 affirms that a pre-determined rate of compensation (or contractual liquidated damages) in effect forms a cap on the amount of recoverable damages, absent deception or gross mistake. In addition, Article 266 of the Civil Code provides the court (or a tribunal) with a discretion to reduce, but not to increase, the agreed levels of compensation in certain circumstances which will be discussed further in Part 2 of this article.

‘Deception’ (also translated as ‘fraud’) and ‘gross mistake’ (sometimes likened to the common law concept of gross negligence) are not defined within the Civil Code. However, deception generally requires a degree of intentional and wrongful misrepresentation and elements of bad faith, whereas gross mistake refers to a serious, if not intentional, indifference in carrying out duties and the failure to exercise due care in performing obligations.

In addition to deception and gross mistake, there are other circumstances that could render a contractual limitation/exclusion clause unenforceable, which we will explore in Part 2 of this article.