Cost Plus Construction Agreement Template for the United Arab Emirates

A Cost Plus Construction Agreement is a specialized contract used in the United Arab Emirates construction industry where the contractor is reimbursed for actual project costs plus an agreed fee or percentage. This arrangement provides transparency and flexibility when project scope or costs cannot be accurately determined at the outset, making it ideal for complex construction projects under UAE law.

When do you need this document?

You need a Cost Plus Construction Agreement when undertaking construction projects with uncertain scope, urgent timelines, or specialized requirements. This contract type is commonly used for renovations of existing buildings, emergency repairs, high-end residential projects, or industrial facilities where specifications may evolve during construction. It's particularly valuable when working with new technologies or materials where pricing cannot be fixed in advance. The agreement is also suitable for projects requiring significant design changes or where the employer wants direct control over material selection and subcontractor choices.

Key legal considerations

Under UAE law, your Cost Plus Construction Agreement must clearly define what constitutes reimbursable costs and establish robust cost verification procedures. The contract should specify the contractor's fee structure, whether as a fixed amount or percentage of costs, and include detailed record-keeping requirements. You must address liability limitations, insurance obligations, and quality standards to protect both parties. The agreement should establish clear procedures for cost approval, change orders, and dispute resolution. Payment terms must comply with UAE Commercial Transactions Law, including provisions for progress payments and final account settlement. Risk allocation clauses should address delays, cost overruns, and force majeure events specific to the UAE construction environment.

Legal requirements in United Arab Emirates

Your Cost Plus Construction Agreement must comply with the UAE Civil Code provisions on construction contracts (muqawala) found in Articles 872-896. The contract must be properly executed by authorized representatives with clear identification of all parties' legal capacity under UAE Commercial Companies Law. You must ensure compliance with local construction regulations, particularly Dubai Local Order No. 3 of 1999 for Dubai projects, including permit requirements and technical specifications. The agreement should address UAE Labor Law obligations regarding worker safety and employment conditions. Payment terms must align with UAE banking regulations and currency requirements. Dispute resolution clauses should specify UAE courts or arbitration under UAE arbitration laws, ensuring enforceability within the local legal system while maintaining compliance with federal and emirate-specific construction regulations.