Lump sum contracts and price escalation in the GCC

The presentation will examine price escalation in lump sum contracts across the GCC, focusing on the tension between the principle of contractual price certainty and the impact of exceptional increases in the cost of materials, labour and other inputs. It will consider the contractual allocation of escalation risk, the legal mechanisms available under selected GCC laws to address unforeseen or exceptional circumstances, and the circumstances in which contractors may seek adjustment of the contract price or other relief. The presentation will also address recent market developments and practical approaches to drafting and managing price-escalation risk in major construction projects.  

• Balancing the principle of price certainty (pacta sunt servanda) with the reality of severe, unexpected inflation in material, labor, and logistics costs
• How global and regional supply chain events may impact traditional risk allocation
• In classic lump sum contracts, the contractor typically bears the risk of price fluctuations unless specific escalation clauses are included
• Force Majeure vs. Undue Hardship
• Overview of civil codes across the GCC that allow for judicial intervention in extraordinary circumstances
• The New UAE Civil Code legal framework: analysis of the recent updates
• Practical approaches