The contractor and development consultant at the Association of Contractors in the state, Dr. Imad Al-Jamal, called for the adoption of the principle of bank guarantees of various kinds according to the conditions, value, quality and complexities of the various projects and the contracting parties, so that the application of the Civil Transactions Law and the Commercial Transactions Law is the basis for contractual and legal dealings away from the criminal law and its known rigor In the application and commitment.
Security checks
Al-Jamal told «Emirates Today» that it is better to avoid using security checks, as guarantees in construction contracts in all cases, given the lack of expectation, appreciation and control over how and the time they are used by the beneficiary, which leads to many disputes and complications in both its civil and criminal aspects in the sector Contracting and construction sector in general.
The camel stated that many developers and small and medium-sized contracting companies have limited capacity and capabilities in obtaining bank guarantees within reasonable conditions,
They resorted to activating the role of bank checks as a guarantee tool instead of bank guarantees, which gave them the opportunity to obtain good business and easy financial terms, and thus the phenomenon of security checks emerged, as well as the policy of payment for completion and without a down payment or a guarantee of good performance or a guarantee check or monthly deduction and by a percentage Certain of the contractor's monthly dues, which reduces the financial liquidity of the contractor and with expenses that far exceed the cost of issuing the guarantee in some cases, which resulted in many issues and negative phenomena between the parties to the contract, and also constituted a legal and financial challenge for all parties and overburden the legal system with a phenomenon The checks bounced.
Construction market
The camel considered that the adoption of the bank check as an alternative to bank guarantees and bank guarantees, and that is recognized in the construction market, is due to the rapid developments in how to deal with unexpected economic and financial fluctuations in recent years, where a need emerged for a practical way to get around the scarcity of liquidity and construction financing in view of multiple factors, Foremost among them are the banks and financial institutions emphasizing lending under costly and complicated terms, intense competition, the diversity of construction projects and their development by developers, investors and contractors, as well as increased competition between large companies for projects that cross the ICBMs and its international financing.
Bank Draft
He explained that there are other factors that supported the adoption of the bank check, such as the increase in the number and efficiency of small and medium companies to obtain a portion of the projects offered, either directly or through subcontracting, in addition to the increase in disputes, liquidity problems, late payments and increased claims for liquidating bank guarantees and guarantees during the period Last.
He stressed that it is possible to replace the security checks, by means of a monthly payment for what was done of the works, as well as agreeing to deduct a certain percentage ranging between 5 and 10% or otherwise, taking into account the conditions, value and quality of the completed works and the complexities of the project, as well as the degree of classification of the contractor and the owner In terms of experience, project size and financial solvency, which greatly reduces excessive, unregulated or disciplined use of security checks and their many negative impacts.
He pointed out that there are many guarantees and guarantees that are circulated frequently due to the nature, conditions and characteristics of construction projects, such as guaranteeing the down payment and ensuring good performance during the implementation phase and ensuring the maintenance phase.