The repercussions of the ongoing war between Russia and Ukraine are still negatively affecting many Arab countries, including Kuwait. The interdependence of the global economic system with each other has increased the price of basic commodities in the markets to exceptional levels, driven by the high cost of shipping.
One of the main markets affected by the price jump is the local construction sector. A local Arabic daily has learned with this situation exacerbating, there is a possibility of termination of contracts between contractors, entities and individuals, and there are signs in this regard.
The sources explained some contractors have refused to begin work on the contracts which they had signed at the beginning of the year for reasons related to licenses or other compelling reasons related to an unprecedented increase in the prices of construction materials. The high inflation has strained the contractors’ ability to continue and some contractors are demanding reconsideration of the contract value.
The sources stated that the series of rises in construction goods is diverse, and includes increases ranging between 8.7 percent and more than 100 percent since last January until early June.
It is clear that the increase in the prices of construction goods was not the only reason for threatening many construction contracts. It was noted that labor prices rose during the last period in 2022 by about 40 percent for both the ordinary worker and the specialized worker, which increased the total cost of construction.
Legally speaking, there are two points of view, the first depends on the fact that there is a contract that must be adhered to by the contractor, unless the contract stipulates a specific deadline to start implementation that has exceeded, while this point confirms that the client, a company or an individual, has the right to sue the negligent contractor, and that he must bear the consequences, taking into account market movements, especially if the contract was implemented months ago.
On the other hand, others believe that the recent price changes are legally convincing to take the procedures for rescinding the contract, even if there is no specific deadline to start work.
In general, the construction sector faces difficult working conditions between the commitment to implement projects in accordance with contracts signed at the beginning of the year and current prices that no one expected to jump to this level