Construction

An industry built on chains

Construction in Pakistan is organized as a chain of contracts: an employer engages a main contractor, the main contractor parcels the work to subcontractors, and suppliers and labour contractors hang off each tier. On public projects and large private ones, the main contract is usually a FIDIC-based form — often the versions embedded in Pakistan Engineering Council standard bidding documents — while subcontracts further down the chain are frequently short, home-drawn, and silent on the questions that matter. That asymmetry is where disputes are born. A subcontractor who accepted thirty-day payment terms against a main contract that pays in ninety is financing the project; a main contractor whose subcontracts do not flow down the employer's liquidated damages is carrying delay risk alone.

We spend as much time aligning chains as drafting individual contracts. Back-to-back is a discipline, not a phrase: notice periods that nest inside one another, pay-when-certified mechanics that are actually lawful and workable, and termination triggers that do not leave a contractor bound upward but released downward.

Security and money

The financial architecture of a Pakistani construction project rests on bank guarantees: bid security, performance security, mobilization advance guarantees, and retention. Most are written as unconditional and payable on demand, and as of mid-2026 the settled judicial approach is that an on-demand guarantee will not be restrained from encashment except in narrow situations such as fraud. A contractor should therefore treat every outstanding guarantee as a contingent cash outflow and manage the portfolio deliberately — negotiating staged reductions tied to milestones, calendaring expiries, and retrieving instruments when obligations are discharged rather than leaving them alive in a banker's drawer.

Payment risk runs the other way too. There is no statutory adjudication and no security-of-payment law, so a contractor's leverage over certified but unpaid sums is whatever the contract gives: suspension rights that can be exercised without repudiating, interest that is actually claimable, and dispute machinery that produces interim decisions. We draft for the payment failure scenario on day one, because the general law will not rescue cash flow later.

Delay, records, and claims

Delay is the industry's endemic dispute. The legal framework is brief — sections 55, 73, and 74 of the Contract Act 1872, layered under whatever the contract says about extensions of time and liquidated damages — but the practical framework is evidentiary. Claims succeed on contemporaneous programmes, timely notices, instructed-variation records, and site correspondence that was written with a future tribunal in mind. We train client teams to keep records in that condition while the project is live, and when a claim or defense must be built after the fact, we reconstruct the delay story honestly: what was critical, what was concurrent, and what the notices actually preserved.

On the receiving end, employers deploying liquidated damages should know that the named figure is a ceiling, not a self-executing entitlement, and that deductions made without a defensible delay analysis convert into counterclaims.

Arbitration and the authorities

Most construction contracts in Pakistan arbitrate. Domestic arbitration still runs under the Arbitration Act 1940 as of mid-2026 — with its filing of awards in court and its grounds for objection — and reform proposals that have circulated in recent years remain unenacted [TO BE VERIFIED BY REVIEWING LAWYER]. Foreign-seated arbitrations are enforced under the 2011 Act implementing the New York Convention, which is why seat selection is a commercial decision, not boilerplate. We run arbitrations from notice through enforcement, and we structure dispute clauses — including engineer determinations and dispute boards — so that interim decisions exist before the full arbitration matures.

Around the contract sits the public-law layer: PEC constructor licensing, procurement rules on public works with their short protest windows, development authority approvals, and labour and safety obligations on site under Punjab's occupational safety, PESSI, and EOBI regimes. A contractor's compliance file is part of its claims position — an employer defending a claim will read it — so we keep the two workstreams connected.

There is also a fiscal layer that bids routinely underprice. Payments to contractors attract withholding under the Income Tax Ordinance 2001, construction services fall within provincial sales tax on services — in Punjab, administered by the Punjab Revenue Authority — and works contracts are instruments chargeable to stamp duty in Punjab, at rates that change with provincial finance acts. As of mid-2026 we treat the tax and stamping assumptions in a bid as items to be verified against current notifications, not carried forward from the last project, because the margin on a construction contract is narrower than the error band on its levies.

How we work with construction clients

We act at three moments. Before signature, we negotiate and align the contract chain, the security package, and the dispute machinery. During the works, we advise on notices, variations, suspension, and termination in real time, when positions can still be preserved cheaply. After the dispute crystallizes, we run the claim, the arbitration, or the guarantee fight with the record we helped build. Fees and scope are set by engagement letter for each of the three modes.