In Mozambique, the legal regime applicable to construction is composed of scattered legislation (available at the National Press of Mozambique EP website), including the following, which are applicable to both public and private construction works:

• The Mozambican Civil Code (Decree-Law No 47344/66, of 25 November) – establishes a largely complementary framework of norms, except for a few mandatory provisions;
• Decree No 94/2013, of 31 December – establishes the general requirements for entities performing construction or construction-related consultation activities (eg, design, supervision and management of construction works), as well as some requirements of construction contracts;
• Ministerial Decree No 77/2015, of 22 May – regulates the legal requirements and qualifications that an entity must meet in order to carry out construction activities in Mozambique;
• Ministerial Decree No 76/2015, of 22 May – regulates the legal requirements and qualifications for an entity to carry out construction-related consultancy activities;
• General Regulation for Urban Buildings (Legislative Act 1976, of 10 May of 1960) – regulates urban edification;
• Decree No 2/2004 of 31 March – approves the private works licensing regime; and
• Law No 07/2021 of 30 December and Decree No 23/2024 of 22 April – establish the legal framework for fire protection.

The following are applicable to public works:

• Regulation for Contracting Public Works (Decree No 79/2022, of 30 December) – establishes the rules applicable to public construction;
• Ministerial Decree No 93/2024 of 25 October – establishes the standard procedural documents for public works procurement; and
• Ministerial Decree No 46/2024 of 13 July – approves a manual for the use of state agencies and institutions to be used in the procurement procedure of public works among other public contracts.

There is no standard type of construction contract in Mozambique. Mozambican civil and commercial legislation allows the parties to a private contract to agree on its terms and conditions, if these do not violate mandatory provision of the law. The use of FIDIC (Fédération Internationale des Ingénieurs-Conseils), NEC (New Engineering Contract) or JBCC (Joint Building Contracts Committee) contractual models may occur in major projects, specifically those subject to multilateral funding.

Public construction contracts typically incorporate the relevant mandatory and supplementary legal provisions specified in the tender documents and adhere to the templates set out in Ministerial Decree No 93/2024. These templates are mandatory.

Any kind of company or individual can act as an employer in a construction contract. In general, its main rights include:

• to have the work carried out in full, in a timely manner and as agreed; and
• to supervise the works.

On the other hand, the employer is typically responsible for:

• the design and specifications of the works (unless the design is carried out by the contractor);
• handing over the site to the contractor and providing the contractor with information on the site (eg, geological reports);
• paying the contract price on time;
• co-operating with the contractor as much as needed to enable it to carry out the works;
• licensing the works (unless the contract provides otherwise); and
• accepting the works if they are carried out without defects and in accordance with what has been agreed.

The relationship between the employer and the contractor is the most important for the execution and completion of the works. However, it is often necessary to involve other entities, such as subcontractors, technical advisers and financiers, especially in major construction projects.

As a rule, subcontractors are required and authorised by the employer to assist the contractor in carrying out the work. Prior approval by the employer may be required for subcontracting.

Subcontractors are hired directly by the contractor. They usually have no direct relationship with the employer. Some construction contracts include subcontractors appointed by the employer (nominated subcontractors) to carry out specific works.

In project finance structures, financiers will typically enter into a financing agreement with the employer, but they usually require direct agreements between the employer, the financiers and the contractor. These aim to protect the financiers’ rights in the event of employer default, cover matters requiring their approval or acknowledgement, and provide step-in rights in some cases.

Contractors may be commercial companies or sole proprietorships, belonging to Mozambican or foreign citizens.

Construction activities are regulated. Entities acting as contractors must be duly authorised to perform construction work in Mozambique by means of a contractor’s licence or a temporary licence, the requirements for which are established by law.

National and foreign contractors have different rules for public works. A foreign contractor can only obtain a permit for the permanent exercise of the contractor activity in public works if it is either a legally constituted company or a branch or subsidiary of a foreign company that has operated in Mozambique for at least ten years. However, it can operate on a temporary basis through a specific licence in situations such as international tendering, reciprocity agreements, subcontracting, or under the Investment Law.

In private works, no such requirement exists.

The main rights of the contractor include:

• being paid the agreed price in a timely manner; and
• right to retain the works in the event of non-payment of the contract price.

Its main obligations typically are to:

• register the works contract with the Ministry that oversees public works, housing and the construction industry;
• carry out the works in a complete and timely manner and in accordance with the agreed specifications;
• provide all materials, equipment and labour necessary for the works, unless otherwise specified (in some projects, such as energy projects, part of the equipment might be supplied by third parties hired by the owner); and
• maintain the works and site until provisional acceptance by the employer.

Subcontractors tend to be smaller, specialised companies. The contractor–subcontractor and employer–contractor relationships are similar in terms of rights and obligations.

Thus, the subcontractor may have rights and responsibilities towards the contractor that mirror those the contractor has towards the employer, even though the employer ultimately benefits from the subcontractor’s work. Depending on the subcontractor’s scale and the work’s significance, a back-to-back contractual arrangement reflecting the main contract may be implemented. Regardless, the contractor is always solely responsible to the employer for the work carried out by its subcontractors.

The process is similar for public works, but legal restrictions apply. The contractor always requires the employer’s authorisation to subcontract, and the subcontractor must fulfil the criteria specified in the contract formation phase for the contractor.

In Mozambique, construction projects are typically financed by a range of entities, depending on the size, scope and nature of the project.

The most common financiers include the following.

• Local and international commercial banks may provide loans and credit facilities for construction projects, especially for large-scale infrastructure and real estate developments.
• Development Finance Institutions (DFIs), such as the African Development Bank, World Bank and other multilateral or bilateral agencies, often finance public infrastructure, energy and social projects.
• Export Credit Agencies from supplier countries may provide financing or guarantees for projects involving significant import of equipment or services.
• Private Equity and Investment Funds may invest in large commercial or industrial developments, often in partnership with local developers.
• For public works, the Mozambican government or its agencies may act as the financier, either directly or through public-private partnerships (PPPs).

The foreign exchange regime in Mozambique is critical for construction projects, particularly those involving cross-border financing or international participants. Compliance with foreign exchange regulations is essential to ensure the smooth flow of funds, the ability to service foreign debt, and the repatriation of returns. Early engagement with local banks and legal advisers is advisable to navigate the regulatory requirements, obtain prior authorisations when needed and to structure transactions in a manner that minimises foreign exchange-related risks.

Financiers in Mozambique, as in many jurisdictions, are not typically parties to the construction contract itself. However, their rights and obligations are often established through separate financing agreements, direct agreements or security.

• Step-in Rights – financiers may negotiate the right to “step in” and assume the employer’s rights and obligations under the construction contract in the event of a default on the financing agreement.
• Direct Agreements – may include approval of key project documents, variations, or changes to the construction contract.
• Security Interests – these may take security over the project assets, including assignment of rights under the construction contract, insurance proceeds, and project accounts, notably pursuant to the favourable legal framework set out by the Movable Property Collateral Regime, approved by Law No 19/2019, of 31 December. This Regime enhances the ability of financiers to secure their interests and to recover value in the event of default.

This framework together with direct agreements provide financiers with both contractual and proprietary rights, increasing the bankability of Mozambican projects for international lenders.

In Mozambique, construction consultancy firms or companies – whether national or foreign – typically serve as “designer” in construction projects, provided they are duly licensed.

The main obligations of the designer are typically as follows:

• to assume full technical responsibility for the project, including its compliance with safety, health and environmental requirements;
• to provide clarifications and technical support during the work’s execution; and
• to ensure that the design aligns with the urban planning instruments.

Their main rights include:

• owning all intellectual property related to the property’s design, unless otherwise established;
• owning the moral rights as the design’s author; and
• the right to prevent changes to the designed property.

In construction projects, it is common for the project owner to engage specialised companies to develop architectural and engineering designs, which are then provided to the contractor for execution. For major or particularly intricate projects, the contractor may be responsible for preparing all or part of the design under an EPC or a design-and-build arrangement. In the context of public works, this design-and-build method is also legally authorised.

The scope of a construction contract depends on the nature of the works to be performed. It may include design and construction, or it may be limited to construction only.

The contract typically specifies the works as all the work required to complete the project in accordance with the agreed specifications. This includes preliminary and ancillary work not explicitly included in the contract but necessary for the project’s completion. In a design-and-build contract, the scope is defined by the employer’s requirements, which detail the design specifications. Depending on the type of project, the specifications might be very detailed, or more focused on the fit for purpose or performance standards. In a pure construction contract, the scope is defined by the approved execution design, among other things. In energy projects, contractors may undertake the obligation to operate the plants for a certain period.

For public construction contracts, the public employer may execute the construction contract based on a final design or on a design and build basis, in which case the requirements regarding the design to be submitted must be defined in the tender documents.

The Mozambican Civil Code generally regulates variations to private construction contracts, distinguishing between:

• variations by the contractor;
• necessary variations; and
• variations by the employer.

Although construction contracts contain specific variation clauses, the Civil Code sets some limits on variations.

• The contractor’s requested variations are not usually allowed without the employer’s prior approval.
• Regarding any necessary variations, the parties must agree on the consequences in terms of price and time. If they cannot agree, the consequences of the variation will be determined by the competent court. However, this matter is usually covered in the contracts, allowing the employer to order variations and set out the mechanisms for fixing the price and time impacts arising from variations, thus avoiding the need for the courts to intervene. 
• The employer is entitled to order variations provided that:
1. their value does not exceed 20% of the contract price in the case of additional work;
2. they do not result in a change in the nature of the works; and
3. if the variation results in a reduction of the work, the contractor shall be entitled to the price of the reduced work, less the amount saved or earned by the contractor in other areas of its activity – these matters are usually regulated by the parties, introducing nuances relevant to the legal regime.

The impact of each variation in price and time is usually defined by considering the agreed bill of quantities and unit price list (and the applicable time limits for each type of work). If the variation requires works not listed in these contract documents, the contractor is usually requested to provide market prices and time limits for the employer’s approval.

As for public works, the contractor must accept any additions or deletions to works, goods or services up to 25% of the initial contract value, provided that the same contractual conditions apply. Any variation exceeding these limits requires agreement between the parties and authorisation from the Minister of Finance. Additionally, the employer may demand the execution of additional works not included in the contract, but the contractor may refuse if its value exceeds 25% of the contract value, or if it can prove that it does not have the means to perform the additional work.

The division of responsibilities for designing a private works project depends on the project’s nature and the intended contract model.

A design and build contract may be entered into, in which the contractor is responsible for the design and construction activities; or a construction contract, in which the contractor is responsible for the works necessary to construct the project in accordance with the design provided by the employer. Front End Engineering Design (FEED) may also be used in large-scale projects such as infrastructure, and oil and gas.

In a design and build contract, the contractor is initially responsible for all design aspects, but construction contracts often require the contractor to review the design documents provided by the employer. This makes the contractor responsible for errors and/or omissions in these documents, as well as any additional work required due to unidentified errors and/or omissions. The extent of design errors and omissions passed on to the contractor may change. It may include discrepancies or omissions in the design documentation or bill of quantities. In the FEED model, the employer will provide the preliminary design and planning, while the contractor will prepare and develop the detailed engineering.

In the case of public design and build contracts, the contractor is responsible for any additional work to correct the relevant errors and omissions, unless these are caused by the elements provided by the employer. As for public construction-only contracts, there are statutory time limits for contractors to claim errors and omissions, after which the contractors are responsible for any additional work aimed at correcting unclaimed errors and omissions. When the tender documents permit and the contractor submits a variation to the base design, the contractor is liable for any errors or omissions, unless they result from data provided by the public employer.

The employer is responsible for paying the agreed price and providing the site, while the contractor is responsible for carrying out all the activities necessary to complete the project on time.

However, depending on the size and complexity of the project, other relationships may arise, such as between the contractor and subcontractors, and the employer, contractor and third-party financiers.

Subcontractors have no direct relationship with the employer; they are liable to the contractor and the contractor is liable to the employer for the subcontractors’ actions. Some contracts allow employers to assume the role of contractors in subcontracts, particularly when the main contract is terminated.

In the case of public works, the responsibility for the site conditions, such as pollution, underground obstacles and geotechnical conditions, rests with the employer. The design provided by the public employer must define the characteristics of the site. As a rule, the employer is responsible for any finds at the construction site, unless otherwise specified.

In the case of private works, there are no mandatory provisions on this matter. Responsibilities can be freely allocated.

The employer generally hands over the site to the contractor, who accepts responsibility for its suitability for the work, including non-visible conditions such as pollution, underground obstacles, geotechnical conditions and archaeological finds. The contractor is usually responsible for visible conditions, including access.

Given the importance of the site conditions for the complete and timely execution of the works, tests are usually done before the signing of the construction contract (or prior to delivery) for major projects. These tests include geotechnical, geological and environmental tests, which are annexed to the contract, and the contractor shall then develop the works accordingly.

To avoid claims resulting from unforeseen effects of site conditions, construction contracts may transfer responsibility for site conditions to the contractor. This is usually done by adding a clause stating that the contractor acknowledges the site’s conditions (including the subsoil) and has performed all necessary tests.

Before construction, the design must be approved by the relevant licensing authority. This requires the submission of detailed design documentation, including architectural plans, proof of land use rights, and technical liability terms.

After the design is approved, a construction licence must be obtained. This licence authorises the commencement of the works and is issued upon submission of all the necessary documentation, including the approved design, cost estimates, and proof of technical and contractor qualifications.

After construction, a use licence is required before the building can be occupied. This licence is granted following a technical inspection which ensures that the building complies with the approved plans and all legal and safety requirements.

Certain types of projects, such as industrial, commercial or tourism projects, or those involving hazardous materials, may require additional approvals from central government ministries.

Although employers are generally responsible for obtaining the necessary permits, contractors and technical professionals (eg, architects and engineers) are often involved in preparing and signing technical documentation and liability terms.

Although the law places the responsibility on the owner by default, the parties may agree in a contract to allocate responsibility for obtaining certain permits to other parties (eg, the contractor or project manager). However, such arrangements do not exempt the owner from ultimate legal responsibility for compliance.

Usually, the contractor is responsible for managing the safety and maintenance of the site and of the works from handover to provisional acceptance. After this point, these responsibilities transfer to the employer without prejudice to the make-good period by the contractor. In energy projects in particular, a maintenance and operation agreement is usually signed between the employer and the contractor, whereby the contractor becomes the operator and maintains the project after acceptance during a certain period of time. These contracts may include both ordinary and extraordinary maintenance as well as supplying of spare parts.

Employers may instruct contractors or third parties on functions such as design, licensing, construction, supervision, testing, operation, maintenance, and financing.

This is particularly relevant in energy projects, where transferring operations to contractors is common. In the case of public concessions, the contractor often assumes financing responsibilities. Other contract structures may apply, such as the build-own-operate-transfer (BOOT) structure.

The contractor normally requests completion tests and inspections when the works are considered to be completed. Provisional acceptance of the works usually depends on successfully completing the specified contract tests and inspecting all the works. Contractors are usually responsible for the said tests. Responsibility for other tests usually depends on the results of these tests.

In pure construction projects, the tests usually cover only the installed equipment (without prejudice to the employer’s inspection of all the works), whereas in projects such as energy projects, the tests are much more comprehensive. They include validation of compliance with the agreed performance ratios through detailed test procedures set out in the contract. The success of the tests will probably be linked to payment milestones.

The acceptance of private works is usually outlined in the contract and typically occurs in two stages: (i) provisional acceptance, once the work has been completed, inspected and validated by the employer, and all relevant tests have been passed; and (ii) final acceptance, once each warranty period has expired and an employer inspection has revealed no defects.

Construction contracts often specify conditions for provisional and final acceptance. These include but are not limited to the following.

• Provisional acceptance –
1. the works have been fully completed (and operational, when applicable);
2. all tests required by law, the contract or the supplier’s specifications have been carried out and passed;
3. bonds (if required) have been provided;
4. as-built drawings have been delivered; and
5. any liquidated damages due must have been paid or set off.
• Final acceptance –
1. any defects identified during the warranty periods have been rectified; and
2. any liquidated damages due have been paid or set off.

The transfer of risk of the works from the contractor to the employer shall take place upon provisional acceptance.

According to the Mozambican Civil Code, contractors are liable for any damage caused to the employer or future purchasers due to collapse or defects in the work for a period of five years after construction.

For construction contracts subject to consumer legislation (ie, if the employer or future purchaser is a non-professional), the law provides for a minimum warranty period against defects of five years for buildings and one year for equipment.

Public works have a similar supplementary warranty period of five years, unless otherwise stated. The warranty period cannot be less than one year, and the law does not distinguish between buildings and equipment.

These periods run from the date on which the works are delivered to the employer. For construction contracts subject to consumer legislation, time limits are suspended while the consumer is unable to use the goods due to repair work.

During these periods, the employer and the consumers must comply with certain rules and deadlines regarding the notification of defects and the bringing of claims to courts. Failure to do so results in forfeiture of the corresponding right, as the Civil Code imposes strict time limits for exercising the right to remedy defects.

Before the warranty periods commence and upon acceptance of the works by the employer, they shall have the right to inspect the works and (shall be obliged to) identify any apparent defects as well as any defects that are not apparent but have been identified by the employer.

If the contractor is not notified of the existence of such defects prior to acceptance, the contractor is not responsible for remedying them. Any apparent defects shall be deemed known by the employer, even if no inspection was carried out before accepting the work.

Following acceptance of the works and during the warranty period, the contractor shall be liable for any defects, as long as the employer complies with the maximum timeframe for reporting defects.

The contract price for construction projects can be determined using different methods:

Defining a global, fixed and non-revisable price is the most common method. It includes all the works and associated costs required to complete the awarded project.

When the required quantities of work for a project are unknown or cannot be determined in advance, the contract price can be established by multiplying the quantities of work performed by the agreed unit prices (unitary prices regime). In such cases, it is common to establish an “estimated maximum price”, which gives the employer the right to take any appropriate measures to reduce the project’s cost if this price is exceeded (or expected to be exceeded), such as seeking alternative, less costly technical solutions. The contract price may, also, be determined by an open book system, whereby the main contractor subcontracts all or a relevant part of the works to subcontractors selected or approved by the employer for an open book fee. In return for this fee, the contractor assumes full responsibility for the subcontractors’ work. Sometimes, the price determined through an open book system becomes a global, fixed lump sum.

Finally, the contract price may be paid in either monthly instalments or milestones, the latter being more common in projects requiring significant equipment investments or relevant performance ratios.

Traditionally, contractors have been responsible for price fluctuations in private construction contracts, especially when the contract price is set as a fixed, non-revisable amount.

Generally, the price of public contracts is not subject to adjustment. However, if the contract provides for it, price adjustments may be applied, especially to contracts lasting more than one year. However, in public works the risk of a significant increase in the price of a particular material that accounts for a large proportion of the cost of a particular job is considered to be the responsibility of the employer.

In recent years, price revision clauses have been demanded by contractors in private construction contracts, as the prices of materials and equipment are subject to relevant fluctuations. This risk is typically mitigated through indexing the agreed unit prices to formulas that ensure fluctuations exceeding a certain percentage result in a revision of those prices. The revision may result in either an increase or a decrease in unit prices.

Construction contracts usually set out the consequences of late or non-payment of invoices, which may include:

• charging interest for each day of delay;
• granting the contractor the right to suspend work until payment is made;
• entitling the contractor to terminate the contract.

Advance and deferred payments are common.

Advance payments are specified when the contractor must make relevant investments immediately upon commencement of the works, such as procuring essential materials and/or equipment, or guaranteeing their cost. In private construction contracts, a first-demand bank guarantee is usually required to ensure completion of the works until the value of the advance payment has been repaid. For public works, this is mandatory by law.

Deferred payments may be agreed upon when the contractor has completed the work, but validation of its correctness, functionality or performance is only possible after testing, which may occur at a later stage of the project. In such cases, it is common to stipulate that part of the price attributable to such work is only due once its correctness has been validated by testing.

If the parties consider it necessary for the project’s proper and timely completion, interim payments may be agreed during the execution of the work.

For public works contracts with unitary prices, the most common invoicing method is to submit monthly invoices based on the measurements of work carried out the previous month. For contracts with a global price, invoicing is done according to the financial plan and milestones.

This procedure is not mandatory in private construction contracts. However, it is common for the parties involved to use a similar procedure.

All invoices must comply with Mozambican tax laws, including the issuance of proper fiscal invoices that include:

• contractor’s and employer’s tax identification numbers (NUIT);
• detailed description of the works or services provided;
• applicable Value Added Tax (VAT), currently at 17%; and
• any other statutory requirements as per the Mozambican Tax Authority.

While electronic invoicing is increasingly common, especially for larger contractors and employers, manual (paper-based) invoicing is still widely used, particularly among smaller construction companies or smaller projects.

The timeline for completing works under a construction contract typically includes global and partial deadlines agreed upon by the employer and the contractor and defined in a works programme attached to the contract.

The contractor must comply with the specified deadlines while performing the works. Failure to do so will result in the application of delay liquidated damages or penalties, and/or compensation for damages incurred, and/or even termination of the contract, subject to its specific stipulations.

The works programme is then complemented by updates from the contractor showing the real progress of the works and its correspondence with the agreed deadlines.

Supervision, which is usually designated and sometimes mandatory, provides the employer with the necessary information to assess the progress of the work.

When the contract price is paid by milestones, the employer validates each milestone through inspection and, when applicable, tests. The employer then issues a milestone completion certificate. This entitles the contractor to payment for the portion of the contract price associated with the completed milestone.

The same procedure applies to payments based on monthly measurements of work done, where the contractor’s report on work performed in the relevant month is validated and the contractor subsequently issues an invoice for the approved work.

The legal and contractual consequences of delays in the performance of obligations under a construction contract depend on the party responsible for the delay.

• Where the contractor is responsible –
1. application of liquidated damages or penalties;
2. compensation for (exceeding) damages; 
3. implementation of a work acceleration plan, if required by the contract; and/or
4. termination of the contract.
• When the employer is responsible –
1. extension of time for the contractor to complete the work; and/or
2. payment of additional costs incurred by the contractor, such as additional site costs.

There are no specific rules regulating concurrent delays, and contracts rarely address this topic. Some legal principles relating to causal link between a fact and damage may apply. Construction contracts often provide for a claim procedure by the contractor, subject to time limits under penalty of forfeiture of the right.

If the contractor delays the completion of the work, the employer is generally entitled to the remedies identified in 5.2 Delays. Under Article 812 of the Mozambican Civil Code, the courts may reduce the amount agreed as damages, if it is proven to be manifestly excessive.

In public contracts, delays in works execution are subject to statutory penalties, ranging from 0.5 to 1%, with a cap of 20%, unless the contract specifies a lower limit. If this ceiling is exceeded, the employer may terminate the contract.

Contracts typically regulate the procedure for extension of time. Contractually, any requests for an extension of time must be submitted in writing to the employer. The request must describe the reasons for the delay and prove that it is not the contractor’s fault.

The extension of time shall be determined by analysing whether the delay has affected the performance of the works and the critical path, and whether the cause of the delay is within the contractor’s risk or not.

Generally, an extension of time is allowed for delays caused by force majeure, unforeseen constraints by the employer, or by acts or omissions of third parties for which the contractor is not responsible. The definition of the contractor’s sphere of risk will generally result from the provisions of the contract or the lack thereof.

The same principles apply to public contracts. Except in cases of force majeure, the Regulation for Contracting Public Works does not establish deadlines for requesting an extension of time; this is to be defined contractually. In the event of a force majeure situation, the contractor must submit a request to the supervisor within eight days for certification of the occurrence and consequences of the force majeure case. The supervisor’s report shall be sent to the employer five days after its production or the decision on reclamation, if any.

Given Mozambique’s exposure to natural disasters and regional instability, force majeure clauses are critical. The force majeure clause is commonly included in private construction contracts and is defined by the parties. This contractual definition usually includes only those events that were beyond the reasonable control of the party claiming force majeure, were not reasonably foreseeable and, if foreseeable, were unavoidable or could not reasonably be prevented or overcome.

It is also common practice to provide examples of events that may be considered force majeure, provided they meet the above criteria. These may include:

• war;
• sabotage;
• hurricanes;
• pandemic; and
• abnormal climate circumstances.

A party affected by a force majeure event is usually entitled to a time extension for the duration of the event. If the event lasts beyond a specified period (usually around 90 to 180 days), either party may terminate the contract. Unless otherwise agreed, each party typically bears its own costs if an event of force majeure occurs.

In public works, contractors are not responsible for defects or delays resulting from a force majeure event. The employer is responsible for any loss or damage caused by force majeure or any other event not attributable to the contractor (unless the contract states otherwise).

Mozambique’s Civil Code allows for the termination or modification of contracts due to unforeseen circumstances, in accordance with the principle of fairness (Article 437). This can only be invoked in cases of extreme gravity, where fulfilling the obligations of both parties would seriously affect good faith.

Employers often transfer responsibility for design errors, omissions and unexpected site conditions to contractors. This makes contractors responsible for any additional work required due to errors and/or omissions and/or site conditions different from what was expected.

In public contracts, the contractor is entitled to financial compensation for additional costs resulting from substantial and unforeseeable changes in contractual conditions, provided that these costs are not considered risks for which the contractor is legally or contractually responsible. The contractor must also identify errors and omissions in the design, as well as unexpected site conditions, within the timeframe defined in the tender documents. Then, the contractor must submit a claim for variation. If errors or omissions cannot be identified within this timeframe, the contractor may submit a claim within 10 days of their detection.

Under Mozambican law, disruption is recognised as a valid reason for an extension of time and/or compensation, if the contractor can prove that the disruption was caused by the employer breaching its contractual or legal obligations.

If the disruption is not the fault of either party, it may fall within the scope of Article 437 of the Mozambican Civil Code, which deals with “abnormal change of circumstances”. If there has been an abnormal change in the circumstances, the affected party may be entitled to the remedies mentioned in 5.6 Unforeseen Circumstances.

In public contracts, the contractor is entitled to claim financial compensation equal to the price difference caused by the abnormal and unpredictable circumstances, if the disruption is not included in the risk contractually or legally attributable to the contractor. If a public employer causes an increase in the costs of a project, it must compensate the contractor. If the disruption falls under Article 236, the contractor can claim an extension.

Articles 809 and 800/2 of the Mozambican Civil Code allow for contractual exclusions or limitations of liability, if they do not apply to acts constituting a breach of duties imposed by public order rules. Liability arising from acts/omissions committed with gross negligence or intent, or which result in injury or death, for example, cannot be covered by a contractual exclusion/limitation of liability.

Mozambican law recognises the concepts of wilful misconduct and gross negligence. The main consequence of classifying certain behaviour as intentional or grossly negligent is that limitation clauses cannot be applied, even with the agreement of the parties involved.

The parties may agree to limit their liability as set forth in 6.1 Exclusion of Liability. Typically, it is limited to a percentage of the contract price and certain types of damages may be excluded, such as consequential and indirect damages or even loss of profit.

The amount of penalties payable under public construction contracts is limited by law to 20% of the contract price, unless the employer decides to terminate the contract.

Construction contracts use indemnities to limit risk. The following risks are generally covered by indemnities:

• bodily injury, sickness, disease or death of any person during or by reason of the performance of the works;
• damage to or loss of property;
• infringement of intellectual property rights; and
• violation of legal standards.

The obligations and risks associated with a construction contract are usually covered by guarantees. These can be bank guarantees, price retentions, insurance bonds or parent company guarantees.

Bank guarantees and price retentions remain the preferred method of protecting the employer against the risk of the contractor’s default. Insurance bonds are generally considered less protective, because they depend on the insurance policy’s terms and conditions, while bank guarantees depend solely on their wording.

Bank guarantees and price retentions are usually used for security purposes:

• advance payments made by the employer to the contractor;
• performance of the contractor’s obligations under the construction contract;
• achievement of performance ratios, when applicable; and
• rectification of defects during the warranty periods.

These bank guarantees are often autonomous, on first demand, irrevocable and unconditional. The guarantor can only refuse payment if they have clear documentary evidence that its execution is fraudulent or abusive. This provides certainty to the market, as mere doubt does not allow them to refuse.

Although less common, a parent company guarantee or a letter of credit may be required from the employer. This would apply to capital-intensive projects in order to assure the contractor that the employer has the financial capacity to pay the contract price.

Performance bonds are usually provided by the contractor and amount to between 5% and 15% of the contract price.

There are three types of guarantees in public contracts:

• a provisional guarantee;
• a definitive guarantee; and
• advance payment.

The definitive guarantee is provided after the contract has been awarded and before its signing. It aims to ensure the proper and timely fulfilment of the contractual obligations, and it may not exceed 10% of the proposed price. Upon completion of the works, the contractor must submit a guarantee covering 5% of the value of the work to cover defects during the guarantee period. The following guarantees are accepted:

• bank guarantee;
• proof of deposit or bank transfer;
• certified cheque;
• public debt securities;
• insurance guarantee; and
• other type of guarantee defined by the employer.

All contractors are required to take out a third-party liability insurance policy, mostly covering the acts and omissions of the contractor (contractors’ all risk (CAR) insurance) and its personnel. Labour law also requires employers to provide insurance that covers workplace accidents and occupational illnesses.

The parties can agree on other types of insurance they consider necessary for fulfilling the contract.

Construction contracts commonly include a provision allowing either party to terminate the contract in the event of the other party’s insolvency.

The validity of this type of provision is questionable in Mozambique because it may conflict with the principles and objectives of insolvency law, namely with Article 114 of the Mozambican insolvency law, which stipulates that an insolvency administrator may decide to comply with the contract if such compliance reduces or avoids increasing the debt of the insolvent estate. Therefore, this type of issue must be contractually regulated with caution.

Most of the risks are generally allocated to the contractor, who typically has greater opportunities and abilities to manage them. Therefore, risk-sharing procedures are not common.

The employer is typically responsible for subsoil, pollution, archaeological findings, financial and licensing risks, while the contractor handles risks such as procurement delays or price increases (in the absence of a revision clause).

Construction contracts usually bind contractors to several obligations regarding their own personnel and those of their subcontractors.

The contractor is typically responsible for making sure that its staff (and those of its subcontractors):

• comply with the applicable safety regulations;
• are legally employed;
• are duly and punctually paid for their work and that it complies with tax and social security obligations; and
• have the technical and physical capabilities necessary to carry out the assigned work.

Subcontracting is generally accepted for private projects, except in exceptional cases. This is true even if the construction contract does not expressly provide for this possibility.

It is standard practice for construction contracts to expressly set out the rights and limitations of subcontracting. As such, this right is often granted with exceptions. For example:

• subcontracting (or subcontracting above a certain percentage of the total price) may be subject to the employer’s consent;
• subcontracting above certain levels (where the contractor represents level zero) may be prohibited; and
• subcontracting of all works may be prohibited.

Subcontracting is permitted for public construction contractors if authorisation is obtained from the public employer and the required information is sent.

Architects and engineers who are responsible for the design of a property usually own all related intellectual property.

Intellectual property rights may be assigned to the employer by their owner. However, the moral rights must remain the property of the design’s author.

Architects legally have a moral right to prevent changes to the designed property. This means that employers may not, either during or after construction, introduce changes without the prior consultation of the architect. In the absence of an agreement, the architect is entitled to repudiate ownership over the designed work, and the employer will be forbidden from using, in its own interest, the architect’s name in relation to the work.

According to Mozambican civil liability principles, if one party breaches a contract, the other party is entitled to compensation for any resulting damage, including loss of profit, provided that the legal criteria for contractual civil liability are met. These are:

• the existence of a contractual relationship;
• a breach of a contractual obligation;
• presumed fault;
• damage; and
• causal link between breach and damage.

Whether the breach and the loss are causally linked is determined by establishing whether the loss would have occurred in the absence of the breach. If the loss would have occurred even without the breach, there is no causal link.

The non-defaulting party may also terminate the contract for fair cause. However, termination of the contract may be subject to a remedy period. This applies to all contracts, including those between employer and contractor or employer and designer.

In the case of public contracts, the contractor shall be entitled to terminate the contract in accordance with the Regulation for Contracting Public Works, namely due to:

• impossibility of accessing the area, place or object to carry out the works within the contractual deadlines;
• impossibility of accessing the sources of the materials specified in the contract or in the proposal, due to an act attributable to the employer (eg, a delay of 180 days in assigning the works);
• delay of more than 60 days in payments; or
• substantial changes in contracting circumstances, which hinder the execution of the contract and increase its charges and costs by more than 25% of the contract value.

Termination of the agreement under these conditions shall entitle the contractor to the return of the definitive guarantee, to the payment for works completed up to the point at which the termination takes effect and payment for the decommissioning of the construction site.

On the employer’s side, the contract may be terminated, among others, in the following cases:

• the contractor’s breach of contractual clauses, specifications, designs or deadlines, including abandonment of the works;
• delay for a period longer than 60 days in complying with contractual clauses, specifications, designs and execution deadlines, or for any shorter period established in the tender documents;
• repeated defective compliance with contractual obligations;
• the contractor’s systematic non-compliance with the determinations of the authority designated to monitor and inspect the execution of the works; or
• changes in the legal structure of the contractor without the prior consent of the employer.

The execution of a public contract may be suspended in two cases, provided that the event causing the suspension is not the contractor’s fault:

• the temporary impossibility of fulfilling the contract; or
• the exception of non-performance – the typical example of which is non-payment.

Private construction contracts sometimes limit the remedies available to the parties in the event of breach. Without prejudice to other mechanisms, this is usually done by:

• limitation of contractual liability to a certain percentage of the contract price;
• qualitative limitation of liability under the contract, whereby certain types of damages (such as indirect or consequential damages) are excluded;
• limitation of the amount of liquidated damages or penalties applicable to the contractor; and/or
• limitation of the circumstances in which the contractor may suspend the works or terminate the contract.

As for public contracts, the parties cannot restrict the legal remedies established by law.

The admissibility of sole remedy clauses is a debated issue. Part of the doctrine recognises that they are not prohibited, provided that a case-by-case analysis confirms that the specific clause does not conflict with imperative legal norms.

As mentioned in 9.2 Restricting Remedies, the parties to a private construction contract in Mozambique may exclude or limit liability. This is not applicable to public works.

This is usually seen in relation to (i) damage caused by delay, where the parties sometimes limit compensation to the amount of the applicable liquidated damages/penalties, excluding compensation for the damage ultimately suffered by the employer, or limiting them to the excess damages, and (ii) indirect damage and loss of profit. However, these exclusions are more common in major construction projects. In other cases, the parties usually simply refer to the applicable law (described in 9.1 Remedies).

The Mozambican Civil Code expressly recognises the contractor’s right of retention. This entitles the contractor to retain possession of the works and the site as security in the event of non-payment of the contract price or any other sums due in connection with the execution of the works. This prevents the employer from using the works.

Although construction contracts often state that the contractor waives this right, the validity of clauses that completely exclude the right of retention in all circumstances is disputed.

Conversely, the contractor’s suspension rights are usually limited in construction contracts, with clear definitions of specific cases in which the contractor may suspend the performance of the works.

However, this contractual restriction does not affect the legal right of either the contractor or the employer to invoke the “exception of non-performance” if the obligations of the two parties are reciprocal. In such cases, the non-breaching party may refuse to fulfil their obligations until the breaching party resumes theirs.

The Regulation for Contracting Public Works allows for the termination of public contracts in three ways:

• upon full performance of the contract;
• by agreement of the parties; and
• unilateral termination due to breach of contractual obligations, served in writing.

The causes for unilateral termination are exemplified in 9.1 Remedies.

A party intending to unilaterally terminate the contract must notify the other party in writing, specifying the cause and grounds for termination. The notified party then has 30 days to remedy the breach. If the breach is not remedied within that period, the notifying party may proceed with termination.

Public contracts may also terminate automatically upon death or incapacity, if the contractor is a natural person, or upon insolvency if it is a legal entity.

Under the Regulation for Contracting Public Works, the employer may suspend the contract for an indefinite period. Such suspension may lead to termination in the employer’s interest. In that case, the contractor is entitled to fair compensation, which includes all payments due up to the date of termination and reimbursement for actual losses or damages incurred as a result.

In private construction contracts, it is common for the parties to include provisions granting a right to immediate termination upon the occurrence of specific events. These typically include:

• abandonment of the works;
• exceeding agreed liquidated damages thresholds;
• reaching the limitation of liability cap; or
• failure to achieve provisional acceptance by a specified date.

Civil law permits termination of a contract when a definitive breach by one party is established. A breach is considered definitive when: (i) due to delay, the non-breaching party no longer has an interest in the other party’s performance; or (ii) following a delay, the breaching party fails to resume performance within a reasonable period granted by the non-breaching party. Accordingly, the verification of a definitive breach depends on the prior delivery of a notice granting a period to remedy the breach.

Article 1229 of the Mozambican Civil Code, applicable to private construction contracts, establishes the employer’s right to withdraw from the contract at any time. To exercise this right, the employer must compensate the contractor for all expenses incurred, work performed, and the profit the contractor would have earned from completing the works.

In Mozambique, there is no adjudication process, nor specific courts that deal solely with construction contract disputes. Generally, these disputes are resolved in the common or administrative courts, or through arbitration. Arbitral tribunals are expressly foreseen in the Constitution of Mozambique.

Mozambique favours arbitration as a dispute resolution method, with a legal framework that supports it. Parties to a construction contract can choose arbitration, conciliation and mediation as alternative dispute resolution methods. These are governed by the Mozambican Arbitration, Conciliation and Mediation Law (Law No 11/99, of 8 July 1999), which aligns with the UNCITRAL Model Law on International Commercial Arbitration of 1985 and incorporates many commonly accepted best practices. Additionally, Mozambique is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. As a result, arbitration clauses are frequently included in public and private construction contracts.