WELCOME

CICES

CONTENTS

20 February 2012 Dubai

2. UAEConstruction&Contracts

UAE Constitution

3. ChoiceofContractForm

Contracts Formation

4. ContractFormation

1.

TheUAEConstitution

5. LettersofIntent/Acceptance
GaryBeamish
Eng.C, C.Eng, C.Env, C.WEM, MICE, MCIWEM, MQSI

M: 050 4889751
E: gary@talos-me.com / qatar_gary@hotmail.com

talos

6. ExpressorImpliedTerms

consult

TheUAEConstitution Overview

TheUAEConstitution Emirates

TheUAEisafederationestablishedon2ndof

December1971.
TheConstitutiondeclarestheShariatobeaprincipal

sourceforlawintheUAEandisessentiallyacivillaw
jurisdictionheavilyinfluencedbytheEgyptianlaw
system,whichhasitssourcesinFrenchandRoman
law.Commonlawprinciplesaregenerallynot
adopted.
ItcomprisessevenEmiratesnamely;AbuDhabi,

Dubai,Sharjah,RasAlKhaimah,UmmAlQuwain,
AjmanandFujairah.

TheUAEConstitution ContentsSummary
Theconstitutioncameintobeingtoexplain:
themainrulesofthepoliticalandconstitutional

organizationofthestate;
purposeoffederationestablishment,objectives
andcomponentsonlocalandregionallevels;
Itelaboratesonthemajorsocialandeconomic
pillarsofthefederationandstressespublic
rights,responsibilitiesandfreedomsaswellas
thearmedandsecurityforcesprovisionsand,
jurisdictionsbetweenthefederationand
memberemirates.

UAEConstruction&Contracts
CommercialtransactionsaregovernedbyUAE

FederalCommercialTransactionsLaw
CommercialCode(No.18of1993).
CiviltransactionsaregovernedbyUAELawof
CivilTransactionsCivilCode(No.5of1985&
No.1of1987).
Intheabsenceofanyspecificprovisions,the
IslamicShari'awillapply.
Inmattersofprocedure,theUAEcourtsfollowthe
FederalCivilProcedureLawCivilProcedure
Code (No.11of1992asamended).

UAEConstruction&Contracts

UAEConstruction&Contracts

Articles872to896oftheUAECivilLaw1987(the

CIVILCODE:ARTICLES872to896 (roughtranslationbyothers)

"CivilLaw")relatingtoconstructionworks,aswell
asgeneralmaximsandprinciplessetoutinthe
samelaw,formthebasisofthelegalframework
relatingtoconstruction.
Inaddition,theprovisionsoftheUAECommercial
TransactionsLawwouldalsoapplytotheextent
thatthepartiestoaconstructionclaimcanbe
definedastraderscarryingoutcommercial
businessinaccordancewithArticles6and11.

Chapter1:TheContractAgreement
Section1:DefinitionandScopeofContractAgreement
Article872

Acontractagreementisdefinedwherebyoneparty
makessomethingorperformsadailypledgetoanotherparty.
Article873
(1)Acontractmaybelimitedtoanundertakingbya
Contractortodotheworksandmaterialstobeprovidedbyan
Employer.
(2)AcontractmayalsoallowfortheContractorto
providematerialsfortheworks.
Article874
ThecontractdocumentshouldspecifytheContractors
address,thescopeofwork,theContractorscapacity,performance
criteria,theContractorsproposedmethodofconstructionand
durationtocompletetheworks.Thecontractdocumentshouldalso
identifythepaymentstobemade.

UAEConstruction&Contracts

UAEConstruction&Contracts

SectionII:EffectsofContractAgreement

ContractorsObligations(continued)

ContractorsObligations
Article875

(1)IftheEmployerhasagreedtotheContractor
providingsomeorallofthematerials.TheContractorshallbe
responsibleforthequalityofthematerialstothetermsofthecontract.
Inallotherinstancesthematerialsshallbeaspertheknowncustoms
andspecifications.
(2)IftheEmployeristoprovideanymaterialsthenthe
Contractorshallensuretheyaretakencareofandstoredasper
manufacturerstechnicalspecification.TheContractorshallgiveback
anyunusedmaterials.Ifthematerialsaredamagedorlostthenthe
ContractorshallreimbursetheEmployer.
Article876 TheContractorshallprovidealltoolsandequipmentto
completetheworksunlessotherwisestatedintheagreement.

Article877

TheContractormustcompletetheworksinaccordance
withthecontract.IftheContractorfailstocarryouttheworksin
accordancewiththecontractandcannotshowthathecancorrectthe
problemtheEmployermayterminatethecontractimmediately.Ifthe
workscanbecorrectedbytheContractor,theEmployermayrequest
theContractortocontinuewiththecontractandundertakecorrective
measureswithinareasonableperiod.IftheContractorfailsto
completethesecorrectivemeasureswithintheperioddefinedthe
Employermayaskacourttoterminatethecontractorlicenseand
entrusttheworkstoanothercontracttocompletetheworksatthe
expenseofthefirstContractor.
Article878 TheContractorshallprovideaguaranteeforhis
defaultedworkswhetheritwasgeneratedduetohisownactor
omissionorduetolossandordamage.Theguaranteecanberemoved
ifitcanbeproventhatthedefaultoraccidentoccurredduetoan
unavoidableincident.

UAEConstruction&Contracts

UAEConstruction&Contracts

ContractorsObligations(continued)
Article879 (1)Iftheworkofacontractorproduces(abeneficial)

ContractorsObligations(continued)
Article880
(2)TheEngineersandContractorscommitmenttothis

effectonthepropertyinquestion,hemayretainituntilthe
considerationdueispaid,andifitisdamagedinhishandspriorto
paymentoftheconsideration,heshallnotbeliableforthedamages,
norshallhebeentitledtotheconsideration.[ieLiens,physical
attachmentorregisteringapriorityright].
Article880 (1)Ifanagreementistoconstructbuildingsorother
permanentconstructionsinwhichtheEngineerisresponsibleforthe
designandtheContractoristoexecutetheworksunderhissupervision
thenitisdeemedthatbothparties areequallyresponsibletothe
Employerwithregardstoanyoccurrencehappeningtothe
constructionwithinatermoftenyears.Therewillalsobeanequal
responsibilitywithregardstoanydefectwhichmayaffectthesafetyor
rigidityoftheconstruction.Theperiodofgeneraldefectsliabilitycan
beincreasedordecreasedbytheagreementofbothparties.

responsibilityexistsevenifthedefectarisesduetothesubsoilorduetothe
Employeragreeingtoacceptthebuildingwithknowndefects.
(3)Thetenyeartermcommencesfromhandoverofthe
constructiontotheEmployer.
Article881
IftheEngineersresponsibilitiesunderthecontractislimited
onlytoresponsibilityforthedesignanddoesnotincludeanysupervisionofthe
worksthentheEngineershallberesponsibleonlyforanydesigndefects.
Article882
Therearenoclausesunderthecontractwhichlimitsthe
ContractorsorEngineersdutiesundertheseclauses.
Article883
Nolawsuitispermissibleifthreeyearshaspassedafter
discoveryofthedefect
Article884
TheEmployerisresponsibletoreceivetheworksaccomplished
bytheContractorandgivenforhisdisposal.IftheEmployerrefusestoaccept
receiptoftheworksdespiteformalnotification andwarningfromthe
Contractorandanydamagesoccurthatwerenotintentionalonhispartand
theContractorhaddoneenoughtoensureitssafety,theContractorshallnot
beconsideredresponsibleforitsrectificationorinsurance.

UAEConstruction&Contracts

UAEConstruction&Contracts

EmployersObligations
Article885
(1)IftheContractisbasedonaunitpriceanditisfound

EmployersObligations (continued)

duringthecourseoftheworksthatitisnecessarytoincreaseanexpectedvalue
duetoimplementingtheagreeddesigntheContractorshouldinformthe
Employerimmediately.TheContractorshouldstatetheexpectedincreasein
theContractValue.IftheContractorfailstonotify theEmployerthenhis
eligibilitytoclaimfortheseexpectedvalueincreaseswillbebasedonthe
ContractAgreementandanyotherexpenses.
(2)Iftheamountofanincrease,duetoimplementationofthedesign,is
massivethentheContractormaygivepermissiontotheEmployertoescape
fromtheContractandtheexecutionoftheworksshallstopwithoutdelay.The
Contractorshallbeentitledtoreceivepaymentforallworksaccomplishedand
estimatedinaccordancewiththeContractterms.
Article887
(1)IftheContractisbasedonadesignagainstatotallumpsum
valuetheContractorshallhavenorighttoincreasethevaluefor
implementationofthesamedesign.
(2)Iftherearemodificationstothedesignoranadditionmadewiththe
consent oftheEmployerthecurrentagreementshouldberevisedandan
addendumtothecontractmade.

Article888

UAEConstruction&Contracts

UAEConstruction&Contracts

SectionIII:SubContractor

SectionIV:TheExpirationoftheContractAgreement
Article892 TheContractagreementshallbeconsidered

Article890(1)TheContractormaygivewholeorpartof

expiredoneithercompletionoftheagreedworksorifitis
cancelledorterminatedbybothpartiesthroughan
agreementofthecourts.
Article893 Ifthereisareasonwhichpreventsthe
implementationorcompletionofthecontractoneparty
mayrequesttheterminationoftheContractdependingon
thecircumstances.
Article894 IfaContractorstartstheexecutionofworks
andanyincidentoccurs,notofhisdoing,whichprevents
himfromperformingandthereforeincapableofdoingthe
workheshallbeentitledtothetotalvalueofanyitem
completedandanycostsincurredduringimplementation
whichareabenefittotheEmployer.

theworkstoanothercontractorunlessthisisprohibited
underaclauseoftheContractoritisnotthenatureofthe
worksorrequirestheworkstobedonebytheContractor
(2)TheresponsibilityoftheContractorshallatall
timesremaintotheEmployer.

Article891 TheSubcontractorshallnotbeallowedto

demandfromtheEmployersomethingwhichthe
ContractordeservesundertheContract.
(Note:paywhenpaidmaybecontrarytopublicpolicyand
toArticle891...Privity?Assignment?)

IfintheContracttherearenopaymentvalues
designatedthentheContractorshallbeentitledtopaymentofequal
valueoftheworksundertakenandthevalueofmaterialsusedinthe
executionoftheworks.
Article889 (1)IftheEngineerwhodesignedthebuildingandthe
supervisionconsultantareunabletoestablishequalvaluethe
Contractorshallbepaidthevaluesusedingeneralpractice.
(2)IftheContractorispreventedtocompletetheworks
foranyreasonthenheshallbeentitledtobepaidfortheworkswhich
hehascompletedinaccordancewiththedesign

UAEConstruction&Contracts

UAEConstruction&Contracts

SectionIV:TheExpirationoftheContractAgreement

VariousArticles
Article106:
Neitherpartymayexerciseitsrightsunderthecontractinamannerwhichis

(continued)
Article895
Ifthereisadisputeonanyclaimedcompensation
amountseachpartyhastherighttosubmithisclaim withinthelimits
establishedbycustom.
Article896 (1)TheContractwillbeterminatediftheContractordies
anditwasagreedthathewilldotheworkshimselforitisfoundthat
hispersonalqualificationsareirrelevanttotheContract.
(2)IftheContractdoesnotmakementionoftherequirementfor
personalqualificationsoftheContractortheEmployerhastherightto
requestdissolutionoftheContractiftherearenotsufficient
guaranteesthattheContractorslegalbequeathedcancarryout
implementationofgoodwork.
(3)Inbothcasesthelegallybequeathedshallbeentitledtothe
totalvalueofcompletedworksandexpenditureinaccordancethe
termsoftheContractandrequiredcustom.

oppressiveorabusivetotheother.Exerciseofarightshallbeunlawfulif,
amongotherthings,theinterestsdesiredaredisproportionatetotheharmthat
willbesufferedbytheotherparty.Thus,ifanotherwisevalidandmeritorious
claimisdisallowedsolelybyreasonofpurely technicalbreachofanotice
provision,thismaybeunlawful,especiallyifthelikelyfinancialharmtothe
ContractorisdisproportionatetotheinterestsinupholdingtheEmployers
contractualrighttoreceivetimelynotice.
Article246:
Neitherpartyshouldactinbadfaith.Thiscouldmeanvaliditytoanoticeby
wayofminutesofameetingoramonthlyreport,i.e.itwouldbeanactofbad
faithnottoacceptthis.
Article318and319:
Unjustenrichmentisunlawfuli.e.rejectionofavalidclaimjustbecausethe
timelimitfornotificationhasnotbeenmet;paymentforadditionalworkisto
bemade.

TheUAEConstitution&Contracts
SpecialisedlawsandDecrees suchasLawNo.6of1997

relatingtocontractswithGovernmentDepartmentsinthe
EmirateofDubaiandlawNo.4of1983fortheEmirateof
AbuDhabi.
Articles203 219oftheCivilProcedureLaw(LawNo.11of

1992)(the"CPL")relatestoCivilaction,Arbitrationand
appointmentofarbitratorsaswellasauthenticationof
arbitralawards.

TheUAEConstitution&Contracts
Federaljudgmentsdeliveredbythefederalcourtsin

theUAE(AbuDhabi,Sharjah,Fujairah,Ajman,Umm
AIQuwain)aresubjecttoanappealtotheAbuDhabi
SupremeCourtofCassation(Federal).
JudgmentsdeliveredbytheDubaiCourtofAppealare

subjecttoanappealtotheDubaiCourtofCassation.

Note:On19November2006,theUAEformallyaccededtotheNewYork

ConventionontheRecognitionandEnforcementofForeignArbitralAwardsand
thetermsoftheConventionbecamelawthroughouttheUAE.

ThereisnoCassationCourtinRasAIKhaimah.

UAEConstruction&Contracts
JudgesintheUAEfederalandlocalcourtsapply

theprovisionsofthespecificlaws,established
usageorcustomaswellastheIslamicShari'a.
PriorityofLawsoftheland:
Federallaw;
Emiratelaws;
Constructionindustrycustom;
Generalcustom;
Lawspertainingtocivilmatters.

ChoiceofContractForm
Partneringapproach:commongoals;collaborative;integratedproject

team;spiritoftrust,goodfaith,fairnessandmutualcooperation,no
blameculture. AlluseKPIs,ValueandRiskManagement.
PPC2000; PrePossessionAgreement.PartneringCharter,amultiparty
contractrelatingtoasingleprojectthroughrisk management;
NEC3 (ECC); OptionX12,Programmeledcontract.ScheduleofPartners&
CoreGroupMembers;betweenmorethantwopartiesonthesameproject.
BeCollaborative; Client/PurchaserandSupplier,cooperativeand
collaborativemanner.Supplierisresponsiblefortherisk register.
GMP;CeilingpricereachedthroughVE,agreedpreliminariesand
benchmarkingetc
Cost+;Mutualagreementonpreliminariesandceilingprice.
Hybrids;targets,incentives,paingainetc.
FIDIC

ContractFormation

1.1Offer&Unconditional Acceptance

Theessentialsofavalidsimplecontract are:

Definite offer accepted unconditionally,

the meeting of two minds (consensus ad idem).

1.1
1.2
1.3
1.4
1.5
1.6
1.7

Offer&unconditional acceptance;
Consideration;
Intentiontobebound(tocreatelegalrelationship);
Legalityofpurpose(Contractmustbelegal);
Capacityofthepartiestocontract;
ReasonableCertainty(Sufficiency)ofTerms;
Possibilityofperformance.

Qualified (conditional) acceptance,

a counteroffer (invitation to treat?)

Genuine agreement and consent,

i.e. no duress.

1.1(a)OffersandCounterOffers
Always reaffirm the conditions and terms that shall prevail

upon acceptance.
Beware of the terms and conditions attached to an offer,

1.1(b)Acceptancebyconduct
Anoffermaybeacceptedby:
Despatchinggoodsinresponsetoanoffer

particularly a final offer.

Carryingoutworkonreceiptofanorder

Battle of the Forms He that fires the last shot!

1.1(c)OffersandCounterOffers
ChichesterJoineryCovJohnMowlem(1987)
Thelastshotwasfiredbythesubcontractorwithan
AcknowledgementofOrder
Thiseffectivelyreimposedthetermsoftheirown
quotationwhichhadbeencounteredbyMowlemsOrder
document
Mowlemdidnotobjecttotheacknowledgement,believing
thattheirorderprevailed;unfortunatelyforMowlem,itdid
not.

1.2(a)Consideration
Definition:
Consideration is some right, interest, profit or benefit accruing to the one

party, or some forbearance, detriment, loss or responsibility, given, suffered

or undertaken by the other.
anexchangeofanact;
apromiseofanact;or,
aforbearancenottocarryoutanact.
Examples of valid consideration would be the payment of money, a promise

to pay money, a promise to perform work, or forbearance from deducting

damages. The monetary value of the consideration is not material for the
formation of a contract as long as it has some value.

1.2(b)WhenisConsiderationneeded?
The essential element of consideration should be borne in mind with
particular regard to the following:
Fairness of the bargain is irrelevant e.g. AED 5 for a Rolls Royce;
Simple contracts (as opposed to contracts by deed) require each party to

give consideration for a contract to be binding;

A gratuitous promise is not normally enforceable;

1.3 Intention tobebound

(1of2)

No binding contract will exist unless it has been made in

contemplation of legal consequences;

A mere statement of intention made in the course of

conversation will not normally constitute a binding promise,

though acted upon by the party to whom it was made.

Hence, the presence of any consideration demonstrates that the promise is

not simply gratuitous;

In every simple contract each partys promise is the consideration for the

other partys promise. In other words there is an exchange of promises.

1.3 Intentiontobebound

(2of2)

In written commercial transactions...

intention to create legal relations is presumed, however in
social and domestic arrangements it is the opposite, the courts
have presumed that the parties did not have intention to create
legal relations.

1.4.Legalityofpurpose
The contract must be legal;
Illegal by Law:

Anillegalterminacontractwillbevoidandeffectivelystruck
out.E.g.,anydetailorspecificationwhichcontravenesUAE
Lawisinvalid.IftheContractororSubcontractorknowingly
incorporatestheillegaldetailthentheremaybenoobligation
ontheEmployertopayforthatwork.

1.5.Capacity
Companies can only contract in accordance with the services

allied to their Licence.

1.6.Reasonablecertaintyofterms(1of2)
It is necessary that the parties agree on its essential terms.
The essential terms must not be so vague as to be incapable of

ascertainment.
Minors, drunks and lunatics cannot enter into a contract. That

is to say, any purported contract entered into by persons in

those or similar categories will be declared void by the courts.

1.6 Reasonablecertaintyofterms(2of2)
Court of Cassation, Case Study 34011999: here the judgment
confirmed that when interpreting contracts, the correct approach
based on Article 265 of Federal Law No. 5 of 1985 (the Civil Code),
is that:
ifthereisscopeforinterpretationofthecontract,an

enquiryshallbemadeintothemutualintentions ofthe
partiesbeyondtheliteralmeaningofthewords,and
guidancemaybesoughtinsodoingfromthenatureofthe
transaction,andthetrustandconfidencewhichshouldexist
betweenthepartiesinaccordancewiththecustom insuch
dealings.

Provided the essential terms are agreed, the courts may imply

ancillary terms to give what is called business efficacy to the

contract e.g., where the contract sum and the extent of work are
agreed but no contract period has been fixed. The court may
determine what is a reasonable time in all the circumstances for
completion.

1.7 Possibilityofperformance(1of2)
A party to a contract is entitled to have the contract performed

in the manner described in the contract. That party cannot be

compelled to accept a different mode of performance.

The parties may, by agreement or waiver, substitute a different

mode of performance for that originally agreed and by so doing

create a new contract, providing that valuable consideration is
present in so doing.

Whether, what has been done constitutes performance of the

contract is a question depending in each case on the

construction of the terms of the contract and/or the facts of the
situation.

1.7 Possibilityofperformance(2of2)

Awaitingthetenderresult...

Occurs, where the circumstances imply a requirement for

Tender is submitted;

performance by an exact time;

Failure to perform gives rights to the other party.
The general principle is that performance must be carried out
within a reasonable time. The exceptions to the general
principle for a reasonable completion time arise where time is
expressed in writing as of the essence;
Where time was not originally of the essence in a contract and
one party has been guilty of undue delay, the innocent party
may give notice requiring the contract to be performed within a
reasonable time, in which case time is said to become of the
essence.

Post Tender Negotiations are finished;

LettersofIntent

LettersofAcceptance(1of4)

Avoid letters of intent wherever possible a dangerous vehicle to rely on

for the formation of a contract

Banking & Finance issues are in place;

Bond is running;
Staff are eager;
Vehicles and equipment are on standby;
Potential new staff are being interviewed;
Accommodation Contracts are renewed;
Suppliers are being squeezed...

In most instances it should be possible to negotiate and compile a comprehensive

formal Contract Agreement: hence, a scantly written Letter of Acceptance should
be the exception, not the standard approach

10

LettersofAcceptance(2of4)
Differentlettertypes,Acceptance,Confirmation,

Agreement,etc,checkthepurposeandcontent:
Asimplestatementofintentionisuncertain;

BritishSteelCorporationvClevelandBridge(1984)

Arequestforworktobecarriedoutmaybebinding

dependingonpartiesconduct;
Beware:Astatementconfirmingthatcontracttermsand

conditionswill beFIDICetcdoesnotnecessarilyinvoke
thoseconditions.

LettersofAcceptance(3of4)
An expression in writing of a partys present intention to enter

into a binding contract with clearly stated scope, agreed terms

and conditions including clearly identified terms and
conditions yet to be finalised.
ALetterofAcceptancemightbeusedwherewewantworkto

commencebeforethefullscope,termsand/orconditionsare
settled,i.e.:
ScopeofWorksyettobefullydesigned;
Pressureonimmediatestart;
Longleadinperiodformaterials;
Contractsumyettobefinalised,etc;

BryenandLangleyvMartinRodneyBoston(2004)

LettersofAcceptance(4of4)

ExpressorImpliedTerms?

Thelettershouldincludecleardetailsof:

Express terms are generally those which the parties

finalofferandacceptanceletters/documentsandterms;
backtoback conditionsofmaincontract,attachclausesthatapply!
paymenttermsandprocedures;
authorizationtoproceedwithspecificdefinedactivities;
definedlimitofexpenditureand subsequentarrangement;
definedperiodoflettervalidityand subsequentarrangement;
termination&windingdownclause;
Bonds,advancepayments;
timeforsubmittals,programme,insurances/indemnityetc;
intellectualpropertyrights,warranties;
liquidateddamagesand/orpenalties,perday,limit;
startandcompletion/sectiondates;
provisionsforvariationsandinstructions;
applicableLaw,noprivity ofcontract,timeisoftheessence,etc;
signaturestoconfirmacceptanceofthetermsandconditions

have written into a contract.

Implied terms which, although are not specified in
writing or orally, can nevertheless be as binding as
express terms.
The courts will analyse the agreement, unearthing
what is necessary and obvious for the satisfactory
performance of that particular contract.
Implied terms arise, or may be implied, in the
following ways: .

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BytheCourts...

ByCustom...

The presumption of the true intentions of the parties

If a rule of custom is relevant, but the contract makes

when such intentions are not fully expressed, ie in

legal terms this is known as business efficacy (this is
not the same as reasonableness)
The term must be so obvious that if the parties were
making the contract and a bystander were to suggest
the inclusion of the term, the parties would have
replied oh of course.
Certaincontractscontainspecificimpliedterms
automatically,e.g.Whopaysforpetrolinarenta
car.

no reference to it, the courts may imply the custom

into the contract;

ByStatute

However, the order of precedence will prevail. The

rules for terms implied by custom are as follows:

Evidence that the custom exists (whether the parties knew

this or not).
Courts cannot incorporate the custom if the contract

contains express terms which rule out the custom.

Recap
TheUAEConstitutionprovidesfortheLawsand

organisation;
The Government implies terms into a contract.

Asimplecontractcanbewritten,oralorimplied,ora

The terms are not based on intentions of the parties, but

Itisalwaysbesttoproperlysetouttermsandconditions

combinationofall;
on rules of law / public policy

andchecktheessentialsarecovered;
AllcontractsmustcomplywiththeLaw,moststatethatit
shallbeconstruedinaccordancewiththeLaw;Hence,an
awarenessoftheLawisessential;
ContractdisputesmaybesubjecttoDAB&/orarbitration
orCourtjurisdiction.

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TheEnd
THANKYOU
Questions&Answers

talos

consult

Gary Beamish
Eng.C, C.Eng, C.Env, C.WEM, MICE, MCIWEM, MQSI
M: 050 4889751

Operating under the official Licence

Title of Beamish Consultancy FZE

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