The UAE’s contract law is predominantly regulated by Federal Law No., 5. This law outlines the legal mechanism for contract formation, interpretation, performance, and enforcement in the UAE. Listed below are the essential principles and regulations of contract law in the UAE:
1. Contract Law in the UAE
The UAE Civil Code adheres to Islamic Sharia principles and incorporates elements from Egyptian and French civil law. In the UAE, there are three fundamental areas of contract law:
The right to make contracts and agree on their terms is granted to parties, as long as it does not conflict with public order, morality, or mandatory legal requirements.
Good faith is a prerequisite for contracts, and parties must act with honesty and fairness.
The binding nature of contracts is characterized by the fact that they can only be modified or terminated by mutual agreement or legal provisions, and are therefore considered valid.
2. Formation of a Contract
The UAE Civil Code states that the terms of a contract are determined by both parties.eu. The foundation of an authentic contract is made up of:
Offer and Acceptance :
To be accepted, an offer must have clear and specific terms and conditions.
The terms of the offer must be reflected in acceptance and communicated to the offering party.
Subject Matter
It must be lawful, specific , and can involve the performance of a contract
Contracts that involve unlawful or immoral conduct are rendered invalid.
Capacity of the Parties :
A contract is only made by those who possess the necessary legal knowledge.
The requirement is that they are of sound mind and must be legally over 18 years old.
Any contract entered into by a minor or someone lacking the ability to think may be invalid.
3. Types of Contracts
The UAE Civil Code outlines different contracts, such as:
The transfer of property ownership through a sales contract.
Governance:
Manage the lease of property or assets.
The employment contracts that govern the relationship between employers and employees.
Service Agreements: Manage the provision of services.
Joint ventures and business partnerships are governed by partnership contracts
4. Terms of a Contract
These are the express terms that have been agreed upon by both parties.
Unsaid Terms are those which have been implied by law, custom, or the nature of this contract.
Mandatory Conditions: UAE law mandates specific conditions, such as employment contracts being obligated to comply with the UAE Labor Law.
5. Performance of Contracts
Termination is a prerequisite for performing contracts within the designated time limit. If there is no time limit, the performance must be completed within a reasonable timeframe.
Venue: The performance is to take place at the location that has been agreed upon. If the location is omitted, the performance must take place at the debtor’s home or workplace.
If one party only fulfills its responsibilities, it may be willing to accept or reject the latter option.
6. Breach of Contract
If a party fails to fulfill its contract obligations, it is considered infringing. Examples of remedies for contract violation are:
The court may require the breaching party to meet specific performance standards.. 1.
- Damages: The non-breaching party may be entitled to compensation for damages incurred in breach.
- End of Contract: Non-breaching party can end the agreement if sued for damages.
7. Termination of Contract
A contract can be terminated in the following ways:
By mutual consent, the parties can terminate the contract.
When all obligations are fulfilled, the contract is considered terminated.
By Breach: The non-breaching party may terminate the contract by breaching a material term.
The contract can be terminated due to legal reasons such as impossibility of performance or frustration, under the Operation Law.
8. Limitation Periods
The statute of limitations for filing a breach of contract claim is typically 15 years…?
The limitation period for certain claims, such as commercial transactions, is 5 years.
9. Special Considerations
Any contracts that violate public policy or morality are invalidated. Unenforceable contracts include those related to gambling or illegal conduct.
The Islamic Sharia mandates compliance with riba in contracts, which is necessary for certain transactions to be conducted.
The UAE typically uses Arabic as the language of contracting.
An Arabic translation may be necessary for UAE courts to enforce a contract that is written in limbo in a language.
10. Recent Developments
Federal Decree-Law No. 50. Contracts are now created and executed electronically in the UAE through digital transformation. Hence,
11. Practical Advice for Contracting in the UAE
Effectively and precisely write contracts to avoid confusion