Understanding the Fundamentals of UAE Contract Law

People in the Emirates make contracts for some reason and the UAE contract law is what regulates them. Contract agreements are useful for purchasing anything from an office item to a negotiation with a million-dollar company. Likewise, each country has its laws for the formation of contracts and the UAE is no exception.

In this article, you will learn about what is Contract Law. And the rules governing contract laws in the United Arab Emirates. In addition, you will observe what the types of contracts are like and the conditions to apply them.

What is a UAE contract law?

UAE contract law is a set of legal rules that form the basis for the interpretation, formation, and enforcement of contracts. Equally, they are an important tool for both business and commercial activities. Likewise, it is the Civil Code that applies to contractual law assets. Also, it applies to any contract in law in the United Arab Emirates.

Major Types of Contract Law in UAE

The Contract Law UAE is one of the branches of civil law that regulates the relationship and agreements between the parties involved in a contract. Likewise, its objective is that both parties comply with the conditions established in the contract. Below are the types of contracts in the Emirates:

Employment Contracts

One of the types of contractual rights in the emirates is the employment contract law. Therefore, about employment in the Emirates, addresses the relationship between employees and employers. Furthermore, in the United Arab Emirates, contract laws do not require the enforcement of written employment contracts.

Furthermore, in the country, there is an indefinite period contract or unlimited contract and a limited duration contract. Likewise, the unlimited-time contract may terminate if any of the parties express the desire to terminate it. In comparison, the limited contract will end according to the time that was set in the established agreement.

Additionally, during the trial period, it is possible to terminate a contract if either party wishes. However, at the end of this time, this is part of the total employment time. In addition, the employer can give some monthly, daily, or weekly bonuses as long as there has been an agreement between both parties.

Similarly, bonuses can be monetary as long as the employee and employer have agreed to it.

Loan and Finance Agreements

The UAE contract law regarding loans and financing for business or personal use has certain key conditions. Thus, you must know them before applying for the loan and signing it. Similarly, in the UAE, various rules and regulations govern loan agreements so you should discuss these with a lawyer.

The purpose of this is to guarantee your interests and rights before financial institutions.

Lease Agreements

As for the lease contract, according to the contract law of Dubai and other emirates, they are the most common contracts in this region. Likewise, the law allows both parties to agree on the amount of the initial rent. Additionally, within 24 months of the lease contract, the tenant will not be able to increase the rent of the space.

Similarly, any demand regarding a written contract will be possible only if you register it with RERA. On the other hand, you will not be able to cancel the lease if the other party does not agree. That is, if you want to end the contract early, whether you are a tenant or owner, you will have to give 3 months' notice.

Licensing Agreements

In UAE contract law a license agreement is a contract between the licensor and the licensee to grant a right to use a trademark. Likewise, you must register the brand and, if it is technology, you must patent it. Also, if it involves selling the goods that are the property of the licensee.

Insurance Contracts

An insurance contract contains the details of the conditions of your policies, including what is covered and what is not. Also, establish the exact amount that you will have to pay for it. This type of contract law in UAE may contain terms that you may not understand when you read them.

Therefore, you must stop to carefully read the conditions before signing to avoid any inconveniences. Also, check to see if the contract has any errors that affect your coverage or rates.

Benefits of Contract Law in UAE

The basis of contract law affirms the legal relationships between the parties that sign the contract, whatever it may be. Therefore, both parties must respect the clauses, rights, and obligations. In addition, this will bring you the benefits that we will detail below:

• ·      A fair and balanced relationship.
• ·      Avoid future complications between the parties.
• ·      Protects your legal and economic interests.
• ·      It allows companies to have precise and clear agreements with clients, partners, and employees, among others.
• ·      With it, you can establish limits and obligations that both parties must comply with.
• ·      Reduces risks due to conflicts and non-compliance.

Moreover, is convenient to work with a specialized lawyer in the UAE contract law. Therefore, you will have more efficient protection against possible financial damage or harm to your reputation.

Guidelines that a contract must have under the new contract law UAE

Next, the details of the elements that a contract must contain in contractual law consideration:

• ·      Identify the parties involved in the contract. When you draw up a contract, specify very well who will be part of it. Likewise, if it is a person, a group of people, or a company.
• ·      Clearly define the terms of the contract. Be clear and very concise in the conditions and terms you want to establish in the contract. Also, add clauses if you need them so that there is no misunderstanding or confusion.
• ·      Specifies the obligations that both parties will have. According to UAE contract law, each party involved in the contract has to know precisely its obligations. In this way, you will avoid any conflict and ensure compliance with what is established in the contract.
• ·      Propose precise dates and deadlines. Clearly define the dates of the start of the contract and the end of the term for compliance with the obligations.
• ·      Include some clauses for conflict resolution. In the contract, write clauses that allow you to resolve problems that may arise.
• ·      Check that the contract complies with the new contract law UAE. Make sure the contract is under the laws that are in effect at the time. This will avoid legal or judicial inconveniences.
• ·      Review the contract. When you finish writing the contract, review it thoroughly, even several times, to make sure it has no errors.

Main Principles Governing the UAE Contract Law

According to UAE contract law, the principles that govern it are as follows:

Adhesion contract

Generally, in the Emirates, the courts cannot intervene with the terms of a contract made by mutual agreement. With this, the parties involved will have the security of compliance with what was freely agreed upon. However, article 248 of the Civil Code authorizes a judge to eliminate any part of the article considered abusive for the adhering parties.

This action of the judge is called an adhesion contract. Likewise, if a contract does not comply with the established conditions, they may execute the adhesion contract. However, it is not a contract of adhesion if they modify the contract even a little.

Principle of good faith

In contract law in the UAE, in Article 246 of the Emirates Civil Code, a good faith contract will be performed according to its terms. That is, this article states that the parties must act in good faith when making a contract. Furthermore, based on the code, acting in good faith implies not using terms in the contract that abuse the rights of the other party involved.

Therefore, the person who draws up the contract must ensure that his or her actions are reasonable and moderate not to cause harm to the other party.

The termination of contracts

Article 267 sets out the terms for terminating a contract under UAE contract law. Hence, a contract is valid if neither of the two terminates it or modifies it. Additionally, if either party agrees or by court order, the contract could end. Below are the ways you can end the contract:

Termination by mutual consent

In this agreement, an employer or an employee could terminate the contract by mutual agreement, complying with Article 267.

Dispute Termination

If there is no mutually agreed termination, either party can bring the case to court. Therefore, it will be the court that dictates the terms to resolve the conflict.

Termination under law

According to Dubai contract law, any of the parts can terminate a contract by law for the following reasons:

• ·      Specific laws for legal disputes, such as cyber law, and labor law, among others.
• ·      Law of Force Majeure due to some unexpected event that results in one of the parties being unable to fulfill the contract.
• ·      Of a public nature or in public spatial situations through which one of the parties cannot comply with the contract. However, in this case, the exemption is permissible.

Contractual and extra-contractual liability

With breach of contract, the parties must determine certain obligations and rights. Hence, Article 124 of the code indicates personal obligations and rights due to legal circumstances and the law itself. Similarly, to establish whether an omission or any act is a breach of a contract or not, reference will be made to the contract, actions, acts, damages, or the law.

Therefore, it is contractual responsibility for the obligations that arise as a result of not complying with the conditions of the contract. Likewise, to claim contractual compensation, the requesting party must demonstrate that there was some breach.

Be careful with agreements to agree

UAE contract law in Article 141 of the Code, says that the parties must agree on the outlines of the obligation. However, they can leave the details for later. Therefore, the parties involved should express that there is no intention to be bound by Article 141.

Limitation clauses

Some intentional limitation clauses restrict the responsibilities of both parties in certain contracts. Likewise, they agree to compensation if any of them breaches the contract. In addition, those involved may set an amount for the compensation that they will have to pay for the contract or a separation.

This provision has to do with a clause for payment of damages and not to limit responsibilities or exclude them for any type of loss.

The misrepresentation

This term defines the action of breaking a contract because one person deceived the other and made them sign a contract. This will also include any false arguments that some of the parties have made and that they later discover. Article 185 of the law supports this and talks about so-called fraudulent acts.

Conclusion

The UAE contract law states that all contracts made under an agreement must be fulfilled and must be official as well as enforceable. Similarly, it is a mediator between both parties so that each one fulfills the obligations of the contract. However, if this does not happen, there are adequate remedies to compensate the affected party.

Likewise, according to the law, the contract cannot change, unless it is a contract of adhesion. On the other hand, you can contact us so that we can advise you and thus be clear about any contract that involves you.