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10 Crucial Aspects of Contract Law in the UAE: Al Kabban & Associates’ Expert Insights

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Aspects of Contract Law in the UAE

Contracts form the backbone of any business transaction, laying the foundation for successful partnerships and secure financial dealings. With the UAE’s dynamic and complex legal system, a clear understanding of contract law is crucial for both local and international businesses operating in the region. Gaining insight into the essential aspects of contract law helps ensure legally binding agreements, protecting your business interests and fostering lasting professional relationships.

In this listicle, we will explore 10 must-know facts about contract law in the UAE, drawing on Al Kabban & Associates’ extensive knowledge and experience in managing contractual matters. From drafting and execution to enforcement and dispute resolution, this guide will provide you with a solid foundation for navigating the complexities of contract law in the UAE and ensuring robust legal protection for your business endeavours.

1. Formal Requirements of a Valid Caontract

To ensure a contract is legally binding in the UAE, it must adhere to specific formal requirements. According to the UAE Civil Transactions Law (Federal Law No. 5 of 1985, as amended), a valid contract must involve:

  • Offer and acceptance: A clear proposal from one party and acceptance from the other.
  • Legal capacity: Both parties must be competent individuals of legal age and able to undertake contractual obligations.
  • Lawful purpose: The contract’s objective must not violate UAE laws or public policy, and the parties should not be prohibited by law from entering the agreement.

Moreover, written contracts are recommended, though not mandatory for most transactions, as they provide stronger legal protection and evidence if a dispute arises.

2. Language Considerations

Contracts in the UAE can be drafted in both Arabic and English. However, it is essential to note that if a dispute reaches court, Arabic versions of contracts will be the documents analyzed and enforced. If an English-language contract does not have an Arabic translation, it will be translated by the court, but the translation may not capture the original intent. Therefore, it is best to create bilingual contracts with professionally translated Arabic provisions to avoid ambiguity or misinterpretation.

3. Governing Law and Jurisdiction

For a contract to be legally enforceable in the UAE, parties should specify the governing law and jurisdiction in the event of a dispute. While UAE law often applies by default, parties can choose another jurisdiction provided the contractual subject matter and counterparty do not mandate otherwise.

If parties do not explicitly mention the governing law, jurisdiction, or dispute resolution methodology in their contract, disputes may be subject to any of the following:

  • The UAE courts, which follow the UAE Civil Code and other commercial laws
  • The Dubai International Financial Centre (DIFC), an English-language common law jurisdiction
  • Arbitration through local or international arbitration centres, as recognised by the UAE Arbitration Law (Federal Law No. 6 of 2018, as amended)

4. Types of Contracts and Their Conditional Requirements

The UAE contracts landscape broadly classifies agreements into unilateral, bilateral, and aleatory contracts. Moreover, some contracts require specific conditions to be legally valid:

  • Real Estate Contracts: According to the UAE Civil Code and specific emirate laws, agreements related to property or land ownership must be written and registered with the relevant land department or authority.
  • Employment Contracts: As per the UAE Labour Law (Federal Law No. 33 of 2021), employment relationships must be accompanied by written contracts, including mandatory terms such as job description, salary, and work hours.

Ensure your contracts fulfill sector-specific requirements as mandated by relevant laws and regulations.

5. Exclusion and Limitation Clauses

Exclusion and limitation clauses outline specific circumstances under which a party’s liability may be restricted or excluded. The enforceability of such clauses largely depends on the scope, clarity, and appropriateness of their terms. In the UAE, exclusion and limitation clauses are generally upheld; however, certain exclusions may be considered void if deemed unacceptable in the eyes of the law. Consulting an expert, such as Al Kabban & Associates, will help ensure that your exclusion and limitation clauses are lawfully drafted and enforceable.

6. Implied Terms

In the absence of specific contractual provisions, the UAE Civil Code may imply terms to uphold the parties’ intentions or conform to existing local customs and practices. For instance, the Code might enforce the principle of ‘good faith,’ requiring parties to execute contracts honestly, fairly, and without deceit. Awareness of implied terms can help you draft a comprehensive contract that aligns expectations and prevents disputes.

7. Termination and Breach of Contract

Termination of a contract in the UAE can occur by mutual agreement, court order, or in instances where the contract’s objective becomes unlawful or impossible. Parties must outline explicit termination provisions in their agreements to safeguard their interests and ensure a seamless process if termination occurs.

Breach of contract arises when one party fails to fulfill their obligations, resulting in potential legal consequences. These may include:

  • Damages: Monetary compensation for losses incurred due to the breach.
  • Specific Performance: Court-ordered fulfillment of contractual obligations.
  • Injunction: A court order prohibiting a party from conducting a particular act or obligation.

It is essential to outline remedies and procedures for breach of contract within your written agreements, ensuring clarity and protection for both parties.

8. Force Majeure and Frustration

Force majeure clauses typically relieve parties of liability resulting from unforeseeable and uncontrollable circumstances, such as natural disasters or political unrest. In the absence of a force majeure clause, UAE courts may apply the ‘frustration’ doctrine under certain conditions, under which a contract’s obligations are waived due to an external event rendering performance impossible.

By understanding these critical aspects of contract law in the UAE—formal requirements, language considerations, governing law, contract types, exclusion clauses, implied terms, termination, and force majeure—you can develop comprehensive, legally binding contracts that protect your business interests and minimize the likelihood of disputes. Ensure your contracts are fully compliant by seeking assistance from seasoned professionals like Al Kabban & Associates, experts in contract law and negotiation in the UAE.

Safeguard Your Business with Expert Contract Law Assistance

Navigating the intricacies of contract law in the UAE can be challenging, but with a thorough understanding of the essential aspects and expert guidance from a reputable law firm like Al Kabban & Associates, you can safeguard your business interests and forge strong professional relationships. Our team of seasoned professionals offer valuable insights and tailored solutions to ensure your contracts are legally sound and enforceable, providing you with the confidence to engage in seamless business transactions and effectively manage disputes should they arise.

Don’t leave your business’s success to chance – secure robust legal protection and peace of mind with Al Kabban & Associates’ contract law expertise. Contact our business lawyers in Dubai today to discuss your contractual needs and receive the knowledgeable guidance necessary for securing successful business transactions in the UAE.


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