United Arab Emirates: Verbal Promise, Law Governing Frauds And Promissory Estoppel

Last Updated: 4 September 2018
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, September 2018

Reliance on Oral Promises and the Concept of Statute of Frauds and Promissory Estoppel

Reliance on oral promises is a significant aspect of real-world litigation. In what follows is a hypothetical example of the application of dependence on verbal agreements; A woman moved from London to Dubai to work for a company based in Dubai. This woman signed a lease for a villa in Dubai. After three months of employment as a manager at the company, such company fired her from her position. The woman went on to sue to company alleging a breach of an alleged oral agreement that she would be under the employment of the company for two years. It is understandable that a Court might question her claim that the company had promised her two years of work. In circumstances where a promise occurred, it is acceptable for a court to examine whether her reliance on such promise was reasonable and whether the termination of her employment before the expiration of the period of two years was reasonably foreseeable. One can speculate whether the Court will find in favor of the reliance on the promise or not. However, a Court will probably dismiss her claim and base such dismissal on the contractual law concepts of promissory estoppel and statute of frauds. The use of this concept is to prevent Courts from considering claims-based on reliance on oral agreements. However, this does raise questions. 

The doctrine of estoppel applied to the statute of frauds

This law is a concept concerning which specific types of contracts regarding which the execution of such must be in writing. The exact form of the enactment of frauds differs between jurisdictions. However, generally accepted arrangements to be completed in writing according to the statue include:

  1.  Those contracts for the sales of land;
  2. Those contracts for the purchase of goods above a specific monetary value;
  3. Those contracts concerning which the completion will not take place in under one year;
  4. Those contracts in which one party is to pay the debt of another party.

On the other hand, promissory estoppel is a concept of law that a promise is enforceable by law, regardless of whether it was made with or without formal consideration – if a person promises something to another person who then relies on such promise to his subsequent detriment, that promise may be considered enforceable by law.

Concerning the execution in writing of the contracts mentioned above, the following provisions may apply. Should there be a partial performance by a party to an agreement for goods or real estate, the court may be compelled to enforce an oral real estate contract since the court cannot efficiently or fairly place the parties in the position they were in before the commencement of the agreement.

Another way in which a party can be exempt from the restrictions placed on such party by the statute of fraud is through admission. In such case, if one of the parties to a contract admits that that contract binds them, either by a statement or action, they then cannot claim that the statute of frauds relives them from their obligations.

Promissory estoppel is one of the reasons that the statute of frauds ceases to apply to a contract. Promissory estoppel can end up in the enforcement of agreements that the Statute of Frauds would otherwise disallow if either of the parties made a justifiable reliance of the other party's promises. Promissory estoppel will apply if such reliance by a party resulted in harm to the party that was relying upon it, and that the party that put forward such promise could have reasonably foreseen the reliance of the other party. In this instance, the only way to avoid committing and injustice would be to enforce the contract.

Promissory estoppel can arise in contracts of sale of real estate, contracts regarding which the completion cannot happen in a year and agreements for the satisfaction of another party's debt, those abovementioned. There is an exception awarded to arrangements in which one party assumes the liabilities of another. If the sole reason for the assuring party to agree is selfish, or that the proprietary reason is to ensure that the responsible party also pays the debt owed to the assuring contractor, then the contract may not be required to be in written format.

 If the agreement is between two parties, a memorandum can work to invalidate a defense by a party stating that the Statute of Frauds makes the contract void ab initio. A memo can take on many forms, but it is a note exchanged by two parties that defines the subjects discussed in a meeting. These memorandums do not have to take a particular format to invalidate a defense reliant upon the Statute of Frauds to escape liability

Use of promissory estoppel to circumvent the statute of frauds

According to precedent, many courts refuse to use promissory estoppel to avoid the statute of frauds. This refusal is due to the fear that oral evidence, if not excluded by the law, will cause prejudice. It is also apparent, however, that in many jurisdictions, the authority is willing to protect promises which, rely on an agreement to their detriment and have incurred unconscionable injury.

An example of such use would be a mother and stepfather told their son that should stay at his residence and work on the farm His stepfather would convey such farm to him upon the death of the last survivor between the mother and father. In reliance upon such promise, the son gave up all of his business and educational opportunities to work and stay on the far. Upon the death of his stepfather, it was apparent that the stepfather had reneged on the agreement by leaving his share of the property to his grandson. In such a case the grandson would be estopped from asserting the testament.

The doctrine of estoppel to profess the statute of frauds has been applied consistently by the courts to prevent fraud that would result from refusal to enforce oral contracts in certain circumstances. Such fraud may occur in an unconscionable injury that would inhere from refusing the enforcement of the agreement. This fraud would happen after one contracting party has been induced by another to change such contractors position in reliance on the contract seriously or in the case of unjust enrichment that would result if a party who has gained the benefits of the another's performance were allowed to rely upon the statute.

Both unconscionable injury and unjustified enrichment were found to exist in the context of promissory estoppel. Most cases apply unconscionable injury as the threshold criteria for the determination of the proprietary application of promissory estoppel. The future intention of the promisor is the critical element of promissory estoppel; it differentiates an action from that of part performance in that partial performance does not constitute an unconscionable injury. 

Legality promises in employment in the UAE

Should either the employer or the employee in a contract of employment wish to terminate such a contract, they may do so. However, such agreement to end must be in writing and consented to by the employer.

Concerning an agreement to employ and on what salary, the next example will depict a situation of such occurrence in the UAE. A recruitment agent orally promised an engineer from India that there was a position in the UAE as an engineer with a salary of AED10,000. When the engineer arrived the job he was placed in was that of a supervisor and was only provided with remuneration of AED6,000.

In this case, because the party which offered the former package to the engineer was a recruitment agent and that the engineer did not receive any written confirmation from the employer regarding the terms of his employment. He will not have a claim against his employer for violating an oral promise.

Oral promises regarding leasing property in the UAE

In the below-mentioned example will be a depiction of the standing of a verbal commitment concerning leasing in the UAE. A woman moved into an apartment as was aware of the fact that she would only be residing in such an apartment for six months. However, she paid the full years rental on the oral assertion of the rental agent that if she should give one month’s notice in her fifth month of rental that she would receive five months rental in return. On the approach of the fifth month, the women notified the agent of her intention to move from the apartment. On the confirmation from the agent, the woman vacated the residence, and the rental agent informed her that the rental amount already paid would be paid to her in a week. The money ultimately was not paid back to her.

In the eyes of the law according to this matter, the fact that the woman took out an agreement for an entire year will take priority over the verbal agreement. The verbal agreement that allowed the woman to vacate early with a promise of the return of some of the rental monies will not withstand in court. The court can only be terminated early if there is a specific clause in such a contract that allows for such early termination or if the landlord agreed to it in writing. Without proof of the oral agreement, the written agreement will take precedence.

Jungquist v. Nahyan, 940 F.

This case involves a terrible boat accident that took place in Abu Dhabi in the year 1993. The plaintiff was a minor American female living with her parents in Abu Dhabi. The allegation is that such an accident occurred on the return trip to the docks in which the defendant drove the boat recklessly through a dangerous channel after intaking alcoholic beverages. The defendant's speed-boat collided with the that in which the young girl was in, causing her to be thrown from the vessel and struck by the propeller of the defendant's boat. The young girl now suffers from brain damage due to the accident.

The plaintiff in the abovementioned case alleged that the defendant approached them after the accident and offered to pay all costs and damages in exchange for the plaintiff not to involve the authorities or embassy. The motive behind such a proposition was alleged to protect the defendant from any resulting personal or political repercussions that would derive from the accident. The plaintiff stated that the performance of the contract was in part in the District of Columbia, where the young girl was receiving medical treatment for eight months at the defendant's expense. The defendant paid such costs from his United Arab Emirates Bank account. Upon the establishment that the girl's condition was permanent and that she would need indefinite medical care, the payments ceased. 

The plaintiff then sued the defendant for a multitude of claims including breach of contract and promissory estoppel

Concerning this case, the court allowed limited jurisdictional discovery, to make sure that the allegations against the defendant and others named in the claimant were not baseless. The defendant denies any involvement in the accident but has admitted to being at the scene, as well as following the ambulance to the hospital and visiting the young girl in the hospital in Germany. These statements are consistent with the version of the events and also corroborate the plaintiff's detailed allegations. For such reasons, the court denied the defendants' motion to dismiss and the court is going to issue an order.

Conclusion

The concept of promissory estoppel to defeat the statute of frauds has been widely utilized and occurs under a multitude of guises. The understanding is that under such theory a third party can seek such support against a promisor, by just establishing the elements of the principle.

In our world today, everything happens at such a high velocity, especially business. Deals are being made at the dinner table or in the hallway, and although the execution of all agreements should follow the strict conditions that they are in writing, this is not the way our world works. The reliance on an oral agreement or promise must be reasonably foreseeable by the promisor to qualify under the doctrine of promissory estoppel. However, the reasonability of such is judged on a case by case basis. The Statute of Frauds is a concept in which all agreements and promises are to be in written form. However, the doctrine provided a layer of protection for transactions which are not in writing. One should, however, err on the side of caution as the legal standing of such promises or agreements is not a guarantee.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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