United Arab Emirates: 6 Notable Points To Consider Before Signing A Contract

Last Updated: 30 October 2019
Article by Hassan Elhais

Whether it is for employment, buying/selling or leasing a property, construction of a building or applying for financial assistance from a bank, having a legal contract in such situations are inevitable. There is a lot of discrepancy and ambiguity in those pages which can sometimes be negligible to common eyes. A careful conscious is pertinent for reviewing any or every provision of the contract to avoid unwanted circumstances. Managing the outcomes, scrutinizing the commercial arrangements, maintaining corporate relation and receiving adequate information are some key factors assist in achieving preferable results. It isn't extraordinary for exceptionally cautious people to overlook an agreement and merely sign it without truly recognizing what it commits them or the other party to do. Always consult with Legal Consultants in Dubai prior to obliging yourself under an agreement which fails to safeguard your interests. Nevertheless, the Lawyers of Dubai will give the readers some essential tips on what all should one look for while reviewing a contract?

1. Law Governing the Contract

All the contracts within UAE are governed by several laws such as Federal Law Number 5 of 1985 UAE Civil Code, Federal Law Number 2 of 2015 on Commercial Companies Law or Federal Law Number 18 of 1993, UAE Commercial Transactions Law. The applicability of a specific law depends on the type of agreement, for example, any commercial contract will be governed by Commercial Transaction Law; any contract entered into between the partners of the company will be governed by Companies Law and alike. Despite the foregoing laws, the contract can also be governed explicitly by any particular law promulgated for such specific types of contracts such as employment contracts are regulated by the Labor Laws of UAE.

2. Right to Contract

It is indeed pertinent for the contracting party to determine whether or not they have the right to contract or if they have fulfilled the fundamental elements for drafting the contract which includes mutual consent to contract, a constitutional subject matter and permissible legal obligations. Besides the foregoing, the UAE Law obliges the parties' to evidence the offer and acceptance, true intent and the parties' capability to enter into a contract.

Importantly, mostly all contracts entered into by parties within the UAE are valid. Without prejudice to the generality, there are certain contracts which may be declared void or voidable by the court, for example, any contract to commit a criminal act or any contract which is against the moral and public values of the country are void ab initio. Any contract signed by the party who does not have the capacity to contract will be null and void.

3. Bona Fide intentions

Legal jurisprudence offers substantial significance to good faith or bona fide intentions of the parties while entering into any commercial arrangement.  It is very pertinent for the parties to have true intentions while signing the contract, which can be evident from the terms and provisions of the contract.

4. Confidentiality

Usually, most of the contracts should have a confidentiality clause as once the parties agree with the terms and conditions, the next step is to allow access to confidential information. Hence, obliging the other to safeguard the information and to restrict them to pass on such information which can jeopardize the market position of the contracting party. Although UAE law will be able to protect either of the contracting party for violation of the right to privacy, it is certainly important to put forth confidential clause which can protect you from unforeseen circumstances.

5. Termination Provision

Nothing is certain, but the uncertain and to be prepared for the unpredictable is your job. Hence, the provision like termination must be inserted in the contract allowing either party to terminate the contract mutually. This is in accordance with the UAE Civil Code which authorizes the parties to terminate the contract either by mutual consent or by courts order or operation of law.

The termination by mutual consent empowers the parties to terminate the contract due to non-performance of contractual obligations or breach of any provision or by mutual decision. Accordingly, the presence of a termination clause can prevent the parties to approach UAE courts for terminating any agreement and subsequently prevent legal and court expenses.

Nevertheless, these clauses are tricky to understand and determine the events upon the happening of which the party will be authorized to terminate the contract. Therefore, it shall be given undue importance.

6. Governing Law and Jurisdiction

Last but not least, the governing law and the jurisdiction clause is one of the most crucial provisions which depicts the law governing the contract in the event of a dispute. Moreover, the concerned clause authorizes any particular authority to entertain the matter should the party fails to resolve the issue through amicable settlement. The mutual agreement to refer the matter to arbitration would prevent either party to register a case before the civil courts and vice versa. While reviewing the governing law clause, one must importantly consider the dispute resolution committee, the territorial jurisdiction and cost associated with referring the matter to either of the authority.

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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