K
Khairallah
New Member
This thread focuses on one of the most important aspect which every buyer/investor wants to know i.e. what one can claim for in a real estate dispute and how under the UAE laws.
As we know that contract by their nature reflects the commercial intentions of the parties at a particular point in time. Accordingly, it is important for each of the party to include what relief they will require if the contract is breached. The purpose of damages is to compensate a party for any loss suffered as a result of default by counterparty to a contract.
As per the laws one can claim for the amount he has paid as:
1) Deposit;
2) Interest (Contractual Interest plus legal interest) ;
3) Agent fees;
4) Bank charges;
5) Additional/Extra amount; and
6) Any other payment he has accrued pertaining to the Agreement.
In most of the disputes it is clearly stated in the contract what one can claim prior to breach by other. Contractual parties are given this right under Article 390(1) of the UAE Civil Code to fix amount of damages in advance. Whereas, under Article 390(2) of the UAE Civil Code the court is given the ultimate right to increase or decrease the amount of the damages agreed by the parties in order to reflect the actual loss suffered upon receiving request from one of the parties in the contract. Article 390(2) is binding in nature; hence none of the parties can override this article. As per the practice of UAE courts it shows that the courts have many times exercised their right given under Article 390(2) of the UAE Civil Code and either increased or reduced the amount of pre-agreed liquidated damages accordingly. This is in line with the shariah principles under which compensation shall be equal to actual loss suffered.
However, where compensation is not pre-agreed contractually then it shall be assessed by the court for it to be commensurate with the actual damage sustained. Accordingly, the quantum of damages, if any, shall be fixed by the courts. This is stated in Article 389 of the UAE Civil Code, which provides that, when the amount of compensation which is to be awarded is not fixed by the laws or if it is not stated in the contract, then in such cases the judge shall decide the amount which is equivalent to the damage suffered by the party.
Dubai Court of Cassation has recognized loss of profits in the course of a contractual liability. Lost profits are normally provided for by Article 292 of the UAE Civil Code. However, for the court to award lost profits, the occurrence of the damage should be certain in the future. Courts will not award compensation for the hypothetical or probable damage. Speculative damages are not accepted. The Claimant must show that it is certain that he would have got benefits if the contract had been performed. In addition, the Dubai Court of Cassation recognizes the compensation of a loss of opportunity as a result of the termination of a contract holding that, if the opportunity is hypothetical however the loss of such opportunity is an occurrence that should be compensated.
PROCEDURE OF CLAIM
Owing to the bilateral and reciprocal nature of a contract, one may be severely prejudiced and burdened with the obligations under a contract due to intention of non-performance by the other party. Hence instead of waiting for the time period to expire, he may terminate the contract before the performance is due to mitigate its losses.
Application has to be submitted for termination of the Agreement, the contractual right of termination is recognized under the Article 272 of the UAE Civil Code which states: “(1) In contracts binding on both parties, of one of the parties does not do what he is obliged to do under the Contract, the other party may, after giving notice to the obligor, require that the contract may be performed or cancelled.” Hence, a notice of termination of the Contract must be served.
The court when considering the question of whether to grant termination or to order compensation along with specific performance considers a) the magnitude of the breach b) possibility if the agreement can still be performed. The Claimant’s case must satisfy all legal criteria necessary to procure termination.
Under property agreement the main obligation is to complete the construction and handover of the Property by the Handover Date and the time is of the essence in this Agreement, therefore failure to perform the obligations in a timely manner constitutes a severe breach justifying termination and leads to complete non-performance.
The grounds on which the Claimant can seek termination are listed below; these legal grounds are not exhaustive:
a) Total failure of consideration by the Developer;
b) Non-performance of the contractual obligation;
c) Impossibility of the performance of contractual obligation; and
d) Unjust enrichment of the Developer
Once the Agreement is terminated the court will either refund all the monies paid and/or also pay compensation if applicable as under Article 274 of the UAE Civil Code whereby, “If the contract is cancelled automatically or by the act of the parties, the two contracting parties shall be restored to the position they were in before the contract was made, and if that is not possible, compensation shall be ordered.” This procedure of recovering the money awarded by the court is termed as “Execution procedure”, which may take up to three to six months to get finalized depending upon other party.
As we know that contract by their nature reflects the commercial intentions of the parties at a particular point in time. Accordingly, it is important for each of the party to include what relief they will require if the contract is breached. The purpose of damages is to compensate a party for any loss suffered as a result of default by counterparty to a contract.
As per the laws one can claim for the amount he has paid as:
1) Deposit;
2) Interest (Contractual Interest plus legal interest) ;
3) Agent fees;
4) Bank charges;
5) Additional/Extra amount; and
6) Any other payment he has accrued pertaining to the Agreement.
In most of the disputes it is clearly stated in the contract what one can claim prior to breach by other. Contractual parties are given this right under Article 390(1) of the UAE Civil Code to fix amount of damages in advance. Whereas, under Article 390(2) of the UAE Civil Code the court is given the ultimate right to increase or decrease the amount of the damages agreed by the parties in order to reflect the actual loss suffered upon receiving request from one of the parties in the contract. Article 390(2) is binding in nature; hence none of the parties can override this article. As per the practice of UAE courts it shows that the courts have many times exercised their right given under Article 390(2) of the UAE Civil Code and either increased or reduced the amount of pre-agreed liquidated damages accordingly. This is in line with the shariah principles under which compensation shall be equal to actual loss suffered.
However, where compensation is not pre-agreed contractually then it shall be assessed by the court for it to be commensurate with the actual damage sustained. Accordingly, the quantum of damages, if any, shall be fixed by the courts. This is stated in Article 389 of the UAE Civil Code, which provides that, when the amount of compensation which is to be awarded is not fixed by the laws or if it is not stated in the contract, then in such cases the judge shall decide the amount which is equivalent to the damage suffered by the party.
Dubai Court of Cassation has recognized loss of profits in the course of a contractual liability. Lost profits are normally provided for by Article 292 of the UAE Civil Code. However, for the court to award lost profits, the occurrence of the damage should be certain in the future. Courts will not award compensation for the hypothetical or probable damage. Speculative damages are not accepted. The Claimant must show that it is certain that he would have got benefits if the contract had been performed. In addition, the Dubai Court of Cassation recognizes the compensation of a loss of opportunity as a result of the termination of a contract holding that, if the opportunity is hypothetical however the loss of such opportunity is an occurrence that should be compensated.
PROCEDURE OF CLAIM
Owing to the bilateral and reciprocal nature of a contract, one may be severely prejudiced and burdened with the obligations under a contract due to intention of non-performance by the other party. Hence instead of waiting for the time period to expire, he may terminate the contract before the performance is due to mitigate its losses.
Application has to be submitted for termination of the Agreement, the contractual right of termination is recognized under the Article 272 of the UAE Civil Code which states: “(1) In contracts binding on both parties, of one of the parties does not do what he is obliged to do under the Contract, the other party may, after giving notice to the obligor, require that the contract may be performed or cancelled.” Hence, a notice of termination of the Contract must be served.
The court when considering the question of whether to grant termination or to order compensation along with specific performance considers a) the magnitude of the breach b) possibility if the agreement can still be performed. The Claimant’s case must satisfy all legal criteria necessary to procure termination.
Under property agreement the main obligation is to complete the construction and handover of the Property by the Handover Date and the time is of the essence in this Agreement, therefore failure to perform the obligations in a timely manner constitutes a severe breach justifying termination and leads to complete non-performance.
The grounds on which the Claimant can seek termination are listed below; these legal grounds are not exhaustive:
a) Total failure of consideration by the Developer;
b) Non-performance of the contractual obligation;
c) Impossibility of the performance of contractual obligation; and
d) Unjust enrichment of the Developer
Once the Agreement is terminated the court will either refund all the monies paid and/or also pay compensation if applicable as under Article 274 of the UAE Civil Code whereby, “If the contract is cancelled automatically or by the act of the parties, the two contracting parties shall be restored to the position they were in before the contract was made, and if that is not possible, compensation shall be ordered.” This procedure of recovering the money awarded by the court is termed as “Execution procedure”, which may take up to three to six months to get finalized depending upon other party.
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