Under UAE law, a UAE contract is well defined as a legally binding agreement between seller and buyer that sets out the terms and conditions of their sale transaction. Such a document actively governs the rights and obligations of both parties about the sale/purchase of goods or services in the UAE.
It outlines key aspects such as the description of goods or services, price, payment terms, conditions of delivery, guarantees, and dispute resolution procedures. It serves to align contracts with UAE laws and regulations by ensuring transparency protection of both the parties’ interests, and fair trade practices.
Understanding the Legal Obligations of Sales Contracts in the UAE
1- What are the key elements of a legitimate sales contract in the UAE?
A valid UAE contract needs an offer, acceptance, and consideration.
Law in support:: Article 125 of the UAE Civil Code (Federal Law No. 5 of 1985) provides the essential elements for a valid contract, namely mutual consent (offer, acceptance), lawful subject matter, and lawful consideration under contract law.
2- What information about the parties should the sales contract contain?
Parties (the contract should identify the parties by including their names, addresses, and contact information).
Law in support: Article 130 of the Civil Code of the UAE states that contracting parties must be clearly identified for there to be accountability and for a contract to be enforceable under contract law.
3- A description of the goods or services What information must it contain?
The sale of goods or services in the UAE must be governed by a contract that identifies the goods or services being sold, their quantity, quality, and specifications, among other details.
Law in support: Article 534 of the UAE Civil Code requires contracts for sale to clearly state the description of the subject matter to eliminate disputes.
4- What price and payment terms should be specified in the contract?
Contract law states that the contract will declare the agreed price, applicable tax or fees, and the method and time of payment
By law, Article 524 of the UAE Civil Code allows parties to freely agree upon the price, provided that it does not contravene public order or morals.
5- What should the contract say about delivery and transfer of ownership?
The UAE contract should state where and how delivery will take place, the cost of shipping, and where ownership passes from the seller to the buyer.
Law in support: Article 528 of the UAE Civil Code, “Unless otherwise agreed, ownership passes to the buyer on delivery.
6- So what are the remedies available in the event of a breach of contract?
contract law offers remedies in the form of damages, specific performance, or termination of contract.
Law in support: Articles 243–271 of the UAE Civil Code further describe remedies for breach of a contractual obligation, including damages and enforcement of specific performance.
7- Should a sales contract include a dispute resolution clause?
Yes, it is advisable to include arbitration or mediation clauses in a UAE contract for efficient resolution of disputes.
Law in support: Article 203 of the UAE Civil Procedure Code allows parties to include arbitration clauses in contracts to resolve disputes outside the court system.
Key points:
- Fundamental Elements: Offer, acceptance, and consideration (UAE contract).
- Party ID: Names, addresses, and contact information.
- Goods/Services Description: Quantity, quality,,y and specifications.
- Price and Payment Terms: The agreed price, taxes, and the payment schedule (contract law).
- Delivery and Ownership: Delivery details and transfer of ownership point
- Breach Remedies: Damages, performance specific, or termination (contract law)
- Dispute Resolution: To add arbitration or mediation (UAE contract).
Familiarization and adherence to these requirements help you have contracts of sale that are legally enforceable under UAE contract law.
Key Elements of a Sales Contract in UAE Contract Law
1- What governs sales contracts in the UAE?
Sales contracts are governed by the UAE Civil Code, which outlines rights and obligations under business contract law.
Supported by Law: The UAE Civil Code (Federal Law No. 5 of 1985) provides the legal framework for sales contracts under a contract of sale business law.
2- What information about the parties must be included?
The contract must include the names, addresses, and contact details of both the buyer and the seller.
Supported by Law: Article 130 of the UAE Civil Code mandates the clear identification of contracting parties under business contract law.
3- What should the contract include about price and payment terms?
The contract must clearly state the price, payment terms, and any applicable taxes or fees.
Supported by Law: Article 524 of the UAE Civil Code allows parties to agree on price and payment terms within the bounds of a contract of sale business law.
4. What provisions for dispute resolution should be included?
The contract should specify the jurisdiction, and applicable law, and include clauses for mediation, arbitration, or litigation
.
Supported by Law: Article 203 of the UAE Civil Procedure Code supports arbitration clauses in sales contracts under business contract law.
Key Points:
- Legal Framework: Governed by the UAE Civil Code under business contract law and contract of sale business law.
- Party Information: Names, addresses, and contact details must be included.
- Price and Payment Terms: Clearly state price, payment methods, and applicable taxes.
- Dispute Resolution: Include clauses for jurisdiction, applicable law, and alternative dispute resolution mechanisms.
By adhering to these guidelines, sales contracts in the UAE remain legally valid, enforceable, and compliant with business contract law.
Common Pitfalls to Avoid in Sales Contracts Under UAE Law
1- What is a common error when defining the subject matter of a sales contract?
Not properly defining the goods or services with their quantity, quality, and specifications.
Law in Support: Article 534 from the UAE Civil Code states that the subject matter of the contract must be clearly defined in order to avoid disputes.
2- What needs to be included as to price and payment terms?
It should clearly mention the agreed price (along with the taxes, if any) and a specific payment schedule.
Law in Support: Price and payment terms may be freely agreed between the parties so long as they are express and do not violate public policy in contract law (Article 524, UAE Civil Code).
3- What is Breach of Contract: Unconscionable Contracts?
Trading with the Fewer Terms including terms unreasonably general or unjust, disallowed, authoritarian, or towards the public policy.
Law in Support: This is backed by Article 7 of the UAE Civil Code, whereby terms that are contrary to the general principle of good faith and fair dealing under contract law may be declared invalid as being unjust, oppressive, or contrary to public policy.
4- The importance of a dispute resolution clause in a sales contract
It outlines a process to resolve disputes, which may involve mediation or arbitration, instead of expensive litigation.
Findings based on Law: According to an article in the 203rd paragraph of the UAE Civil Procedure Code, it is permitted to insert an arbitration clause in contracts, underlining the importance of swift and economical dispute resolution.
Key Points:
- Goods Subject: Be specific about what goods/services (Article 534).
- It is in: Price and its Terms of Payment: Must specify price, taxes, and the payment terms (Article 524)
- Unfair Terms: Do not incorporate any unfair/harmful terms (Article 7).
- Dispute Resolution: Add a clause for mediation or arbitration (Article 203).
By steering clear of these common pitfalls and adhering to UAE contract law, parties are better positioned to establish a sound and enforceable sales contract that safeguards their rights and interests.
Conclusion
A UAE contract for the sale of goods should address and take into account certain important aspects and details in order to ensure that the same is valid, legal, and also enforceable in the UAE. It should also specify remedies for breach, such as damages or specific performance, and dispute resolution procedures.
- Some key takeaways to keep in mind:
- Identifiable parties — Both parties must be clearly identified.
- It is an accurate description of the goods or services
- Price and payment terms.
- By the way, you have 3 deliveries and title transfers.
- Clause for dispute resolution (arbitration or mediation).
Which must align with these guidelines and comply with UAE contract law.
Having said that, Contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.
*Disclaimer: our blogs, law updates and FAQ’s are freely distributed for educational purposes and to showcase recent updates and regulations in the UAE’s framework.
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