The limitation period is when you have to file a case in the proper forum or court. To protect your claim, the limitation period is not allowed to expire before you file your claim. If, however, you file after this period closes, the courts can deny the lawsuit on the grounds of exceeding a statute. This limitation period is the procedural condition to invoke a claim, particularly in the limited contract in UAE. This is often done to ensure that the claims are received for adjudication promptly. Otherwise, the lawsuit world would be in a state of confusion and irrationality. If you would like more information on what is the best approach in this situation, you can ask for guidance from Khairallah Law Firm.

Limitation Periods for Various Types of Claims: Understanding Limited Contracts in UAE

As mentioned earlier, various matters are governed by different time limits or limitation periods. For example, the time limit for a contractual claim differs from that of an employment dispute.

For contractual claims, the limitation period generally spans fifteen years and expires once this period elapses without a valid legal reason for extension (Article 473). In contrast, commercial contracts are subject to a shorter limitation period of ten years instead of fifteen. These differences reflect the limited contract rules in UAE.

Construction Contracts: In construction contracts, the limitation period extends for ten years or longer if agreed upon by the parties. During this time, both the architect and the contractor bear responsibility for defects that could compromise the building’s stability or safety (Article 880).

Contracts for Sale of Goods: In matters involving the sale of goods, such as claims for contract termination, price reduction, or other disputes, the general rule stipulates a limitation period of one year from the date of goods delivery (Article 524).

Understanding Limited Contracts under UAE Labour Law: Key Aspects of Limited Contracts in UAE

Terminating a Limited Term Contract

Usually, limited term contracts simply end without notice as of the close of the contracting period or on a date specified in the contract not less than ten (10) days prior to such end; for an early termination by an employer or vice-versa, see Questions.Question 5 and Question 6 below.

The employer may terminate the services of an employee summarily on one of these 11 exhaustive grounds that are prescribed under Articles 88 and 120 of the UAE Labour Law. According to Article 121 of the law, an employee may validly give notice of resignation before the expiry of the contract. This is applicable for arbitrary dismissal on a limited contract termination in UAE.

Renewal Process for Limited-Term Contracts

Both parties may renew a limited-term contract by mutual consent. Alternatively, they can agree to convert the contract to an unlimited term at its expiration.

Early Termination of Employment Contract by the Employer

Under the UAE Labour Law, if an employee had their contract terminated before a limited term closes, then they should be paid “early termination compensation” equal to a minimum of three months’ remuneration -salary and allowances. If the contract is less than three months before its expiry, compensation is calculated based on the remaining duration.

Early Termination of Contract by Employee

Unless specified otherwise in the employment contract, if an employee wishes to terminate a limited-term contract before its expiry, they are required under UAE Labour Law to compensate the employer. This compensation amounts to half of three months’ remuneration, which includes salary and allowances. If the contract has less than three months remaining, the compensation is calculated as half of the remuneration for the remaining period.

Calculating End of Service Gratuity for Limited Term Contract upon Employer Termination

An employee with one year or more of continuous service earns end of service gratuity calculated as follows:

• 21 calendar days’ basic pay for each year during the first five years of service.
• 30 calendar days’ basic pay for each additional year.
• The total remuneration cannot exceed two years’ pay.

However, an employee terminated summarily for gross misconduct under UAE Labour Law is not entitled to end-of-service gratuity. These provisions apply to limited contracts in UAE and limited employment contracts UAE.

Conclusion 

For employment, limited term contracts end on a specified date, with rules for early termination and possible renewal or conversion to unlimited terms. End-of-service gratuity is calculated for early terminations. For more details, consult Khairallah Law Firm.

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