What is a contract?
A contract is an agreement between two or more parties that creates a mutual obligation. The objective of a contract is to honor an agreement on a certain subject matter. A contract can either be verbal or written. However, it is a lot harder to prove oral agreements, so they are advised to be avoided.
Contracts are often created to sell and purchase real estate, employment, commercial transactions, constructions, lease, and other deals between buyers and suppliers.
What is a breach of contract?
Failure to adhere to the obligations of the contract is termed as Breach of Contract in the UAE. In a broader sense, breach of contract describes the contract’s violation when one of the parties fails to fulfill the partial or full obligations described in the agreement.
Sadly, it is not exceedingly rare for a party, failing to fulfill obligations and enter into a breach. It is a common scenario that our business lawyers observe. Moreover, it has been on the rise because of the level of uncertainty in all industries caused by the Covid19 pandemic.
The UAE government had issued and implemented some of the most impressive laws and regulations to deal with issues related to the breach of contract. The law provides non-breaching parties the right to take legal actions to mitigate their losses and breaching parties to represent their reasons. Thus, securing both parties’ interest.
However, to go ahead with a legal suit, the non-breaching party must understand the elements of a breach of contract claim, such as:
- Existence of contract: The agreement or the contract must be valid. The contract must consist of all the 3 components.
- Performance of the plaintiff: Plaintiff must maintain everything that is expected of him/her as per the contract provisions.
- Proof of failure: Plaintiff must present proof that the defendant actually breached the contract’s terms.
- Notifying the defendant: Plaintiff must send a written notification to the defendant about the breach before filing the case. Written notification is always preferred over verbal ones.
How can I prove that an agreement exists?
All the legal agreement consists of three components:
In general, it means that one of the parties must have made an offer, and another party must have accepted that offer. Consideration is a crucial component, which means that both parties have received something of value (irrespective of the size of the value). Consideration is also something that is given up, e.g., when someone pays you for not doing something.
What if someone performs some provisions, but not all the terms of the contract?
Generally, the UAE contract law utilizes the term “substantial performance.” The term describes a contracting party complies with the “essential obligations” mentioned in the contract. This mostly arises in situations when the defendant’s side argues that he/she breached the contract because the plaintiff failed to perform the essential obligation/s. As long as the plaintiff has performed the essential obligation, he/she may continue to bring the breach of contract claim.
What are legal remedies for businesses when clients cancel contracts?
The party that breaches the contract can be held liable for losses. The losses that occurred may be due to probable or natural consequences of their actions. There are several remedies the plaintiff can pursue to file a case against their clients. Your lawyer can advise you better by looking at your contract and provide you with the best solutions.
The most common monetary remedies for businesses are:
- Compensatory damages: The amount awarded to the claimant to compensate for the damages occurred or likely to occur due to contract breach.
- Incidental or consequential damages: The amount awarded when all parties are aware of the potential damages. Moreover, it can be proven to have occurred due to the non-performance of one party.
- Liquidated damages: It is also known as ascertain damages. The amount is awarded based on the already mentioned specific number in the agreement. The injured party is liable to be compensated with that amount.
- Punitive damages: It is also known as exemplary damages. The amount is typically awarded at the court’s discretion, and it is in addition to the actual damages. Punitive damages are punishment for the offensive behavior of the defendant.
In the UAE, even the victim to a breach of contract carries the responsibility or duty in mitigating loss. It simply means that the plaintiff must not make the situation intentionally worse. The plaintiff must take necessary steps to ensure that the loss he/she incurs must not increase further. Any damage is calculated based upon the performance of the plaintiff. For example, if the victim has benefitted because of the breach, the benefit’s value can be deducted from the damages that the defendant owns.
In general, UAE courts consider that some losses may not be the responsibility of the party that breached the contract. Thus, if the plaintiff aims to get a higher reward, he/she must prove that they took all the reasonable steps to prevent the losses by their actions or the lack of actions.
Should I hire a lawyer if I want to file a breach of contract lawsuit?
Not all breach of contract requires legal assistance, however, if the term of contract involves objects or losses of high value, you must contact a business lawyer.
An efficient corporate or business lawyer can educate you about your legal remedies and alternatives. Apart from this, there is a heap of documentation required if you intend for the courts to intervene. A lawyer can help you in drafting, reviewing, editing, and negotiating the terms of the contract. This not only minimizes your risks, but it also prevents you from any legal disputes.
Moreover, if you want to sue or get sued for the breach of contract, an expert lawyer can help you. From preparing your case to representing you during litigation or arbitration, all come under the lawyer’s scope. So, having a lawyer by your side is highly advisable.