A well-drafted contract that serves its intended function is critical to the successful functioning of the business in the UAE. The UAE’s Civil Code regulates and applies to all civil rights and obligations, including contractual agreements.
Whenever a contract is made for a commercial purpose, the Commercial Code also applies to the agreement. A series of other rules and regulations, in conjunction with the Civil and Commercial Codes, address the effectiveness and authenticity of particular kinds of contracts, such as land acquisition and ship trades.
What is a Contract?
Contracts are legally binding agreements between two or more parties that compel them to do or refrain from doing specified actions. The contract’s specifications should be enforceable in law by the signatories. The conditions must be well understood by all the parties and it must be in agreement.
The Civil Code requires the following elements for the formation of a contract:
- Mutual acceptance of the contract’s fundamental key components.
- A legitimate reason or objective for the contract’s obligations.
- A permitted subject matter that is viable and specified.
Various types of contracts must be in writing and stamped to be effective like, commercial agency agreements that must be filed with the UAE Ministry of Economy and contracts intended to transfer real estate.
When determining whether or not a contract is valid, the courts will usually look at the underlying facts, especially the proof of offer and acceptance, clarity of the terms, and each party’s contractual ability.
Duty of Good Faith
Regardless of circumstances, all contracts in the UAE are entitled to the party’s duty of utmost good faith. When entering a contract, a party’s obligation to operate in good faith is a responsibility to deal equally and ethically. This is a legally binding commitment that is deeply enshrined in the Civil Code.
All the parties must conduct in compliance with the principles of law, custom, and the contract’s overall nature, as well as the agreement’s specific terms. The obligation of good faith can be applied to pre-contract discussions, contracts regulated by international law, and can also impact the settlement of a dispute.
What is a Contractual Dispute?
When two people, organizations, or businesses have opposing viewpoints and are unable to agree on how the provisions should be applied, a contract dispute arises that must be resolved under legal guidance.
All contracts must include a well-drafted and properly studied dispute resolution clause. If a disagreement emerges, there are several ways to settle it. As a result, a dispute resolution clause must specify when, where, who, and how the disagreement will be resolved. Such clauses prevent the issue from delay due to a disagreement between the litigants.
To settle such matters of paramount importance that involve the law of contract, it is crucial to understand the many ways in which the court may employ the interpretation or structure of the contract.
In simple terms, a person can explore two techniques for interpreting a contract: subjective and objective. In most circumstances, the judge may examine the aims of the contract as subjective, or the deeds and how they would link to specific terms, as objective. Due to the fact that UAE law is based on the UAE Civil Transactions Act, contractual disputes may eventually be resolved through a subjective approach.
Clients who dwell in a situation where the common law is enforced may require legal advice and direction to ensure that the agreement protects their individual interests and serves the intended purpose.
Reasons for Contract Disputes
Contractual disputes may arise due to poor planning at the commencement of a contract and the relevant provisions not being apparent to the parties. Specifications of one party’s contract offer must be included in these terms. Since consideration is an important component as it signifies something of worth, the exchange of consideration may not be adequately described to both sides, resulting in a huge divide.
The contract may contain various mistakes and errors, which may lead one party to go against the deal due to misinterpretation of the concept. Due to several inadequate and incomplete expense estimations, the budget may go beyond the planned amount. Clients may lose faith in the company because they believe their money has been siphoned, which is a breach of contract.
The contract could potentially be illegal, forcing the parties to breach their terms and conditions.
Ways to Avoid Disputes
To be in agreement, you must be careful about the terms and pay attention to details to prevent contract disputes that are costly to both parties.
- A contract must be drafted with the assistance of a lawyer. Some people enter into unwritten contract arrangements which lead to a lot of disagreements as there is no documentation if a matter is taken to court.
- You must consult your business attorney for legal advice before entering into any contract. The lawyer must examine the document for legitimacy, specific terms, and potential conflicts of interest.
- To avoid misinterpretation, you must read and comprehend any contract before signing it. This will confirm that you understand the conditions and that your area of interest is taken into account.
- It’s critical to understand both party’s common expectations as well as their roles in the deal. A strategy to resolve any dispute must be planned.
- Financial planning for the project will allow you to estimate the potential investments and anticipate unavoidable emergencies. This helps to prevent cost and payment conflicts, which has posed a significant problem to many contracts.
Why choose Bin Eid Advocates?
Our legal team includes some of the greatest contract lawyers in Dubai. They possess extensive knowledge of how contracts are written on any magnitude and how contract law is implemented in the city. Our firm collaborates with legal authorities in Dubai to guarantee that you receive the finest advice and support possible, in accordance with the law.
We provide tailored advice to clients for practically all types of commercial activities. Our contract lawyers have the deep market knowledge required to safeguard our client’s business interests and assist them to achieve desired outcomes. Get in touch with us for legal assistance in any matter.
A contract is an agreement between two or more parties that establishes mutual legal obligations. Contracts are used in all facets of life on a daily basis. As a result, it is critical to comprehend the principles that regulate them to ensure that you have a genuine agreement.
Before signing a contract, you must study conditions and take careful note of details that will help you prevent disputes that can have serious consequences for both parties, such as financial loss, delays in the judicial proceedings, and a loss of faith between the parties. It would be beneficial if you draft stipulations to ensure that this element remains relevant in the future.
Take help from a professional law firm to choose the correct agreements and contracts for your business activities in order to accomplish your goals faster and achieve the desired results.