No wonder, the concerned subject has been discussed by Lawyers in Dubai on
numerous occasions. Yet, the frequency of contractors who are unaware of the
rights and repercussions of terminating a commercial contract within UAE which
convinced the Legal Consultants in Dubai to dedicate this article on the issue
of termination and procedure pertaining to the same.
In below-mentioned paragraphs, you will study the legal options and redress
available for terminating a commercial contract in consonance with UAE laws.
Federal Law Number 5 of 1985 on UAE Civil Code talks about the dissolution of
contracts under Articles 367-273.
Where in, Article 267 clearly highlights the
three different ways under which the parties can terminate the contract as
By mutual consent;Most contracts within UAE refer to a termination clause wherein contracting
parties agree to dissolve the contract upon happening of a certain event
especially breach of the terms of the contract. The Civil Code subsequently
enable the parties to terminate the contract upon mutual consent.
parties must draft this clause prudently and in harmony with UAE law. In the
event termination is due to breach of any clause or non-performance, the
provision may allow the party to terminate without prior notice, else the notice
is mandatory in accordance with Article 271 of the Civil Law. Nonetheless,
parties may terminate the contract unilaterally as per their convenience by an
explicit clause in the contract.
Order of the court;As the name suggests, the parties may seek termination upon reaching out to the
relevant authorities which may be Court or Arbitration Institute as the contract
suggests. This option shall also be exercised in the absence of a termination
clause in the contract.
By operation of the LawUnder the said option, the law governing the contract shall be considered while
terminating the contract according to the type of contract. Different types of
contract persist in UAE which if requires termination shall refer to the
Alternatively, any event beyond the control of parties or is unforeseeable may
enable termination, making a contract unfeasible to perform. This is in
accordance with Article 273 of the Civil Code. Furthermore, any situation of
public nature may also empower the parties to terminate the contract. However,
either of the contracting parties should confirm that the performance of the
contract is inconvenient and unprofitable.
In accordance with Article 247, either party may terminate the contract
regardless of mutual consent in the event if other party fails to adhere to the
The article reads as follows:
In a contract, where the contractual obligations are due, each of the
contracting parties will have the authority to abstain from executing his part
of the obligations, should other party failed to perform theirs.
It is clear from the foregoing provision that non-performance of the contract by
either party will empower the other party to refrain themselves to continue the
contract. However, the termination of the contract will not be executed, if the
other party is willing to resume the contract. Nevertheless, the contractor may
still approach the court for termination of the contract due to non-performance
or failing to abide by the contractual obligations.
Either party seeking a remedy under the foregoing provision, shall not suspend
the work without prior notice to the other party. It is advised to issue notices
entailing their non-performance and allowing them to remedy the breach.
Parting ways with the contracting party can be troublesome. However, the process
of approaching court can be avoided by legally drafting the termination clause
allowing mutual termination as contemplated under Article 267. The relevant
provision ensures legality before the court and may also attenuate the court
Henceforth, prior to terminating any commercial contract, the party must assure
that there exists a legal right to dissolve the contract or must seek legal
assistance from Corporate Lawyers in UAE to review the terms of the contract in
line with the UAE Civil Law and other contractual laws of the country to prevent
the unnecessary hassle of termination before the court.