Abu Dhabi Court of Cassation, Commercial Appeal No. 1015 of 2021, judgment of 17 November 2021
In bilateral contracts, if one party fails to perform, the other may, after notice, seek performance or rescission, and the judge may rescind and award compensation where justified. Contracts must be performed in good faith and include what follows from law, custom and the nature of the transaction. Whether a party failed to perform, and which party is at fault, is for the trial court, which may rely on the expert's report. A developer that signed the sale agreement cannot avoid liability by claiming it acted only as agent for the owner.
In March 2015 a buyer agreed to buy an off-plan plot of land for AED 785,227, with handover due twenty months after signing. The date was later extended to July 2021. The buyer paid the down payment and handed over cheques for the monthly instalments. When the land was not delivered, he sued the selling company and a second company jointly for rescission, return of the price with 12% interest, return of the deposit, agreed penalties and AED 150,000 compensation. The court-appointed expert found that the infrastructure, including roads, pavements, utilities and drainage, had not been started (0% completion) and was unlikely to be completed in the near future. The first-instance court held the claim inadmissible against the second company, which was not a party to the agreement, rescinded the sale, and ordered the seller to refund the price with 5% interest from the claim and to pay AED 60,000 compensation. The Court of Appeal upheld the judgment.
The Court of Cassation dismissed the seller's appeal. Determining standing is for the trial court. Contracts must be performed as agreed and in good faith, and cover what follows from law, custom and the nature of the transaction. In bilateral contracts, a party may, after notice, seek performance or rescission when the other fails to perform, and the judge may grant rescission with compensation. Whether a party has failed to perform and who is at fault are questions of fact that the trial court may decide on the expert's report, without answering every objection to it. The expert's findings showed that the seller had failed to deliver the infrastructure, and that the buyer had been harmed by being kept out of his money, which he could otherwise have invested. The seller's argument that the second company was the real principal and that it acted only as agent failed, because the agreement had been signed by the seller itself and not by the second company.
Off-plan buyers in Abu Dhabi can obtain rescission and a refund with interest and compensation where the developer has not delivered the infrastructure needed to hand over the plot. The company that signed the sale agreement is the one that answers for performance, even if it describes itself as agent for a related owner.
| Civil Transactions Law, general rules on performance and rescission of bilateral contracts (the judgment cites no article number) Decided under this law; it has been replaced by Civil Transactions Law 2025. |
“ولا ينال من ذلك دفاع الطاعنة بأن المسؤول عن الاخلال بالالتزامات هي المطعون ضدها الثانية باعتبار أنها الأصيلة وأن الطاعنة مجرد وكيل عنها”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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