Abu Dhabi Court of Cassation, Commercial Appeals Nos. 311 and 366 of 2022, judgment of 26 May 2022
Parties may include terms that increase, reduce or exclude a party's contractual liability, provided they do not conflict with mandatory rules, public order or morals. Article 296 of the Civil Transactions Law voids only clauses excluding liability for a harmful act (tort); by implication, an exemption from contractual liability is valid. A clause in an off-plan sale by which the buyer agreed that delays in completion would not entitle her to cancel or to any compensation, and released the developer from claims arising from the purchase, barred her claim for delay damages.
In December 2015 a buyer agreed to buy an off-plan villa in a project in Al Samha, Abu Dhabi, for AED 1.7 million, with completion due on 31 December 2017 plus or minus twelve months. She paid every instalment except the last, due on completion. The developer notified completion only in March 2021, nearly three years after the extended date. She claimed AED 450,000 for lost use and rental income and AED 150,000 for moral damage. The developer relied on clauses 7 and 10 of the contract: under clause 7 the buyer accepted that delays in completion, which the developer could treat as unforeseen or unavoidable, would not give her any right to cancel or to any compensation; under clause 10 she released the developer from all claims arising directly or indirectly from the purchase. The first-instance court awarded AED 300,000 and the Court of Appeal upheld that award.
The Court of Cassation allowed the developer's appeal. Contracting parties may agree terms that tighten, reduce or remove a party's contractual liability, as long as they do not breach mandatory rules or public order. Article 296 of the Civil Transactions Law makes void only a clause exempting from liability for a harmful act; reading the article the other way, exemption from contractual liability is permitted. The buyer had agreed to exempt the developer from claims, including compensation for delay, and had not shown that the damage was foreseeable. The Court quashed the judgment, decided the developer's appeal itself and dismissed the claim. The buyer's own appeal, seeking a higher award, was dismissed.
Off-plan contracts in Abu Dhabi that exclude delay claims can be enforced against buyers as contractual exemption clauses, so the wording of the sale agreement can decide whether late delivery leads to any compensation. Read with Appeal No. 1104 of 2021, where an agreed amount was adjusted upward under Article 390, outcomes depend on whether the contract fixes compensation or excludes it altogether.
| Article 296 of Federal Law No. 5 of 1985 (Civil Transactions Law) — text of article 296 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
“وبمفهوم المخالفة لحكم المادة 296 من قانون المعاملات المدنية فانه يجوز للمتعاقدين الاتفاق على الاعفاء من المسؤولية العقدية”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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