Dubai Court of Cassation (General Assembly), Appeal No. 5 of 2021, judgment of 20 April 2021
The General Assembly restated that a contract is the law of the parties: neither may revoke, amend or rescind it except by agreement or on grounds the law allows, and clear terms may not be departed from by interpretation, since they express the parties' common intention (Articles 246, 265 and 267 of the Civil Transactions Law). Applying that principle, it upheld a judgment refusing rescission of a sale of a development plot to a sub-developer, where the contract defined handover as providing access to the plot, the buyer had accepted that the master developer's infrastructure might not have started, and it was the buyer that failed to take delivery and pay instalments. The seller's slow infrastructure work justified denying it contractual late-payment penalties, but not rescission.
In April 2007 a sub-developer agreed to buy a 4,500 square metre plot in a waterfront master project for AED 22,039,108 payable in instalments. It paid part of the price, did not take delivery and in 2019 sued the two companies described as master developer and owners of the project for nullity, because the sale was not entered in the interim register, or rescission for failure to deliver, build infrastructure and issue development guidelines, with refund of AED 4,407,822 and damages. The developer counterclaimed the balance and penalties. The court of first instance rescinded the contract and ordered a refund; the Court of Appeal reversed, rejected rescission and ordered the buyer to pay the AED 17,631,286.40 balance, but refused contractual penalties because the developer had been slow with the infrastructure. The buyer appealed in cassation.
Because earlier judgments on similar facts had gone different ways, the chamber referred the appeal to the General Assembly under Article 20(a)(4) of Dubai Law No. 13 of 2016. The Assembly restated, by the required majority, the settled principle that a contract is the law of the parties, which neither may revoke, amend or rescind except by agreement or as the law allows, and whose clear terms bind them.
Applying it, the Assembly held under Articles 246, 265 and 267 of the Civil Transactions Law that a contract must be performed in good faith according to its terms and what they necessarily imply, and that interpreting contracts, identifying the defaulting party and deciding whether a breach justifies rescission are for the trial court. The Court of Appeal had found that handover was defined as access to the plot by written notice; the buyer knew that infrastructure might not have started and bought the plot as it was; the developer provided road access, notified handover in September 2007 and sent the development guidelines; and the buyer asked in 2008 to defer payments. The contract set no deadline for completing infrastructure, so the buyer was the defaulting party. Denying penalties for the developer's own delay was not inconsistent. The appeal was dismissed.
Sales of development plots by master developers to sub-developers often allow handover before infrastructure is complete. The reaffirmation that clear contract terms bind means that a buyer who accepted that risk cannot escape the contract by pointing to unfinished master infrastructure, while the developer's own delays may still cost it contractual penalties.
| Articles 246, 265 and 267 of Federal Law No. 5 of 1985 (Civil Transactions Law) — text of articles 246, 265, 267 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
| Article 20 of Dubai Law No. 13 of 2016 on the Judicial Authority in the Emirate of Dubai (referral to and majority of the General Assembly) |
“العقد شريعة المتعاقدين، فلا يجوز لأحد المتعاقدين الرجوع فيه ولا تعديله ولا فسخه إلا باتفاق الطرفين أو للأسباب التي يقررها القانون”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
An unlicensed real estate broker cannot recover commission, compensation or expenses under a void brokerage agreement
Dubai legislation (Articles 3 and 24 of Local Order No. 32 of 1987 regulating real estate brokerage and Articles 3 and 21 of Regulation No. 85 of 2006 on the Register of …
A mortgage securing present and future facilities survives repayment of one facility, and a guarantor-mortgagor can be sued first
Under Dubai Law No. 14 of 2008 on mortgages, a mortgage gives the creditor a real right over the property to be paid from its price ahead of ordinary and later creditors.…
A sale of a business binds the parties once agreed; registration governs only when ownership passes
A business (محل تجاري) is the set of tangible and intangible assets used for a commercial activity, physical or virtual (Article 36 of the 2022 Commercial Transactions La…
A mortgagee bank may, but need not, enforce against the mortgaged property before other assets
A secured creditor may enforce first against the mortgaged real estate, but this is an option, not an obligation: it may pursue the debtor's other assets to recover its d…
Under apparent agency a land sale binds the owner, and only the owner can claim under it
A contract may be made through an agent, whose authority under the agency agreement governs his relationship with the principal; a third party must normally check the age…
An agreed delay penalty is payable without proof of loss unless the debtor proves none occurred or it is excessive
A penalty clause fixes in advance the loss the parties expect from a breach, so the creditor need not prove loss; the debtor must prove that no loss occurred or that the …
Whether you are establishing a new venture, restructuring an existing enterprise, or exploring residency pathways — we are here to advise.
Arrange a Consultation →