Dubai Court of Cassation, Real Estate Appeal No. 48 of 2024, judgment of 20 May 2024
Payment of a deposit (earnest money) shows that the parties intended the sale to be final; unless the agreement or custom provides otherwise, a recipient who withdraws must return it doubled and a payer who withdraws forfeits it. A suspensive condition suspends the enforceability of an obligation until the future, uncertain event occurs (Articles 420 and 425 of the Civil Transactions Law). Where a resale fails because the master developer stops issuing no-objection certificates for reasons outside the seller's control, and the contract provides that the deal is then cancelled and the deposit returned without compensation, the seller owes neither double the deposit nor damages.
Two buyers agreed in March 2022, under a standard-form sale agreement, to buy a residential plot in a master-planned community for AED 11 million. A deposit cheque for AED 1.1 million was held by the buyers' agent and transfer was due by 30 May 2022. The transfer did not take place because the master developer did not issue a no-objection certificate. The buyers sued for an amount equal to the deposit and about AED 2.25 million in compensation. The Court of First Instance awarded AED 70,000. The Court of Appeal, relying on expert reports that attributed the refusal to the seller's unfulfilled undertakings to the master developer to build on the plot, held that the seller had withdrawn and ordered him to return the deposit cheque and pay a further AED 1.1 million.
The Court of Cassation quashed that judgment. After restating the rules on deposits and conditional obligations, it held that the Court of Appeal had failed to deal with the seller's defence and had drawn a conclusion that the evidence did not support. The first expert had been unable to identify the reason for the refusal, and the master developer's email showed that it had suspended certificates for vacant plots pending a new policy, a matter outside the seller's control, not that the seller was at fault.
Deciding the merits itself, the Court relied on a panel of experts and on the buyers' own statement that the only reason the sale was not completed was the missing certificate. Clauses 15 and 16 of the additional terms provided that, if the master developer did not allow the transfer for a reason beyond the control of seller or buyer, the deal would be treated as cancelled, the deposit cheque returned to the buyer and no compensation claimed. The buyers had admitted recovering the cheque. The Court therefore set aside the award of compensation, dismissed the claim for double the deposit and damages, and rejected the buyers' appeal.
Resales in master-planned communities depend on the master developer issuing a no-objection certificate. The judgment shows that the double-deposit sanction applies only to a party who actually withdraws or defaults, and that contract terms allocating the risk of a refused certificate are applied as written. Buyers who cannot show that the refusal was the seller's fault get their deposit back but nothing more. The case was decided under the 1985 Civil Transactions Law.
| Articles 148, 420 and 425 of the Civil Transactions Law (Federal Law No. 5 of 1985) (earnest money and conditional obligations) — text of articles 148, 420, 425 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
“ومن ثم فإن عدم إصدار هذه الشهادة الذي حال دون نقل ملكية المبيع في الموعد المتفق عليه لا يكون بسبب راجع للمستأنف ضده البائع”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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