Federal Supreme Court, Commercial Appeal No. 1444 of 2022, judgment of 25 April 2023
Under Article 1028(1)(c) of the Civil Transactions Law, a printed condition in an insurance policy relating to a circumstance that leads to the avoidance of the contract or the lapse of the insured's right is void unless it is shown conspicuously, set apart from the other conditions. A court that relies on such a condition to deny cover must deal with the insured's objection that the condition was not printed prominently; failing to do so is deficient reasoning and a breach of the right of defence.
A company insured under a comprehensive all-risks policy suffered a fire at its warehouse on 1 June 2020 while steel sheets were being cut. The insurer refused to pay, arguing that the work had been done without notifying it, in breach of policy conditions. The insured took the matter to the insurance dispute settlement committee, which ordered the insurer to pay AED 2,696,165. The insurer challenged that decision in court. On 29 March 2022 the court of first instance dismissed the challenge and upheld the committee's decision. On appeal, the court appointed an insurance expert, who concluded that the damage fell outside the cover because the insured had breached condition FC (07), which required the insurer's written consent and an additional premium for welding work. On 29 September 2022 the appeal court reversed and set aside the committee's decision. The insured appealed, relying on Article 1028 of the Civil Transactions Law and Article 7 of the Insurance Authority Board's Regulation No. 3 of 2010, under which a printed clause that is not shown clearly (in bold or a different colour), and that relates to a circumstance leading to the avoidance of the contract or the lapse of the insured's right, is void. The Federal Supreme Court held that Article 1028(1)(c), which governs insurance contracts, makes such a printed condition void unless it is prominent and distinguished from the other conditions. The insured had raised this before the appeal court, but the judgment relied on condition FC (07) to exclude the fire and defeat the insured's right without answering that essential defence. The judgment was deficient and breached the right of defence. It was quashed and the case remitted.
Insurers commonly rely on hot-works, notification and similar conditions to decline property claims. Under the 1985 Civil Transactions Law, which governed this policy, such conditions had to be conspicuous to be enforceable, and a court must rule on the objection when the insured raises it. The 1985 Law has since been replaced by Federal Decree-Law No. 25 of 2025.
| Article 1028(1)(c) of Federal Law No. 5 of 1985 (Civil Transactions Law) — text of article 1028 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
| Article 7 of Insurance Authority Board Regulation No. 3 of 2010, as invoked by the insured |
“بطلان الشرط المطبوع المتعلق بحالة من الأحوال التي تؤدي إلى بطلان العقد أو سقوط حق المؤمن له إذا لم يكن بارزا بشكل ظاهر يميزه عن باقي الشروط”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
A bank that let unauthorised partners move a company's money is liable in contract alongside the wrongdoers
Where the injured party and the person responsible are bound by a contract, the court may not apply the rules of tort liability unless the harm amounts to a crime, fraud …
A murabaha acceleration clause makes the whole unpaid balance due on default, and courts, not experts, interpret it
The terms of a contract govern the parties' obligations and how they are to be performed; a valid contract is the law of the parties, which neither party nor the judge ma…
A telecom company is liable for its employee's illegal SIM swap only if the swap caused the fraud loss
Tort liability requires that the harmful act be the direct or effective cause of the loss claimed. Identifying the fault and assessing causation are for the trial court, …
Silence about a debt is misrepresentation only if meant to mislead, and rescission also needs proven gross lesion
Under Articles 185 to 187 of the Civil Transactions Law, misrepresentation (taghrir) is deceiving the other party by fraudulent words or acts, and deliberate silence abou…
A customer's deposit at a bank's foreign branch cannot be set off against facility debts in the UAE without agreement
Compulsory set-off under Article 370 of the Civil Transactions Law requires each party to be both creditor and debtor of the other, with debts of the same kind, descripti…
Claims against a contractor or engineer for building defects are barred three years after the defect is discovered
Under Article 883 of the Civil Transactions Law, a claim under the guarantee owed by the contractor or the engineer for the collapse of a building or defects in it cannot…
Whether you are establishing a new venture, restructuring an existing enterprise, or exploring residency pathways — we are here to advise.
Arrange a Consultation →