Federal Supreme Court, Commercial Appeal No. 60 of 2021, judgment of 30 March 2021
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 about a fact counts if the deceived party would not otherwise have contracted; a contract affected by misrepresentation may be rescinded only if it was also concluded at a gross lesion (ghabn fahish). The party alleging misrepresentation must prove the deception, the intention to mislead, its effect on consent and the gross imbalance between price and value. Nullity operates by law and a judgment merely declares it, whereas rescission ends a contract that was valid when made. A court granting relief must identify each of these elements.
In June 2014 a quarrying company bought four vessels from a fuel supplier for AED 24.8 million (AED 6.2 million each); the seller confirmed that they were free of any mortgage or legal restriction. The seller then had the vessels attached for fuel debts owed to it by their charterer, without telling the buyer before or after the sale. The buyer sued in Sharjah to annul the sales, recover the price and obtain the same amount again in damages. The first-instance court dismissed the claim and the Court of Appeal agreed; the Federal Supreme Court quashed that judgment in August 2020 on a res judicata point, and the remand court then rescinded the sale and ordered the price returned against return of the vessels. On the seller's appeal, the Federal Supreme Court found the remand judgment's reasoning inadequate: it had not identified what amounted to misrepresentation, the circumstances of the seller's silence, how that silence showed an intention to mislead that influenced the buyer's consent, or any imbalance between price and value amounting to gross rather than slight lesion, in a negotiated sale between two companies. It also restated that nullity and rescission differ. Deciding the merits itself, the Court noted that the buyer had registered the vessels in its name, chartered them out eight days later and obtained judgments against the charterer worth AED 22,029,768, including compensation for the attachment, which a final judgment had upheld and attributed to the charterer's own fault. The buyer, which bore the burden of proof, had not shown that the seller's silence was meant to mislead or that it decided the buyer's consent, and there was no evidence of the vessels' market value at the time of sale to establish a gross lesion. The Court dismissed the buyer's appeal and upheld the first-instance judgment rejecting the claim.
Buyers of vessels, plant or other assets who discover an undisclosed claim after completion often plead misrepresentation. The federal standard is demanding: the buyer must show deliberate concealment aimed at misleading it, that the concealment decided its consent, and a gross disparity between price and value supported by evidence of market value; otherwise rescission fails. The case was decided under the 1985 Civil Transactions Law, since replaced by Federal Decree-Law No. 25 of 2025.
| Articles 185, 186 and 187 of Federal Law No. 5 of 1985 (Civil Transactions Law) — text of articles 185, 186, 187 Decided under this law; it has been replaced by Civil Transactions Law 2025. |
“عبء إثبات واقعة التغرير الذي تم فيه العقد بغبن فاحش يقع على عاتق المتعاقد المغبون”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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