A reader asks: Under UAE law, can I withhold instalment payment to realtor if completion of my apartment is delayed?

KARM legal
According to UAE law, either party has the right to request for termination of any legal contract as long as it is proven that the other party has breached the terms of the contract. This also applies to contracts regarding purchase and sale of real estate units. Image Credit: Shutterstock

Delay in completion of housing project

Question: About three years ago, I purchased a property off-plan from a developer and I paid the instilments regularly. The completion date was supposed to be October 2020. However, at the current progress rate, the property will not be delivered until 2023. According to the purchase contract, the buyer is not entitled to cancel the contract unless he or she pays appropriate compensation. My question is, am I legally entitled to file a lawsuit and cancel the purchase contract. Also, am I legally entitled to refrain from paying the instalments because of the delay in completion? Please advise.

Answer: Article 246 of the Civil Transactions Law of the UAE states: 1. ‘The contract shall be implemented according to the provisions contained therein and in a manner consistent with the requirements of good faith.’ 2. ‘The contract is not restricted to what is contained therein, but shall extend to its essentials in accordance with the law, custom and the nature of the transaction.’

Article 247 states: ‘In bilateral contracts, where the reciprocal obligations are due, each of the contracting parties shall have the right to abstain from executing his or her obligation in case the other party does not honour his obligation.’

Article 272 says: 1. ‘In bilateral contracts, if one of the parties does not perform his or her contractual obligations, then the other party may, after serving a formal notification to the debtor, demand the performance of the contract or its rescission.’ 2. ‘The judge may order the debtor immediate performance of the contract or grant him specified additional time, as he may order rescission with damages, in any case, if deemed justified.’

From the above, we can conclude that, any contract is binding on both parties. Either party has the right to request the termination of the contract as long as it is proven that the other party has breached, and therefore you, as the buyer of a real estate unit under construction, have the right to file the termination and recover the amount paid if it is proven that the real estate developer has breached his or her contractual obligations. This is guaranteed according to the possibility of proving the breach and the effect of this breach on the subject of the contract and on the parties to the contract.

As mentioned by you, the completion will be in 2023, which gives a clear indication that the seller was too late to fulfil his or her obligation and that your request to terminate the contract is based on legal grounds. But it is better not to stop any payment unless you file a case in order to be in a position of non-breaching, while the developer did the breach on his or her part. But not every breach requires termination of contract, which means that assessing the adequacy or insufficiency of the reasons for the termination and denying or proving the failure of the applicant for the termination is a matter related to the court.

It is decided by Dubai Supreme Court that the developer, in the off-plan sale, ‘must complete the project by handing over the sold units to the buyer at an appropriate time, even if the sale contract is devoid of a specific date for completion and delivery. This does not justify the endless inaction of the seller in completing the project and delivering the sold units. It is also determined that the buyer has the right to withhold what he has not paid from the price of the sale, even if it is due for payment, until the danger of the seller’s failure to fulfil the corresponding obligation has passed’. (Cassation No 262/2020. Real Estate.)

Honouring a cheque

Question: A month ago, I agreed with a person to buy a car, provided that the owner of the car would repair it and give it to me. I paid the seller by cheque. However, the owner of the car refused to hand over the vehicle to me. So I withdrew the balance from my bank account [in order to make sure that even if he presents the cheque, it won’t get cleared]. A week ago, the owner of the car presented the cheque to the bank and the same was returned due to insufficient balance. The owner of the car has threatened to file a police complaint against me. I am currently exposed to fraud and I am afraid to report it to the police because the car seller may open a case against me for a bounced cheque. My question is, what is the law regarding the conduct of the car seller and what is the appropriate action that I can take against him?

Answer: In case if there is no sale agreement between you and the seller, the seller’s position is stronger than yours. This is because according to UAE law, the original reason behind the issuance of the cheque was to fulfil a debt. However, whoever claims the contrary to this principle may establish evidence in support of what he or she claims, by establishing the real reason for issuing the cheque.

This principal should also not prevent you from filing a criminal case against the car seller or a civil case, requesting to return the cheque, in keeping with the general principal that the plaintiff has to prove his right, and the defendant has to disprove it as per article 1 of the law on evidence in civil and commercial transactions. You have the right to prove your case with all the means of proof such as: a) Written documents including emails, WhatsApp etc; b) Testimony; c) Presumptions; d) Eye-witnessing and expertise; e) Avowal; f) Oath. For example, you must prove that the cheque was paid in keeping with a verbal agreement and that the seller does not deserve to receive the cheque amount because he did not fulfil his obligations. You may also request the testimony of any person who knows about this deal or may request the seller to say on oath … etc.

‘The court has the full authority to examine the evidence and documents presented in the lawsuit, to weigh them and to extract what it deems to be the reality in the case’. (Cassation No 179/2020, Real Estate.)

It is decided by the court that ‘although the cheque is a tool for fulfilling a debt owed by its drawer before the beneficiary and that it has a legitimate reason, this does not prevent the drawer from proving otherwise by proving that the cheque has no reason or that it has an illegal reason, or that its cause has ceased to exist, or that the beneficiary has breached his or her obligations arising from the original relationship for which the cheque was drawn’. (In cassation No 697/2019 Commercial.)

It is also decided that proving the veracity of a debt is a material incident related to the reason for writing the cheque. It is permissible to prove it by all the legally established methods of proof. (Civil cassation No 8/2006.)