Termination of the contract is governed by Section 5 of the
UAE Civil Code from Article 267 to 275.
A
valid contract can’t be terminated under UAE laws except by the following three
modes:
1. With the
mutual consent of the Party.
2. With an
order of the Court.
3. Under the
provision of the law.
First mode of termination of contract is by way of mutual
consent of the parties. Under Article 268 of UAE Civil Code the contracting parties with the mutual
consent can terminate the contract. As per Article 270 of the UAE Civil Code the
revocation/ termination of contract should be by offer and acceptance in the
session ( Majlis). The precondition for such termination is that the subject
matter of the contract must be in existence. If part of the subject matter of
the contract is not in existence then the termination shall be valid to the
extent of the existing subject matter.
The second mode of termination is by way of the order of the
Court. However, Article 271 of UAE Civil Code gives freedom to the parties to dispense
with the requirement of the court order for termination of the contract, if
they mutual agree for that. If the parties mutual agree in a written contract that
in case of non- performance of contractual obligation by one party, the other
party has right to cancelled/ terminated by a party without need for a judicial
order then there is no need to obtain a court order for termination of the
contract.
Article 272 stipulates the procedure to terminate the
contract by a court order. If a party to contract fails to perform his
contractual obligation, the other party may give notice to the defaulting party
with an instruction to perform his contractual obligations or face termination.
If the defaulting party failed to act upon the notice given by the other party,
that party can move to the court for termination of the contract. Court may
order the defaulting party to perform his obligation forthwith or may defer
such performance for a specified period. Court may also pass an order for
termination of the contract and can award compensation to the non- defaulting
party.
The third mode of termination of contract is by way of
operation of law. Article 273 of UAE Civil Code governs the termination of the
contract by operation of law. If performance of the contract becomes impossible
due to force majeure conditions then the reciprocal contractual obligations of
the parties shall cease and the contract shall stand automatically cancelled.
In case of partial impossibility, only that part of the
contract which is impossible shall be extinguished and the same shall apply to
temporary impossibility in continuing contracts.
Article 274 and 275 of the UAE Civil code deal the effects of
dissolution/ termination of the contract.
Under clause 274, if the contract is cancelled/ terminated automatically
or by the act of the parties, then the two contracting parties shall be
restored to the position they were in before the contract was made, and if not
possible, compensation may be ordered by the court.
As per Article 275 of the UAE Civil Code, if the contract is
dissolved by the reason of voidness or cancellation or through any other cause
and each of the parties is obliged to return that which he has obtained, it
shall be permissible for each of them to retain what he has received so long as
the other party has not returned what he has received from the former, or
provided security for such return.
( You can mail to writer at azeez_nazar@rediffmail.com)
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