Dissolution of Sale Contract of Residential Property

Breach of contract and attempt to terminate a contract

APRIL 20, 2020

The contract is the law of the contracting parties that obligates each contracting party to execute what is stated therein. Thus, it may be revoked or modified only by agreement of both contracting parties or for the reasons stipulated by the law as long as it does not contain conditions contrary to public order or morality. If the sale took place regarding a specific object, such object must be described in a manner refuting any ignorance and the buyer must be quite familiar with the sale and the sold object. Such familiarity is ascertained if the contract contains a statement of sold object and its basic description in a way that clearly identifies such object according to the judgments of the Court of Cassation in the light of articles No. 267, 271, 272 of the Federal Law No. 5 of the year 1985 regarding the Civil Transactions law ,The laws governing the sale of real estate in the Emirate of Dubai allow the sale of real estate units shown on the map or that have not yet been completed in accordance with Article No. 11 of Law No. 13 of the year 2008, as amended by Law No. 19 of the year 2017.

There are three conditions stipulated for establishing the right to contract dissolution that are:

  • A contract is a binding contract for both parties.;
  • Either party fails to fulfil any of its obligations arising out of contracts, whether in whole or partially.
  • The party claiming the contract dissolution is not in default with regard to any of its obligations thereunder.

Conditions of judicial dissolution of sale contracts, these are concerning the notifying the defaulting party of the breach, giving it a delay to fulfil its obligations, claiming the contract dissolution by filing a lawsuit, and obtaining a contract dissolution court order. Such dissolution can only take place by virtue of the judge's decision.
Concerning the effects of contract dissolution:

The two contracting parties shall restore the position they were in before the contract conclusion and compensation claim is restored, and either party shall give back what he has obtained under the contract in accordance with the provisions of articles No. 274 and 275 of the Federal Civil Transactions

Subject:

Whereas the facts of the claimed are summarized as follows:

The plaintiff has filed a real estate full lawsuit against the defendants before the Dubai court of the first instance pleading the court to:

  • originally, order the dissolution of the sale contract issued regarding the residential unit of the project, and compelling them to refund the amount of down payment.
  • pay the interest of 9% of the due amount as of the date of the judicial claim until full payment.
  • compel the defendants in both cases to and precautionarily, compel the defendants to pay compensation for the delay of the sold units to deliver, equal to an amount of one million Dirham as of the date of filing such lawsuit until full payment, in addition to the interest of 9% of the due amount as of the date of the judicial claim until full payment.


The plaintiff has based claimed on the fact that:

  • The plaintiff has contracted with the defendant for the purchase of the aforementioned residential unit, and paid the amounts, in litigation Both parties agreed on the date settled for the delivery of the said unit, but such delivery was delayed by the defendant for almost four years and the project completion percentage has only reached 84%.
  • The plaintiff depends in his claim of the dissolution of the sale contract in litigation on the defendant breach of the provisions of articles No. 4 and 10 of Law No. 13 of the year 2008 regulating the interim real estate register in the Emirate of Dubai since such sale took place before obtaining the approval required for the project from the competent authorities, which legally invalidates the contract.
  • finally, it failed to fulfil its obligation to deliver the sold unit on the agreed date after its extension. Concerning the compensation, in case the court does not render the dissolution decision, the plaintiff has incurred severe damage due to the delay of the sold unit delivery, represented in missing the opportunity to lease the said unit as od the agreed delivery date until the date of filing such lawsuit. However, the court dismissed the case. The plaintiff challenged the court decision by a real estate appeal. At the final decision hearing, the court dismissed the appeal and confirmed the appealed judgement.

The Court of Cassation responded to such matter:

  1. The contract is the law of the contracting parties that obligates each contracting party to execute what is stated therein. Thus, it may be revoked or modified only by agreement of both contracting parties or for the reasons stipulated by the law as long as it does not contain conditions contrary to public order or morality.
  2. If the sale took place regarding a specific object, such an object must be described in a manner refuting any ignorance and the buyer must be quite familiar with the sale and the sold object. Such familiarity is ascertained if the contract contains a statement of sold object and its basic description in a way that clearly identifies such an object.

Summary of judgment:
The laws governing the sale of real estate in the Emirate of Dubai allow the sale of real estate units shown on the map or that have not yet been completed in accordance with the provisions of articles No. 605 and 606 of the civil transaction act, which state that:” If a person sells property of a third party without his consent, the sale shall be dependent upon the consent of the owner.” Depending on the foregoing, and since it is proved by the writ of summons that the plaintiff has included therein the description of the residential unit, in action, this proves that it is quite familiar with the sold object as proved as well by the documents of the unit registration in its name at the interim real estate register. Whereas the appealed judgement has included such facts and reached the right decision of denying them, the challenge of such a decision is not legally founded.

Therefore, challenging the decision for the previous reasons is unacceptable. On the ground of the foregoing, such appeal was dismissed.

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