The Real Estate Purchase agreements are also known as Sale Purchase Agreement (SPA), it is a legal contract that sets out the terms and conditions of a real estate transaction between a buyer and a seller. Perhaps the most important document in a property transaction is the Sale and Purchase Agreement (SPA).
Are Purchase Agreements Legally Binding in the UAE?
In the UAE the purchase Agreement is a legally binding agreement. These contracts are governed by Federal Law No. 5/1985 on the Civil Transaction law of the United Arab Emirates State (The Civil Code).
Can a Sale Purchase Agreement be cancelled by a buyer?
Yes, a Valid sale purchase agreement can be cancelled by a buyer. The Federal Law No. 5/1985 on Civil Transaction law provides certain methods under which the agreement can be terminated.
What are the methods under which a Sale purchase agreement will be cancelled?
Federal Law No: 5/1985 on the Civil Transaction law of the United Arab Emirates State (The Civil Code) States that a contract if valid can be terminated by the following:
- Mutual consent;
- Prior agreement of the parties;
- Judicial Order; or
- Force Majeure.
How can an agreement be cancelled by Mutual Consent?
Subsequent to the formation of the contract, the parties to the contract may dissolve the contract, by both the parties agreeing for the contract to be dissolved.
This mode of cancellation of an agreement is detailed under Article 268 of the Civil Code.
What does cancellation by Prior Agreement mean?
The parties to the contract may add a clause in the contract, agreeing to the cancellation of the contract upon non-performance of the contract by either party, when such a clause is already existing in the contract upon the default of either parties, the contract can be terminated.
But the other party must send a formal notice to the defaulting party, unless the parties have agreed that such notice is not necessary.
This mode of cancellation of an agreement is detailed under Article 271 of the Civil Code.
How can an agreement be cancelled by Judicial order?
When one party to the contract fails to or refrains from performing its obligation the other party must formally notify the defaulting party of such default demanding the performance of the contract or its cancellation. Once the above has been satisfied the other party may seek judicial recourse where the judge may order the defaulting party immediate performance of the contract, or grant him additional specified time or cancel the agreement with damages.
This mode of cancellation of an agreement is detailed under Article 272 of the Civil Code.
How can an agreement be cancelled by Force Majeure?
If a circumstance arises, which is completely beyond the control of either of the parties such as a natural disaster which makes it impossible to fulfill the obligation, the parties can cancel the agreement by invoking the force Majeure clause.
This mode of cancellation of an agreement is detailed under Article 273 of the Civil Code.
It is important to note that the terms and conditions of the Purchase Agreement determine the cancellation process and the consequences. It is recommended that Buyers carefully review their agreement and seek professional advice
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