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Terminating a Sale and Purchase Agreement (SPA) in the UAE: A Comprehensive Guide

Introduction to Sale and Purchase Agreements

A Sale and Purchase Agreement (SPA) is a fundamental contract in business transactions, especially in the real estate sector. It outlines the terms and conditions for transferring ownership of property or other assets. While having a well-drafted SPA is crucial, many parties overlook its legal implications. Real estate lawyers in the UAE recommend thoroughly reviewing the SPA before signing to understand your rights and obligations.

Grounds for Termination of an SPA

There are numerous reasons a party might seek to terminate an SPA.

Common issues include:

  • Non-performance: Failure to meet contractual obligations.
  • Delay in Handover: Failure to transfer property as agreed.
  • Failure of Payments: Issues with payment obligations.
  • Mistake: Errors in the contract details.
  • Fraud or Misrepresentation: False information or deception.
  • Force Majeure: Unforeseen circumstances beyond control.

Legal Framework for Termination

Under UAE law, specifically Article 272 of Federal Law No. 5 of 1985 (the “Civil Code”), parties to a contract may seek termination if the other party fails to meet its obligations. This provision allows for the termination of an SPA and a full reimbursement of any invested amounts.

Effects of Termination

Article 274 of the Civil Code details the consequences of terminating an SPA. It stipulates that parties will be restored to their pre-contractual positions. If restoration is not feasible, compensation may be awarded. Courts in the UAE increasingly favour buyers who seek legal recourse when developers fail to meet their contractual commitments, such as delivering properties on time.

Evaluating Your Legal Options

To determine the best course of action for terminating an SPA, it is essential to establish:

  • Breach of Contract: Verify if the developer has not fulfilled their obligations while you have met yours.
  • Justification for Breach: Ensure that the defaulting party cannot justify their failure to comply with the contract terms.

Typically, SPAs include an Anticipated Completion Date for property handover and may grant the seller an extension of 6 months to a year. If the developer fails to meet this revised deadline, it may be grounds for termination.

Seeking Legal Assistance

Given the complexities involved, consulting with experienced property lawyers in Dubai is advisable. They can guide you through the termination process, ensure compliance with legal procedures, and represent you effectively in court if necessary.

For expert legal advice on terminating a Sale and Purchase Agreement, contact our team of dedicated property lawyers in Dubai to explore your options and protect your interests.

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