Legal protection offered by contract templates in UAE

A contract establishes a relationship between two or more parties, where such relationship is governed by a set of provisions. A breaching party is held liable for breach of such provisions. Breach may also result in the termination of the contract without prejudicing the right of the other party to seek legal remedies.

Contracts are legally binding documents that offer legal protection to the party who suffered legal damages because of the breaching party’s failure to observe the terms of the contract.

It is a rule of law that responsibility falls on the claimant to prove his claim and the respondent to refute it. Therefore, using a contract template is crucial to ensure legal protection of the party who suffered damages.

Contract templates are recognized by the law and as such legal protection is offered to contracts of all types as long as the contract is valid, in other words, formed in a manner consistent with the laws.

The object of the contract may be to provide any type of goods or services. A contract template may also record the purchase of a property. In general, the object of the contract template must not be anything that is prohibited by the law.

The UAE laws explicitly state that the parties must fulfil their obligations arising out of the contract. 

The law also states that the parties must adhere to the principle of good faith in the performance of the contract.

Protection provided by the UAE laws:

1. Right to abstain from fulfilling the obligations of the contract

Parties of the contract hold the right to refrain from executing their obligations in the event of the other party’s failure to meet his obligations. This right is subject to serving a notice requiring performance of the obligations.
 
2. Adhesion Contracts

Adhesion contracts place one party in a favorable position as this party sets the provisions of the contract and the other party is not able to place more advantageous terms for himself such as mortgages. As a result of the nature of such contracts, the judge holds the right to modify the arbitrary conditions or relieve the adherent party from them. 

3. Performance and Compensation

The UAE law describes that a party may demand the other party to fulfil his obligations and/or demand compensation in lieu of performance. The judge may determine the amount of compensation if the parties have not previously agreed on a specific compensation amount or if the specified amount is not equal to the damage that occurred.

Clauses that offer protection in contract templates:

Contract templates differ in their subject, and every contract may include certain clauses that apply, however the following are some standard clauses that offer protection in contract templates:

1. Force Majeure Event

A contract template provides a force majeure clause. A force majeure event is any event that hinders the affected party from performing its obligations. Force majeure clauses are crucial to set the types of events that may take place and to release the party affected from the performance of its obligations until such event terminates. The concept of a force majeure event is recognized by the UAE laws. the UAE laws adopt the principle of “Unpredictable Circumstances” if dispute arises as to whether an event is a force majeure event or not.

2. Governing Law

A governing law clause is crucial since the UAE laws allow the parties to choose the governing law that applies to the contract. Any dispute that may arise will only be governed by the chosen law. Contract templates provide governing law clauses to ensure that parties are legally protected. However, if the parties to the contract do not assign a governing law, the governing law will be the law of the common residence or the law of the country where the contract is made in case of different residences. 

3. Termination 

All contract templates provide a termination clause. The termination clause would state that either party may terminate the contract with giving a prior written notice, and the parties can also agree that either party may terminate the contract without prior written notice in certain circumstances such as breach of contract provided that the breach has continued for a period of time agreed by the parties. A termination clause is crucial because it provides the circumstances for which either party can end the contractual relationship and terminate their legal obligations, unless they are surviving obligations. The UAE law recognizes the termination of a contract by agreement and the unilateral termination for breach of contract. 

4. Indemnity

An indemnification clause can set a mutual obligation on the parties or a sole obligation on one party of the contract. The indemnity clause may state that one party will compensate the other party for any loss or damage that arises out of the contract as a result of the indemnifying party’s breach of contract.

5. Confidentiality

In order to protect a party’s confidential information from disclosure, a contract template includes a confidentiality clause which states that any information that is deemed confidential by either party should not be disclosed to any third party or to the public unless such disclosure is a requirement by law or court order or at the consent of the party who holds such confidential information.

6. Non-competition & Non-solicitation

A non-competition clause guarantees protection of a disclosing party who has disclosed trade secrets to another party in a way that restricts the other party from competing with the disclosing party’s business. A non-compete clause should be limited by geographical scope, duration and the nature of the business. A non-solicitation clause specifies that a party may not solicit the employees or clients of the other party. In all cases, the court determines the validity and applicability of the clause.

Conclusion

Pre-made legal contract templates provide legal protection as they are drafted in accordance with the UAE laws, thus using a contract template is the perfect choice to save time and cut costs. A contract specifies all necessary clauses to protect the interests of both parties such as dispute resolution mechanisms and confidentiality.