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September 24, 2019
A man can make a promise as he deems fit, and he is only obligated to fulfil the promise he made. Accordingly, a contract in its true nature has its reliance on the consent between the parties, and accordingly, the parties are only bound by the terms which were agreed upon by mutual consent.
A substantial number of legal disputes between contractual parties arise due to contradicting views regarding the terms of the contract expressly made between the parties. The Contract Lawyers of Dubai, in this article, will explain to the readers the differentiating opinion of contractual terms between parties.
In the event of a difference of opinion regarding the terms of the contract which subsequently affects the rights and obligations of the parties, the difference shall be settled by the competent court.
These differences are settled by the court to a large extent by determining the intention of the parties to the contract and interpreting it accordingly.
In order to arrive at such an opinion, the courts in UAE usually take the assistance of Federal Civil Transaction Law, Federal Law 5 of 1985. The starting point is typically to read the terms of the contract and interpret what it says and construe the intention of the parties based on the actual terms of the contract.
Methods of Interpretation
Significantly, there are two different methods for interpreting a particular contract. The study of internal and external factors driving the contract assists in understanding the intention of the parties. Courts can deduce the intention of the parties through a subjective approach wherein, the terms of the contract play a vital role. On the other hand, the external factors or acts of the parties form a part of the objective approach which formulates the meaning of the contract.
Interpretation in a concerned format differs with the jurisdiction, considering the tradition of common law countries, the objective approach is often utilized in ascertaining the intention of the parties as compared to the actual terms written in the contract. The primary objective is to draw the real intention of the parties through various tests such as the "reasonably prudent man" standard test. As said, external factors play a crucial role when the intention of the parties cannot be clearly understood from the terms of the contract.
Whereas, in civil law countries like UAE, the courts unequivocally use the terms of the contract as it supersedes the external factors. The written context prevails over external factors. The Civil Transactions Law, under the chapter "Construction of Contracts", outlays the procedure for applying the subjective test to draw the intention of the parties signing the contract and accordingly passing the judgment thereof.
Construction of Contracts
The governing law for contracts entered in UAE provides three instances where the expressions of any given contract necessitate interpretation. Article 265 and 255 of the Civil Transactions Law distinctly highlights those rules for construing the real intention of the parties. Below are those three rules:
A. Obvious Expressions
Clear or Unclear! The two possible scenarios in any particular contract, are where you can either construe the real intention or will of the parties through its very expression or you cannot understand the will of parties through its terms as it is vague and ambiguous.
The clear intention is when the expression of the contract is simple and understandable in its entirety, and it matches the true will of the parties, it is as simple as the people signing the contract, leaving no room for ambiguity. Thus, necessitating the court to consider the expression of the contract which does not contradict the law.
This is in accordance with Article 258 of the Civil Transactions Law stating that there shall be no space for interpretation in the presence of obvious expressions. It has been countlessly approved and affirmed by UAE courts such as the Court of Cassation Judgment of 280 of 2008 declaring the wording of the contract simple and obvious and with no room for deviation.
The world is neither simple, nor it looks. The real question is when the expression of the contract is unclear and does not represent the real intention of the parties. A contradicting intention can be witnessed in the wording of the contract. In such circumstances, courts may use interpretation methods notwithstanding the clear wording of the contracts as it opposes the intention of the parties.
Certainly, importance shall be given to the clear and true meaning of the terms anticipated by the parties disregarding the apparent meaning of the expressions. This is reflected in the Civil Law under Article 265 which states that in interpreting the contract the real intention of parties holds significant importance rather than the syntax.
B. Delphic Expressions
A Delphic statement consists of two primary meanings, each of which gives two dissenting meanings with the same language. Indeed, such cases require interpretation as it holds more than one meaning of the same term if read in conformity with the law and language of the contract.
As said and confirmed by the law by virtue of Article 265, if there is room for construction, the mutual intention of the parties shall be considered notwithstanding the literal meaning along with the relation with the nature of the contract and the bona fide intention of the parties in terms of the contract.
Nevertheless, it is pertinent for the courts to create a distinction between the evidence in context and extraneous evidence. Where the former is used to construe the ambiguity of the contract, the latter cannot be utilized for interpreting the contract. Thus, intention can only be drawn by the contract itself, and this is also referred to as the parol evidence rule.
C. When in Doubt
Doubt is always in favour of the debtor (Article 266 of the Civil Transactions Law). The concerned article in itself is ambiguous and uncertain with regards to the definition of doubt and debtor. The doubt envisaged in article 266 can have meaning only if the ambiguity of the contract is not resolved by any other interpretation method. Thus, this rule works in isolation and is the court's last resort for interpreting the terms of the ambiguous contract. Be the master of your contract!
One cannot unsign a contract, after signing it. It is hence pertinent for parties to highlight the actual intention or will beyond a reasonable doubt. The Lawyers of Dubai have surveyed by way of famous judgments of UAE courts that the preceding principles and rules are mere guidelines to assist the court in drawing the intention of the parties and thus not obligatory to follow. Freedom to contract in the modern world is a blessing in disguise and must be adequately used to frame the real intention in conformity with the wording of the contract.