February 21, 2022



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The UAE has issued many critical changes in recent years in furtherance of its aim to establish itself as the leading business hub in the region, one that promotes a business-friendly environment. Aligning to this goal, the UAE has recently introduced new amendments to the commercial company's law ((Federal Law No. 2 of 2015 and its amendments), allowing for the first time in the history of the UAE, one hundred per cent ownership to foreign ex-pats. With the latest changes, complete foreign ownership is now allowed in mainland companies within certain industries, which was earlier allowed only with the appointment of either a local company or an individual as the local agent.

Contracts are a part of our everyday life, including in the business world. The Federal Law number 5 of 1985 on the civil transactions, defines a 'contract' as 'A contract is the meeting of an offer issued by one of the contracting parties with the acceptance made by the other party and their concordance in such a manner as to produce their effect on the object of the contract and results in a binding obligation on each party in consideration of the obligation of the other party. A meeting of more than two minds may agree to produce a legal effect'. A contract is thus said to be constituted when a valid offer is made by one party, and the same is accepted by the other. Both an 'offer' and its 'acceptance', convey the expression of a will, and it is the formulation of this mutual will between the parties that constitutes a contract.

Legal ingredients required to form a valid contract:

The legal ingredients that must be present in order to constitute a legally enforceable contract as per the UAE laws include the following necessary elements:

  • Meeting of minds of the contracting parties on the main elements of the contract
  • The object of the contract must be something possible, specified or specifiable, and negotiable.
  • The obligations arising out of the contract must have a licit cause (i.e. the contract must be formulated for a legally valid object and not to do something that is illegal under the law)

Only by understanding the legalities involved in a given matter the parties to a contract can enter into a valid and effective contract. Furthermore, quite often in contractual or business relations, parties also face issues wherein one party is breaching the terms of the contract, thus resulting in the intentional non-performance of a key obligation. These are instances wherein parties to a contract might have to take the legal remedies of effective mediation or litigation in order to correct the breach and, in most circumstances, to claim compensation for the damages caused. Knowing business law thus provides ample options for a given party to negotiate and settle disputes and as far as possible to strategically layout the business contract in itself.

The UAE continuously aims to enhance its business laws and to bring in economic reforms that help in building a flexible business environment in the UAE, one that furthers the economic prosperity in the region. Many of the new laws introduced in the UAE have set the country apart in the entire Middle East. UAE today resonates not only as a great place to do business but as a great place to live and build a life for the long term. The new changes thus aim to attract more foreign direct investments and to build a heavily diversified economy.

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