Termination of a Sale and Purchase Agreement in UAE — Legal Grounds & Process

What a Sale and Purchase Agreement Covers

A Sale and Purchase Agreement is a legally binding contract setting out the terms both buyer and seller have agreed to, providing the legal framework that carries a property transaction through to completion. Beyond simply recording that a sale is happening, it sets out the agreed elements of the property itself and builds in protections for every party involved. The terms typically included cover the purchase price, the closing date, and a detailed description of the property being transferred.

An SPA also interlinks a number of remedies available to the parties if something goes wrong along the way — which is precisely why these agreements deserve careful, rigorous drafting, with legal guidance for both buyer and seller rather than a template applied without review.

What a Sale and Purchase Agreement Typically Includes

• Full identifying details of the buyer and seller — names, addresses, and contact information
• The type of sale being conducted
• The date the initial contract was entered into
• The agreed terms of payment
• Dates by which other stages of the agreement are to be completed
• The date of final closing
• Details of how ownership will be transferred
• A description of the property, including any known defects or deficiencies at the time the contract is drafted

The Legal Basis for Terminating a Contract Under UAE Law

Contract termination in the UAE — including for a Sale and Purchase Agreement — is governed by the UAE Civil Code, Federal Law No. 5 of 1985. Article 267 sets out the starting principle clearly: where a contract is valid and binding, neither party may unilaterally revoke, vary, or rescind it. Termination is only available through one of three routes — mutual consent, a court order, or a specific provision of law.

This single article underpins everything that follows. A party cannot simply decide a deal is no longer convenient and walk away; termination has to be properly grounded in one of these recognized paths, or it risks being challenged as an unlawful repudiation of the contract.

Common Reasons for Disputes in Sale and Purchase Agreements

Termination of a sale and purchase contract can arise from a number of circumstances. Some of the more common ones include:

Agreement Between the Parties

The most straightforward route is where both buyer and seller simply agree to terminate, releasing each other from their obligations under the contract. Under Article 268 of the Civil Code, parties are entitled to mutually agree to revoke their contract at any point after entering into it — including through a separate settlement agreement that formally addresses the termination.

Disagreements

Disputes over ownership of the property, or over the interpretation of specific contract terms, can lead to termination where the parties are unable to resolve their differences.

Nonperformance

An SPA can be terminated where either party fails to fulfil an obligation set out in the contract — a missed payment, a failure to deliver clear title, or any other material commitment left unfulfilled.

Mistake, Fraud, or Misrepresentation

Where a contract was formed under conditions involving genuine mistake, misrepresentation, or fraud, the agreement may be terminated on that basis — the contract’s validity itself is undermined by the circumstances surrounding its formation.

How a Contract Can Be Lawfully Terminated Under UAE Law

Termination by Mutual Consent

Termination by mutual consent applies where the contract is no longer functional for either party — typically because it can no longer be performed as intended, or because both parties have already fulfilled their core obligations under the agreement. Where termination is genuinely mutual, no further consequences generally follow, unless the terminated agreement has knock-on effects for other related contracts. Once terminated, the contract is no longer enforceable. Even where both parties are in agreement, it’s worth consulting a lawyer before finalizing the termination, to confirm neither side remains exposed to a claim for breach as a result of how the termination is documented.

Termination by Explicit Contractual Provision

Article 271 of the Civil Code allows parties to agree in advance — within the contract itself — that non-performance of obligations will result in automatic termination, without needing to obtain a court order to confirm it. This is a meaningful drafting choice: an SPA that includes a properly worded automatic termination clause gives the non-breaching party a faster, more predictable route to ending the agreement than relying on the general court process. Even with this clause in place, the aggrieved party is still generally required to serve formal notification on the other party, unless the contract specifically states that notification is dispensed with.

Termination Through the Court

Where the contract is silent on automatic termination, Article 272 governs the general route: the aggrieved party must serve formal notice on the breaching party, informing them of the breach and of the intention to seek termination. If the counterparty disputes that notice, the aggrieved party will need to bring a claim demonstrating the breach occurred, that valid notice was served, and that termination is therefore warranted. While proceedings are ongoing, the contract technically remains in force — meaning the breaching party may, in principle, still cure the breach, even at a late stage.

Courts retain meaningful discretion here. Even where a breach is established, a judge is not obliged to order termination — Article 272 allows the court to instead give the breaching party additional time to perform, or to order compensation in place of termination, depending on the circumstances and how serious the breach is judged to be.

Termination by Operation of Law — Force Majeure

Article 273 provides for automatic termination where an event of force majeure makes performance of the contract genuinely impossible. In this scenario, no formal notice is required before the contract is treated as cancelled — though if one party disputes that performance has actually become impossible, the matter can still be brought before the court for determination.

Litigation and Seeking a Court or Arbitral Order

Where the parties cannot resolve termination between themselves, either party may seek a court or arbitral order confirming termination of the sale and purchase contract. Courts most commonly grant such orders where:

• One party has violated the agreed terms of the contract
• There has been misconduct by either party in connection with the agreement
• One party has failed to make payment for the performance of specific obligations

Depending on the nature of the agreement, sector-specific or industry-specific laws may also need to be considered alongside the general Civil Code provisions when pursuing termination through the courts.

Remedies Available After Termination

Termination is rarely the end of the matter on its own — remedies typically accompany it. These can include a damages award covering the non-breaching party’s losses, or an injunction either ordering a party to remedy a defect in the property or preventing a party from taking a specific action regarding it. A party may also claim monetary damages for breach of contract, which can include compensation covering the non-breaching party’s actual losses, or damages intended to penalize the breaching party’s conduct. In some cases, rather than granting termination, a court may instead order the contractual obligation to continue — directing a party to perform rather than releasing them from the agreement entirely.

Why Legal Guidance Matters Before Pursuing Termination

Sale and purchase agreements raise specific legal issues that are easy to get wrong without proper guidance — the difference between a properly served Article 272 notice and an informal complaint, for instance, can determine whether a termination claim succeeds or fails entirely. A lawyer experienced in UAE property law can help confirm which termination route actually applies to a given situation, ensure formal notice requirements are satisfied where required, and help structure remedies appropriately where termination alone won’t fully resolve the dispute.

Frequently Asked Questions (FAQs)

What law governs the termination of a sale and purchase agreement in the UAE?

Termination of an SPA in the UAE is governed by the Civil Code, Federal Law No. 5 of 1985, particularly Articles 267 to 273, which set out the recognized routes to termination: mutual consent, court order, explicit contractual provision, and force majeure.

Can a sale and purchase agreement be terminated without going to court?

Yes, in two scenarios: where both parties mutually agree to terminate under Article 268, or where the contract includes an explicit termination clause under Article 271 allowing automatic termination upon non-performance, though formal notice is typically still required unless the contract waives it.

What happens if one party breaches a sale and purchase agreement?

The non-breaching party can serve formal notice and seek termination through the court under Article 272. The court retains discretion to order termination, grant the breaching party additional time to perform, or order compensation instead of termination.

Does force majeure automatically terminate a sale and purchase agreement?

Yes, under Article 273, if an event of force majeure makes performance genuinely impossible, the contract is automatically terminated without the need for formal notice, though either party can still bring the matter before a court if impossibility is disputed.

What remedies are available if a sale and purchase agreement is terminated?

Remedies can include monetary damages to cover losses, an injunction requiring a property defect to be remedied or preventing certain actions, or in some cases a court order requiring the contractual obligation to continue rather than terminating the agreement.

Can fraud or misrepresentation be grounds for terminating a sale and purchase agreement?

Yes. Where a contract was formed under conditions involving genuine mistake, misrepresentation, or fraud, the agreement may be terminated on that basis, since the validity of the contract itself is undermined.

Do both parties need to agree before a sale and purchase agreement can be terminated?

Not necessarily. While mutual consent is one valid route, a party can also pursue termination unilaterally through a court order under Article 272, or automatically under an explicit termination clause or force majeure provision, without requiring the other party’s agreement.

How Farahat & Co. Can Help

Sale and purchase agreement disputes involve specific procedural requirements — particularly around formal notice — where a misstep can weaken an otherwise valid claim for termination. Farahat & Co.’s SPA advisory team supports buyers and sellers across the UAE with agreement drafting, termination guidance, and dispute resolution support.

Contact Farahat & Co. today to discuss your sale and purchase agreement requirements.