The preliminary contracts allow the parties to define the terms of the agreement and to agree on the conditions to be fulfilled before concluding the final transaction. These preparatory contracts help avoid misunderstandings and future disputes between the parties. In real estate, they can be assigned an important role in helping to secure the sale of real estate. Indeed, because of the binding force that this type of contract can have, generates an increase in the value of a commitment for both parties.
In addition, one of the interests is the protection of the interests of the parties, the preliminary contracts can protect the interests of the parties by specifying the conditions to be fulfilled before concluding the final transaction. For example, a preliminary agreement contract may include an exclusivity clause that prohibits the parties from negotiating with other parties for a specified period.
In addition, for security for investments, pre-contracts can offer some security for investments in real estate. By defining the terms of the agreement and agreeing on the conditions to be met, the parties can avoid misunderstandings and future disputes and be more secure in the transaction.
In short, it is also a question of facilitating the negotiation, indeed the pre-contracts can facilitate the negotiation in real estate matters by allowing the parties to define the terms of the agreement and to agree on the conditions to be fulfilled before concluding the transaction. final.
In addition, these contracts avoid certain additional costs: Pre-contracts can help avoid additional costs by allowing the parties to define the terms of the agreement and agree on the conditions to be met before concluding the final transaction. . This can help avoid misunderstandings and future disputes which can lead to additional costs for the parties.
I – The characteristics of preparatory contracts
A – Types of preliminary contracts
A unilateral promise contract in the United Arab Emirates. Promise contracts are recognized and commonly used in the UAE legal system. They can be used in a variety of situations, including real estate contracts and sales contracts.
In a unilateral promise contract, one party undertakes to perform an obligation towards another party if the latter fulfills a specific condition. However, unlike a bilateral contract, the party making the promise has no obligation to keep its promise if the condition is not met.
It is important to note that unilateral promise contracts must comply with the laws and regulations in force in the United Arab Emirates to be considered valid. It is therefore strongly recommended to consult a competent lawyer to ensure that all the required conditions are met when drafting such a contract.
In addition to the unilateral promise contract, there are other types of pre-contracts recognized in UAE contract law, including:
The option contract: a contract by which one party (the owner of the option) undertakes to sell or buy a good from another party (the buyer of the option) at a specified price, provided that the latter exercises its option within a fixed period.
Mandate contract: a contract by which one party (the principal) entrusts another party (the agent) with the mission of performing a specific task on its behalf.
The preliminary agreement contract: a contract by which the parties agree on the terms of a future contract, without this contract being formally concluded.
The subscription contract: a contract by which a party (the subscriber) undertakes to buy a good or a service from another party (the seller) at a fixed price, provided that the good or service is offered for sale .
B – The binding force of preliminary contracts
All such contracts may be legally binding if they are valid and comply with the laws and regulations in force in the United Arab Emirates.
In the case of an option contract, for example, if the buyer of the option exercises his right within the fixed period and the owner of the option does not respect his commitment to sell the good at a fixed price , the buyer can take legal action for compensation.
In the case of a mandate contract, if the principal entrusts a mission to an agent and the latter does not respect the terms of the contract, the principal can take legal action to obtain compensation.
In the case of a preliminary agreement contract, if the parties have entered into a preliminary agreement contract and one of them does not respect the agreed terms, the other party can take legal action to obtain a remedy.
In the case of a unilateral promise, the party making the promise undertakes to perform a certain action or not to perform a certain action, but without any consideration from the other party. In other words, the party making the promise cannot be compelled to perform its undertaking by force of law, unless the promise is considered to have binding force.
Under contract law in the United Arab Emirates, a unilateral promise can be legally binding if it meets the following conditions:
It must be made in writing, must be clear and precise enough for the person receiving it to understand the terms of the commitment. In addition, it must not be contrary to law or public order. Therefore, if these conditions are met, the unilateral promise can be considered to have binding force and can be enforced in court.
II – Pre-contracts in real estate matters
A – The preliminary agreement contract in real estate matters
In real estate matters in the United Arab Emirates, the most commonly used pre-contract is the preliminary agreement contract, also known as a "memorandum of understanding" or "letter of intent".
The preliminary agreement contract is a non-binding agreement between two parties who wish to buy or sell real estate. It defines the terms of the agreement and allows the parties to commit to exploring the terms of a potential transaction. However, it does not bind the parties to conclude the definitive transaction.
This type of contract is very popular in real estate in the United Arab Emirates because it offers the parties a certain security and transparency before concluding the final transaction. It allows the parties to define the terms of the agreement and to agree on the conditions to be met before concluding the definitive transaction. Plus, it can help avoid misunderstandings and future disputes between parties.
In summary, the preliminary agreement contract is the most used pre-contract in real estate matters in the United Arab Emirates because it offers the parties a certain security and a certain transparency before concluding the final transaction, while helping them to avoid misunderstandings. and future disputes.
However, it is important to specify that the preliminary agreement contract is generally not binding, that is to say that the parties are not obliged to conclude the definitive transaction. However, there may be exceptions, depending on the nature of the terms of the agreement and how it is drafted.
For example, if the preliminary agreement contract contains an exclusivity clause, which prohibits the parties from negotiating with other parties for a specified period, this clause may be binding. Similarly, if the contract contains clauses on deadlines, conditions to be met before concluding the definitive transaction or penalties in the event of breach of these clauses, these clauses may also be binding.
B – The security nature of the preliminary contract
In contract law in the United Arab Emirates, the consequences of not respecting a pre-contract depend on the nature of this pre-contract and the way in which it was concluded. In general, if one party fails to comply with the terms of a pre-contract, the other party may be entitled to claim damages. However, it is important to note that the amount of damages may be limited by the terms of the pre-contract itself. In some cases, a party may also have the right to terminate a preliminary contract in the event of non-compliance by the other party.
Pre-contracts can also facilitate negotiation and avoid additional costs. When buyers deposit large sums to reserve a property, it is even more crucial to have a pre-contract in place to ensure that their investments are protected.
Akram Cheik, Lawyer
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