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Breach of Contract: Your rights when a client Terminates a Contract

Breach of contract describes a violation to an agreement or contract which occurs when a party fails in fulfilling what it is supposed to as per the contract provisions. Sometimes, it involves the interfering of another party’s ability in fulfilling its duties. Contracts may be breached in part or as a whole.

Most contracts end as both parties fulfilled their obligations as per the contract. But, remember it is not rare for a party to fail in fulfilling obligations to a contract. A breach of contract can be brought to court in order to resolve the contract dispute.

General Requirements – Suit for Breach of Contract

When you are running a business and your client decides to cancel a contract, a suit for breach of contract can be upheld in local courts if certain requirements are met, which are as follows:

  • The agreement has to be valid. The contract has to contain every single essential contract element as per the law. A contract is not valid unless it has the essential elements. Without necessary provisions, there can’t be a suit.
  • The plaintiff, the party that’s suing the defendant for agreement breach, has to present proof that defendant actually breached contract terms or provisions.
  • The plaintiff has to uphold everything that’s required of it as per the contract provisions.
  • The plaintiff or claimant is to advise the defendant for the contract breach prior to the filing of the case. Notifications that are written would be best, especially compared to notifications made verbally as they can offer clear evidence or proof.
Find out more info: Alternative Methods in the Settlement of Business Disputes

The Legal Remedies for businesses when clients cancel Contracts

Some of the remedies you’re able to pursue can be excluded explicitly in the agreement. Before you initiate court proceedings against your client, it’s worth taking a look at your contract or agreement and check which options are provided to you.

Some of the common monetary remedies for businesses when clients cancel contracts are as follows:

  • Compensatory damages – the defendant will pay the amount of money in order to reimburse cost, as well as compensate the plaintiff for losses it may have incurred.
  • Incidental and consequential damages – this kind of remedy may be awarded when all parties involved were aware of the potential losses when there is a breach in the contract.
  • Liquidated damages – if a specific number is in the agreement, then this kind of reward will be given to the plaintiff or claimant.
  • Punitive damages – this one is kind of rare as it is traditionally awarded due to the actions or offensive behavior of the defendant.

In most cases, there’s more for local courts to consider other than money. For these cases, they tend to be fully resolved with any of the following:

  • Specific performance – this is where the court will order all parties to the agreement to follow through or fulfill the obligations that are in the original agreement.
  • Rescission – here, the court orders the agreement to be cancelled with the money involved returned. It’s basically as if the matter has never taken place.
  • Reformation – this one is what’s known as a do-over. In reformation, the agreement will be cancelled and a brand new one will be drafted. The rewritten agreement will better reflect intentions of the parties to the agreement.

If you are in a situation wherein a client is attempting to cancel a contract with your business, we suggest you talk to commercial lawyers in UAE. Take note: parties can all decide to hire a mediator to mediate the contract dispute. Out-of-court alternatives in resolving disputes can work when parties involved in a contract mutually agree.

Read More: A Property Dispute in Dubai For Breach of Contract

Mitigating Loss

In the United Arab Emirates, a victim to a breach of a contract has the responsibility or duty in mitigating loss. Essentially, a breach of contract victim is not to actively make a situation worse.

The victim has to take reasonable steps in order to make sure the loss it incurs doesn’t increase any further. Any damages calculation aims in putting the party that’s innocent in the same exact position as if contract in questions was performed. For instance, if the victim of claimant has benefited with the contract breach, the benefit can reduce the damages that is owed by the defendant.

Although the duty in mitigating loss would be a voluntary duty, local courts in UAE can take into consideration the fact that some losses may not be the responsibility of the contract ‘breacher.’ If the claimant wishes to get the highest reward that is possible, it has to make sure it has prevented the losses from ballooning with its own actions or the lack of actions.

We know you may need further details and advice regarding breach of contract in UAE. If you want guidance with every single stage of legal matters in UAE, don’t hesitate to reach out to HHS Lawyers!

Hassan Humaid Al Suwaidi., LL.B. is a Senior Partner in HHS Lawyers. He has 20 years of experience dealing with high-value and complex cases. Frequently featured in local and international legal directories and commended for his ability to attain favorable outcomes for clients, Hassan has been involved in some of the largest legal settlements. A major part of his work is providing expert legal advice on UAE legislation and acting for individuals and businesses during disputes and litigation.