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The Deposit – UAE Civil Transactions Law
The deposit according to UAE law:
A Deposit is a legal term that refers to the amount of money paid by one party as a guarantee or confirmation of its commitment to complete a contract or a particular transaction in the future.
The text in Article 148 of the Civil Transactions Law stipulates that:
1. Payment of the deposit is considered evidence that the contract has become final and cannot be renounced unless an agreement or custom dictates otherwise.
2. If the two contracting parties agree that the deposit is a penalty for abandoning the contract, each of them has the right to withdraw. If the one who paid the deposit withdraws, he will lose it, and if the one who received it withdraws, he will return it in kind.
The interpretation of this according to judicial opinions:
First: The basic principle is that paying the deposit is evidence that the two parties to the contract wanted to confirm their commitment to it, unless there is an explicit text in the contract itself or the established custom followed requires otherwise.
Second: It is sometimes known that the parties to the contract may intend that the deposit be a penalty for abandoning the contract. In such a case, each of them has the right to withdraw. If the one who paid the deposit withdraws, he loses it, and if the one who received it withdraws, he returns it in kind. Thus, Article 148 of the Civil Transactions Law of the United Arab Emirates has established a general rule:
-Paying the deposit means that it is not permissible to renounce it and that the contract has thus become final and irrevocable except in two cases:
The first:
If one of the parties proves the existence of an explicit agreement between the two parties stipulating otherwise.
Second:
If the custom in the field of dealing does not give the depositor this affirmative meaning to the contract, but rather gives it another interpretation, such as the right to withdraw or other interpretations, then the burden of proving the custom falls on the one who claims that.
What about case law
In its various rulings, the Court of Cassation applied the same interpretation of Article 148, as seen in its ruling in Appeal No. (100) of 2015, s. 9 BC, a commercial on 8/4/2015, which stated that “paying the deposit is evidence that the contract has become final, unless the parties agree, or custom requires otherwise.” The court added:
The agreement of the contracting parties that the deposit is a penalty for withdrawal means that each of them has the right to withdraw. If the one who paid the deposit withdraws, he loses the deposit, and if the one who received it withdraws, he is obligated to return the deposit and a similar amount, even if no harm is caused to him.
In this case, the deposit is a penalty condition, but it may not be reduced or canceled even if there is no harm.
Then, if the damage exceeds the amount of the deposit, it allows the injured party to demand greater compensation in accordance with the general rules.
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