Civil Law and UAE Basic Breach of Contract Remedies

1. Introduction

A breach of contract occurs when a contracting party fails to perform an obligation required by the contract, performs it late, performs it only partly, or performs it defectively.

Under the current UAE legal framework, contractual remedies are principally governed by Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law, which entered into force on 1 June 2026 and replaced the former 1985 Civil Transactions Law.

The basic remedial structure is:

Performance → Specific performance → Compensation → Termination/Rescission → Other contractual remedies

The current Civil Transactions Law expressly provides that where specific performance becomes impossible, compensation may be ordered; the same basic approach applies to delay, partial performance and defective performance. It also generally requires formal default before compensation, unless the law or contract provides otherwise. (UAE Legislation)

2. Meaning of Breach of Contract

A contractual breach may take several forms.

A. Non-performance

The debtor does not perform the promised obligation.

Example: A seller receives the purchase price but refuses to deliver the goods.

B. Late performance

The obligation is eventually performed but after the agreed time.

Example: A contractor completes a project six months after the contractual deadline.

C. Defective performance

The debtor performs but not according to the contractual specifications.

Example: A contractor uses materials of a lower quality than those specified in the contract.

D. Partial performance

Only part of the contractual obligation is performed.

E. Anticipatory or threatened non-performance

The circumstances may demonstrate that performance will not occur as required, potentially giving rise to contractual remedies depending on the terms of the contract and applicable law.

3. Basic Elements of a Breach Claim

A claimant generally needs to establish:

A valid contractual obligation

Existence of a breach

Attribution of the breach to the debtor

Damage, where compensation is claimed

Causal connection between breach and damage

Any required default/notice

Availability of the particular remedy requested

Therefore, simply proving that a contract existed is not enough.

The claimant should demonstrate:

Contract + Obligation + Breach + Causation + Damage = Potential contractual remedy

4. Main Remedies for Breach

The principal remedies can be divided into five categories:

1. Specific performance

The debtor is required to perform the contractual obligation.

2. Performance by compensation

The debtor pays compensation instead of performing where specific performance is impossible or where the legal conditions for compensation are satisfied.

3. Termination/rescission

The innocent party may seek termination where the statutory and contractual requirements are satisfied.

4. Refusal to perform a reciprocal obligation

In reciprocal contracts, a party may in appropriate circumstances withhold its own performance where the other party has failed to perform.

5. Contractual damages and agreed compensation

The contract may contain a compensation/liquidated-damages mechanism, subject to applicable UAE law and judicial control.

5. Specific Performance

Specific performance means compelling the debtor to perform the actual obligation promised under the contract rather than simply paying money.

For example:

delivering the agreed property;

handing over documents;

completing contracted work;

transferring an asset;

performing an agreed service.

Specific performance is particularly appropriate where the promised performance remains possible and monetary compensation alone does not adequately satisfy the creditor's right.

The current Civil Transactions Law expressly recognizes specific performance and provides rules concerning the consequences where it is performed or the debtor continues refusing performance. (UAE Legislation)

6. Case Law: Federal Supreme Court Civil Cassation No. 538 of 2016

Federal Supreme Court, Civil Cassation No. 538 of 2016, judgment dated 18 December 2017

This is an important UAE authority concerning reciprocal contractual obligations, performance and good faith.

The dispute concerned interconnected property/financing arrangements. The Court considered whether one party could insist upon the other party's performance when the first party had not itself fulfilled the obligations that were contractually connected to the other party's performance.

The Court emphasized the principle that contracts must be performed according to their contents and consistently with good faith, and that contractual obligations can include consequences arising from law, custom and the nature of the transaction. (e-Laws)

Principle

A party generally cannot demand performance of a reciprocal obligation while disregarding its own material contractual obligations.

Importance

This case is especially useful for:

specific performance;

reciprocal obligations;

good faith;

conditional performance;

property contracts; and

termination disputes.

7. Refusal to Perform Reciprocal Obligations

A particularly important UAE contractual remedy is the right to withhold performance in appropriate reciprocal contracts.

The idea is straightforward:

If A and B have mutually dependent obligations, A may not necessarily be required to perform while B has failed to perform the corresponding obligation.

The old Civil Transactions Law contained this principle expressly, and the same conceptual approach remains important under the current Civil Transactions Law.

Example

A contractor is required to construct a building while the employer must provide the agreed site and access.

If the employer materially prevents construction, the contractor may have a legal basis for refusing or suspending its corresponding performance, depending on the contract and applicable law.

This is different from simply abandoning the contract.

8. Case Law: Federal Supreme Court Civil Cassation No. 538/2016

The Court specifically considered reciprocal contractual obligations and concluded that the purchasers' performance was connected to the developer/seller's fulfillment of its corresponding obligations.

The Court accepted that failure to complete essential infrastructure could justify the other parties in withholding their corresponding contractual performance where the contractual obligations were interconnected. (e-Laws)

Rule

Reciprocal obligations must be examined together rather than in isolation.

This is one of the most important principles for breach-of-contract examination questions.

9. Compensation for Breach

Where contractual performance cannot be achieved or where the law permits compensation for defective, partial or delayed performance, the creditor may seek monetary compensation.

The current Civil Transactions Law provides that where specific performance becomes impossible, compensation may be ordered unless the debtor proves that the impossibility resulted from a foreign cause beyond the debtor's control. The provision also expressly addresses delayed, partial and defective performance. (UAE Legislation)

Compensation may cover legally recoverable losses caused by the breach.

The claimant must nevertheless establish the legally required elements.

10. Default or Formal Notice

A significant principle is formal default.

The current Civil Transactions Law provides that compensation generally is not due until the debtor has been formally put in default, unless the law or the contract provides otherwise. (UAE Legislation)

This makes notice an important practical issue.

Example

A contractor fails to complete work on time.

The employer should consider:

whether the contract itself specifies automatic default;

whether a notice is required;

whether a contractual cure period exists;

whether the breach is already sufficient to trigger a remedy; and

what consequences follow from the notice.

11. Importance of Notice

A proper notice can establish:

that the creditor demanded performance;

that the debtor was aware of the breach;

when the debtor was placed in default;

that a contractual cure period expired; and

the beginning or strengthening of a damages claim.

However, notice should not be treated as an automatic requirement in every situation because the applicable law or contract may provide exceptions.

12. Case Law: Federal Supreme Court Commercial Cassation No. 941 of 2019

Federal Supreme Court, Commercial Cassation No. 941 of 2019, 24 March 2020

This case is important for understanding contractual liability and damages.

The Court explained that contractual and tortious liability involve the essential elements of:

fault;

damage; and

causation.

It also emphasized that where the relationship between the parties is contractual, the court must properly characterize the legal basis of the claim rather than simply applying tort principles without justification. (e-Laws)

Principle

A claimant seeking contractual compensation must establish the necessary connection between:

contractual breach → damage → causation.

Importance

This case prevents a claimant from automatically recovering damages merely because a contractual obligation was not performed.

13. Defective Performance

Defective performance occurs where the debtor technically performs but fails to provide the promised contractual quality.

Examples include:

defective construction;

non-conforming goods;

incomplete services;

failure to meet specifications;

defective repairs;

inadequate professional performance.

The appropriate remedy can depend upon:

the seriousness of the defect;

whether the defect can be corrected;

contractual specifications;

whether the creditor accepted performance;

the nature of the obligation; and

resulting damage.

14. Case Law: Federal Supreme Court Civil Cassation No. 826 of 2017

Federal Supreme Court, Civil Cassation No. 826 of 2017, judgment dated 31 December 2018

This case involved a construction dispute and questions concerning:

contractual specifications;

delay;

completion of works;

responsibility for interruption;

expert evidence; and

losses arising from the contractual relationship.

The Court held that determining factual matters such as the extent of contractual work completed, compliance with specifications and whether delay resulted from the contractor, an external cause or the employer falls primarily within the trial court's assessment of evidence, provided the reasoning is legally sufficient. (e-Laws)

Principle

In construction breach cases, expert evidence can be extremely important, particularly when determining whether performance complied with contractual specifications.

15. Termination of Contract

Termination is a major remedy for serious breach of a reciprocal contract.

Where one party fails to perform a material contractual obligation, the other party may, subject to the applicable legal requirements, seek:

performance; or

termination,

together with compensation where appropriate.

Termination is more serious than damages because it affects the continued existence or enforceability of the contractual relationship.

Example

A buyer purchases a property and pays the agreed consideration, but the seller fundamentally fails to perform the essential obligation to transfer or deliver the property.

Depending upon the facts and legal requirements, the buyer may seek:

specific performance;

termination; and

compensation.

16. Case Law: Federal Supreme Court Civil Cassation No. 538/2016

The same case is particularly useful because the Court dealt with the principle that, in a bilateral contract, where one party fails to perform what it owes, the other party may, after satisfying the applicable requirements, seek performance or termination.

The case demonstrates that the court must examine all interconnected contractual obligations before deciding whether a party is itself in breach. (e-Laws)

Exam rule

Before granting termination for breach, the court should identify the contractual obligations of both parties and determine who failed to perform and whether that failure is legally material.

17. Compensation for Delay

Delay can itself constitute breach.

Examples:

late delivery;

delayed construction;

delayed payment;

delayed completion of services;

failure to provide documents on time.

The creditor may seek compensation for legally recoverable loss resulting from delay.

The current Civil Transactions Law expressly includes delayed performance within the compensation framework. (UAE Legislation)

18. Partial Performance

Partial performance occurs when only part of the contractual obligation is completed.

For example:

A supplier agrees to deliver 10,000 units but delivers only 6,000.

Possible consequences can include:

acceptance of the 6,000 units;

demand for the remaining 4,000;

compensation;

termination where the partial performance is sufficiently serious;

contractual penalties, if enforceable; or

a combination of remedies where legally permissible.

The remedy depends upon the contract, the seriousness of the failure and the actual consequences.

19. Impossibility of Performance

An important distinction must be made between:

Ordinary breach

The debtor could perform but does not.

Impossibility

Performance has become legally or physically impossible.

Under the current Civil Transactions Law, where specific performance becomes impossible, compensation may generally be ordered unless the debtor establishes that the impossibility resulted from a foreign cause beyond its control. (UAE Legislation)

This protects the creditor while recognizing that a debtor should not automatically be liable for every event outside its control.

20. Force Majeure and Foreign Cause

A debtor may argue that failure to perform resulted from an external event beyond its control.

The court may therefore examine:

Was the event genuinely external?

Was it unforeseeable or legally relevant under the contract?

Did it actually prevent performance?

Could the debtor have avoided or mitigated its consequences?

Did the contract allocate the risk?

Was the debtor already in default?

Did the debtor notify the other party?

Force majeure should therefore not be treated as a general excuse for poor performance.

21. Contractual Penalty / Agreed Compensation

Commercial contracts frequently contain clauses providing a predetermined amount payable upon breach.

Such provisions can serve important functions:

estimating potential loss;

encouraging performance;

reducing evidentiary disputes;

allocating contractual risk.

However, the enforceability and judicial treatment of such clauses depend upon UAE law, the wording of the agreement and the circumstances of the breach.

A contractual penalty does not mean that every stated amount is automatically recoverable regardless of actual circumstances.

22. Mitigation and Avoidable Loss

A claimant should act reasonably after a breach.

For example, if a supplier fails to deliver goods, the claimant should consider whether substitute goods can reasonably be obtained.

A claimant should not deliberately increase losses and then expect unrestricted recovery.

This principle is particularly important in commercial disputes involving:

replacement costs;

lost profits;

business interruption;

construction delay;

supply-chain disruption.

23. Causation

Causation is essential.

Suppose:

A breaches a contract;

B claims AED 5 million in losses.

B must establish that the claimed losses were sufficiently connected to A's breach.

The court may distinguish between:

Direct loss

Loss directly resulting from the breach.

Remote or unsupported loss

Loss that lacks a sufficient causal connection or adequate proof.

This is why evidence and expert reports can be critical.

24. Case Law: Federal Supreme Court Commercial Cassation No. 941/2019

The Court emphasized the need for the elements of liability to be established, including fault, damage and causation. It also recognized the trial court's authority to assess the evidence and determine whether those elements exist, provided the conclusion is supported by sufficient reasoning and evidence. (e-Laws)

Exam significance

For a damages claim, remember:

Breach alone ≠ automatic full compensation.

The claimant must connect the breach to a legally recoverable loss.

25. Role of Experts in Contract Breach

Experts are particularly important in complex UAE contractual disputes.

They may examine:

construction defects;

accounting records;

project delays;

financial losses;

engineering specifications;

quantities;

invoices;

bank transactions;

technical performance.

But the expert generally assists the court on technical and factual questions. The ultimate legal determination belongs to the court.

26. Case Law: Federal Supreme Court Civil Cassation No. 826/2017

The Court confirmed the trial court's authority to assess factual matters and expert evidence concerning contractual performance, including:

whether work was completed;

whether it complied with agreed specifications;

causes of delay; and

responsibility for interruption.

Where the court's conclusions are supported by the record and adequately reasoned, the appellate/cassation court will not ordinarily substitute its own factual assessment merely because another interpretation is possible. (e-Laws)

27. Good Faith and Contractual Performance

Good faith is fundamental to UAE contract law.

A party should not:

deliberately frustrate the contract;

exploit technical wording dishonestly;

demand performance while refusing its own essential performance;

conceal material contractual circumstances; or

use contractual rights abusively.

The Court's reasoning in Cassation No. 538/2016 illustrates that contractual performance is not assessed solely by isolated words; the court can consider the contract as a whole and the obligations arising from law, custom and the nature of the transaction. (e-Laws)

28. Can a Party Obtain Multiple Remedies?

Potentially, yes—but remedies cannot ordinarily produce double recovery for the same loss.

For example, depending on the circumstances, a claimant might seek:

Termination + compensation

or

Specific performance + compensation for delay

But the court must ensure that the remedies are legally compatible and that the claimant does not recover twice for the same injury.

29. Case Law: Federal Supreme Court Civil Cassation No. 538/2016

The case also demonstrates an important limitation on judicial relief.

The Court criticized a judgment that granted relief beyond what had actually been requested by the parties. It emphasized that a court cannot simply award a remedy that was not requested in the circumstances prohibited by procedural law. (e-Laws)

Importance

A claimant should therefore formulate the requested remedy carefully.

For example:

specific performance;

termination;

compensation;

contractual penalty;

interest where legally available;

restitution.

The court must remain within the procedural and substantive boundaries of the claim.

30. Breach by Both Parties

Sometimes both parties breach the contract.

For example:

contractor delays completion;

employer changes the project location;

both events contribute to the ultimate delay.

The court must determine:

what each party promised;

what each party actually did;

which obligations were breached;

whether one breach caused or contributed to the other;

whether the contract allocates the risk;

what damage resulted; and

the appropriate remedy.

31. Case Law: Federal Supreme Court Civil Cassation No. 826/2017

This case is particularly useful because the dispute involved competing conduct relating to construction performance.

The Court accepted the factual assessment that both parties' conduct could contribute to the contractual consequences and that the court could rely upon the evidence and expert report in reaching its conclusion. (e-Laws)

Principle

Contractual breach must be analyzed comparatively where both parties' conduct contributed to the failure.

32. Contractual Liability Versus Tort Liability

A breach of contract normally gives rise to contractual liability.

Tort liability is conceptually different.

In Commercial Cassation No. 941/2019, the Federal Supreme Court emphasized that where the parties are connected by a contractual relationship, contractual liability is ordinarily the appropriate framework for damage arising from non-performance of contractual obligations, subject to recognized circumstances in which tort principles may also become relevant, such as conduct constituting a crime, fraud or serious fault satisfying the relevant requirements. (e-Laws)

Exam point

Always ask:

Did the damage arise from failure to perform the contract, or from an independent unlawful act?

That determines the legal framework.

33. Basic Remedy Matrix

The current Civil Transactions Law expressly addresses specific performance, compensation for impossibility, delay, partial and defective performance, and formal default. (UAE Legislation)

34. At Least 6 Important UAE Case Laws

35. Simple Exam Formula

For any UAE breach-of-contract problem, use this sequence:

1. Contract

Was there a valid and enforceable contract?

2. Obligation

What exactly did the defendant promise?

3. Breach

Was there non-performance, delay, partial or defective performance?

4. Default

Was formal notice/default required?

5. Defence

Was there force majeure, impossibility, the other party's prior breach or another contractual defence?

6. Damage

What actual legally recoverable loss occurred?

7. Causation

Did the breach cause that loss?

8. Remedy

Should the court order:

specific performance;

compensation;

termination;

correction/replacement;

contractual damages; or

another appropriate remedy?

Conclusion

The basic UAE law of breach of contract remedies is built around the principle that contractual obligations should be performed and that the innocent party should receive an effective legal remedy when performance fails.

The principal remedies are:

Specific performance → Compensation → Termination → Remedies for defective/late/partial performance

The current Civil Transactions Law specifically recognizes compensation where specific performance becomes impossible and also deals with delayed, partial and defective performance and the requirement of default in appropriate cases. (UAE Legislation)

The leading jurisprudence shows that UAE courts pay particular attention to reciprocal obligations, good faith, causation, damage, evidence, expert reports and the precise relief requested. Cassation No. 538/2016 is especially useful for reciprocal obligations and good-faith performance; Commercial Cassation No. 941/2019 is central to contractual liability and causation; and Civil Cassation No. 826/2017 is valuable for construction and defective/delayed performance disputes. (e-Laws)

For examination purposes, remember:

Breach → Default → Damage → Causation → Remedy.