No compensation or penalty if contract terminated: Dubai Court

The Dubai Court of Cassation has ruled that the termination of a contract in civil cases, by agreement among the parties or via the court, ends the contractual relationship between them, bringing the parties to the situation before signing of the contract.

The end of the contractual relationship also brings an end to commitments and obligation written in the contract, including clauses about penalty and compensation.

Based on this new judicial doctrine, the Dubai Court of Cassation rejected the appeal of a real estate company, which had asked the court to compel the investor to pay penalty as per the penalty clause of the contract The company had asked the court to allow it to retain the installment of Dh562,000 already paid by the investor as compensation for the latter?s failure to pay the remaining installments.