The fact that a sale and purchase agreement provides for an anticipated completion date to complete the project and handover the property, will not entitle the developer to extend the actual completion date indefinitely, as this would be contrary to the requirements of certainty in business contracting under UAE law.
Facts
On or about 2007, our client (Buyer) has entered into a sale and purchase agreement (SPA) with a renowned real estate developer (Developer/ Seller) for the purchase of a property in Dubai. Our client has paid to the Developer a deposit in the amount of AED 312,066.55. Due to Developer’s unjustified delay in completing the project and handing over the property to our client, M&A have been retained to commence legal proceedings against Developer.
According to the SPA, all disputes arising out between Seller and Buyer, will referred to arbitration, to be conducted by 3 arbitrators (Tribunal) according to the rules of the Dubai International Arbitration Centre (DIAC).
Before the Tribunal, we requested: a) the cancelation of the SPA based on Developer’s failure to fulfill its contractual obligations, b) Developer to refund our client the paid amount plus 12% interest from the date of filling the arbitration until actual payment to our client; and c) Developer to pay our client all arbitration costs and lawyer’s fees.
Parties’ Arguments
Developer argued that the SPA does not provide for a specific completion date on which the property must be ready for handover. Instead the SPA provides only for an anticipated completion date, which in order to be achieved, the Developer is only obliged to take all reasonable steps and to act with diligence.
Developer, while admitting the delay in performance, argued that the delay is outside its control and essentially a result of the global financial crisis. Developer further argued that since Buyer is in breach of his payment obligation according to RERA “amended” payment plan, he is not entitled to terminate the SPA.
M&A argued that exclusion of a specific completion/ handing over date in a sale purchase agreement, doesn’t give Developer the right to determine it solely nor to an open-ended completion date. In fact, Developer unreasonable/ unexplained delay in completing the project and handing over the property to our client proves that developer is not performing its obligations in good faith and gives our client the right to request the cancelation of the SPA and refund of the deposit.
M&A denied that Buyer was bound by the RERA “amended” payment plan as Buyer never accepted said payment plan and remained bound by the original payment plan laid down under the SPA. M&A further rejected Developer’s allegation that economic downturn qualifies as an event outside Developer’s control, and as such does not justify Developer’s failure to complete the project.
Tribunal Ruling
The Tribunal ruled that the definition of “Anticipated Completion Date” within the meaning of the SPA doesn’t entitle Developer to determine the actual completion date of the project at its sole discretion. As such wide interpretation of the meaning would empower Developer to extend the actual completion date indefinitely, which would, no doubt, be contrary to the requirements of certainty in contracting under the UAE law.
The Tribunal further held that Developer has failed to demonstrate that it has satisfied the contractual requirements to invoke the “Force Majeure” argument or any other arguments of contractually-excused delays within the meaning of the SPA. The Tribunal further concluded that since Buyer never accepted the RERA amended payment plan offered by Respondent, Buyer did comply with his payment obligation over the course of the SPA and is entitled to cancel the SPA by reason of Developer’s breach.
Note: based on the certificate issued by the Dubai land department dated 27/03/2012, the progress of the project has reached 49%.
In view of the above, the Tribunal rejected the Developer’s arguments and ordered: 1. the cancellation of the SPA; 2. Developer to refund our client the paid amount plus 9% interest from the date of filling the case until final payment by Developer; and 3. Developer to bear all arbitration costs in the amount of AED99,000/-.
DIAC Award issued on 6 May 2014.
