Effects of Contract on a Third Party in the UAE
Posted on 4th April 2010 by Camille Paldi,
The Civil Transactions Law, Federal Law No. 5 of 1985
The effect of a contract shall apply to a contracting parties and universal successors without prejudice to the rules of inheritance unless it appears from the contract or from the nature of a transaction or from the provisions of the law that such an effect does not apply to universal successors.
If a contract creates private rights relating to an item whose title passes thereafter to a single successor, such rights shall pass to said successor at the time when the title to such a thing is transferred if they are an inseparable part thereof, provided, and the single successor is aware of them at the time when the title to said item has been transferred to him.
A contract shall not impose an obligation upon a third party but may create a right in his favor.
- If a person undertakes to bind a third party to do something he shall not bind such third party to accept his undertaking; however, if the third party refuses to be under obligation, the undertaking person must compensate the party with whom he has entered into contract.
- However if a third party accepts such an undertaking, his acceptance shall not produce an effect except from the time it has been made unless he intends explicitly or impliedly to make such an acceptance effective as of the date on which the undertaking is made.
- A person may, in his name, stipulate in a contract rights for the benefit of a third party if he has a material or moral interest in performing them.
- As a result of such a stipulation, the third party shall acquire a direct right against the person who undertakes to perform the stipulation and can raise a claim against him for discharge thereof unless it is agreed otherwise however the undertaker may plead for exceptions arising from the contract against the beneficiary.
- The stipulator may also demand that the undertaker perform what has been stipulated for the benefit of the beneficiary unless it becomes clear from the contract that the beneficiary alone has the right to make such a demand.
- A stipulator may revoke the stipulation against his creditor or heirs before a beneficiary notifies the undertaker or stipulator of his desire to benefit therefrom, unless it is contrary to the provisions of the contract.
- Revocation of a stipulation shall not result in discharging the undertaker of his obligation towards the stipulator unless it is agreed explicitly or impliedly to the contrary. A stipulator may replace one usufructuary with another and may have the right to inure solely from the benefit of the stipulation.
Where a stipulation is made in favor of a third party; a usufructuary may be a future person or future authority, and may be a person or an authority not appointed at the time of contract since their appointment can be made at any time the contract produces its effect according to the terms of stipulation.
Posted on 4th April 2010 by Camille Paldi