Questions & Answers
Drafting an agreement with business partner for debt
We have an LLC company in Dubai for the last 12 years. We have bank liabilities with one of the UAE banks for which our sponsor has given a personal guarantee.
To remove his personal guarantee he has agreed to make a partial settlement of the loan but needs confirmation from the company that when we win one of the arbitration cases and money which we get in Dubai court, he should have first right over that receivables from Court.
The receivable amount will be more than what he will pay to banks.
1) Can we create such an agreement and will Dubai court accept this?
2) What is the procedure we can do and give him the confidence to pay money to the bank?
Hello.
Under the UAE law, parties are generally free to agree and contract on the parameters of their contractual relationships.
The essential elements for the formulation of a contract under the Civil Code are:
- mutual consent to the basic essential elements of the contract;
- a permissible subject matter that is possible and defined (or capable of being defined); and
- a lawful reason or purpose for the obligations arising out of the contract.
When considering whether a contract has been actually formed, the courts will ordinarily review the surrounding circumstances and will specifically consider whether there is evidence of:
- offer and acceptance;
- certainty regarding the terms; and
- each party’s capacity to contract.
It is possible to construct the contract satisfying the above conditions and enforceable under the UAE regulations.
You may call us and schedule a consultation on this matter. The initial consultation is free.
Best regards,
Maha Bin Hendi Law Firm Team
Dear Questioner,
Any contract with mutual agreement of two persons is valid in the court of law.
If you need help in drafting the contract you can contact us directly.
Further, you can schedule a meeting with us so that we can discuss in details
Kindly contact us on the phone for a detailed discussion or write us at our email for further assistance.
Dear Sir/ Madam,
Thank you for reaching out to me on this.
I understand that your company and the sponsor intend to enter into a Mutual Payment Agreement.
This means that the sponsor will pay off the loan to extinguish the guarantee and further the arbitration award sum to be paid off to sponsor.
Such agreements aren't usual in its character since both the payments are originating from a different source, one from the individual and the other from arbitration sums.
Having said the above, it is possible to draft an enforceable agreement to meet both parties requirement i.e. set off of the loan payment against the arbitration award.
In simple words, you will be assigning the arbitration amount in total to the sponsor without claiming any rights.
Answering your two queries:
1- Yes you can get this agreement drafted and it will be enforceable by the Dubai Courts.
2- You need to get this Agreement drafted by a professional lawyer who has handled such commercial transactions as it's very easy for the court to invalidate the agreement if the key terms or intention are not explained.
I trust you will find this helpful.
You can get in touch with me on the phone or email for further assistance and clarification.
Regards,
Hari Wadhwana
