Contract Law

Introduction

The aspect of law often oscillates between certain technicalities that are concentrated on fairness on the one hand and technicality on the other. In regard to contract law, the English law has often been viewed to have a positive approach that draws a distinction between morality on the one hand and law on the other (McKendrick 1997). Furthermore, the laws that are related more to the vitiating factors are often inclined towards the attainment of fairness. It is vital to note that by their functioning and nature in case the vitiating factors are pleaded successfully, they end up unraveling the agreement at hand. Traditionally, the vitiating factors have encompassed different doctrines such as misinterpretation, duress, unconscionability and undue influence. The application of the law related to these vitiating factors is often similar in most countries since they all of them tend to use the English law as a bedrock of law formation (Beale et al. 2010). In contrast, there seem to be certain differences in the law application in certain Asian states such as the United Arab Emirates. Current paper will give a comprehensive comparison of duress and misrepresentation under the UAE law and the English law. Besides, a comparative case analysis will be given to differentiate how different countries manage with different cases concerning the two vitiating factors.

The UAE Legal System

The most important step to take before discussing any vitiating factors is to understand the structure of the legal system under which the UAE operates since the English law is widely known. The first aspect to note under this legal system is that the structure of the country’s civil law is identical in most Arab states (Khedr & Alnuaimi 2013). The UAE majorly borrowed the ideas of drafting its code from Egypt after the formation of its federation in the early 1971.Therefore, the legislative process in UAE was heavily influenced by the federation that was legally formed by the Egyptian government. Furthermore, in cases that seems not to be clear under UAE laws, the courts tend to consult the Egyptian authorities. The UAE is therefore governed by certain statutory codes just like in all the jurisdictions of the civil law (Khedr & Alnuaimi 2013). The statutory codes mainly regulate the commercial and civil relationships between legal and physical person engaged in any business in the UAE.

Misrepresentation under UAE Law and English Law

Since the law serves the same purpose, the English law and the United Arab Emirates law can, therefore, be viewed as similar. On a closer look, though, they tend to vary in both practice and theory. To effectively understand this difference, a description of certain perceptible differences such as application, variation in definitions and the aspect of cancelling contracts needs to be clearly outlined.

In terms of definition, the definition of Misrepresentation under the UAE law is completely different from that of the English law. Article 185-192 of the UAE civil code clearly defines misrepresentation concepts, setting the purpose and providing necessary terms and conditions. Under Article 185, misrepresentation occurs in case one of the contracting parties in a contract fraudulently deceives the other by act or word, which makes the other agree to something he would otherwise not agree or give consent (Nassif 2011). Article 186 further defines misrepresentation as an act of deliberately keeping in secret the fact or certain set of circumstances and when it is proved that the person who engaged in a contract agreement would not have otherwise signed the contract if he had been aware of the set of circumstances (Nassif 2011).

On the other hand, the English law defines misrepresentation as an act of giving out false information or statement that eventually acts as the underlying basis for the other party to agree and sign a contractual agreement (Craswell 2006). As for the English law, the case of a complainant is often regarded as null and void if relevant proof cannot be found to determine that the false information fact or statement has been given out in the process of signing the contract. The English law further claims that the use of dishonest promises or lies when one is entering a contract agreement cannot be equal to misrepresentation. A factual statement should, therefore, be provided (Craswell 2006). The individual intention is another element that the English law tends to consider as a non-argumentative fact. In case of the English law, there must be sufficient proof from the complainant that he completely relied on the misrepresentation that he was given while signing the contractual agreement.

The UAE law has rather given dissimilar provisions on the matter. Unlike the English law counterpart, the UAE tends not to associate itself with any form of negligent misrepresentation. Various sources define the term negligent misrepresentation as total failure to exercise and provide the necessary care that any prudent person would have otherwise exercised in similar circumstances (Nassif 2011). Other sources define it more as an act of carelessness than intentional harm. The contrary aspect is further confirmed in article 185-186 of the civil code that indicates that for one to make a claim of being deceived by fraudulent means he/she must provide proof of purposeful inaction or action as well as an intention (Nassif 2011). The burden of providing proof that a person has been deceived through intentional misrepresentation, therefore, lies on the shoulders of the victim of misrepresentation.

Legal Consequences of Misrepresentation 

The legal consequences of misrepresentation under the United Arab Emirates laws are well set under article 187 of the civil code. The article states that if one contacting party intentionally makes misrepresentation to the other party and it later transpires that the given contract was done with much unfairness then the misled parties have a right to cancel the contract (Nassif 2011). This article clearly demonstrates that the UAE Civil Code only views the act of misrepresentation as a mere defect to the contracting parties consent. In the case when the aspect of misrepresentation can be proved by the victim the consent element is then vitiated .The major pillars of a contract include contracting party’s capacity, consent and the contract clause or subject. In a case where one of these elements or pillars have been violated, missing or deemed defective, the contract can be said to have collapsed and, therefore, can be terminated depending on the pillar that has been violated. Therefore under the UAE laws the act of misrepresentation alone gives grounds for termination but does not offer any compensation as the law does not deem it as an act of breaching a contract (Nassif 2011).

Termination of Contract 

Article 187 of the UAE civil code further correlates with the aspect of lesion-gross unfairness to the act of misrepresentation. This correlation has gained support of major stakeholders such as the rulings of the Court of Cassation (Nassif 2011). The court has categorically stated that the act of gross unfairness becomes more of an obvious fact when there is extreme imbalance between the subject contract value and the price the purchasers paid for the same subject. Therefore it is clear that the concepts of gross unfairness and misrepresentation must be used together and not separately for the contract to be terminated successfully (Nassif 2011).

Evidence of Consent

In the case where evidence can be found to prove that the victim of misrepresentation continued to perform according to the contract knowingly and with their consent, the right of the victim to claim termination of the given contact based the claims of misrepresentation is then set aside. According to Article 192 Of the Civil code under UAE law, the given right to cancel the agreement based on gross unfairness and misrepresentation virtually vanishes when the person who have the right to cancel dies or when the victim engages in the contract knowingly or in case the property is completely damaged while in possession of the person who had the right to cancel the contract (Nassif 2011).

The case analysis below further represents the negligent misrepresentation case under the English law.

Ogden v Howard Marine [1978] QB 574 

In this case the claimant known as Ogden had hired dredging badges from Howard Marine, while the defendant was made to carry out some excavation duties for Northumbrian Water Authority for 1800 pounds per week. To establish the tenders, accurate estimate for the completion of the whole work Ogden inquired from the defendant on the barge capacity. Howard Marine then confirmed from Lloyds register and gave an estimate of 850M3.The entry in the register was found to be wrong as the capacity was much lower. Eventually, the work took much longer and in the end it appeared to cost more. The claimant eventually brought up an action for negligent misrepresentation. The defendant, on the other hand, argued that they had enough grounds to believe that the statement they had given to Ogden was true as they had picked it from Lloyds Register. The defendant was held accountable since they failed to discharge the burden of proof by demonstrating to the court that they had enough grounds to believe the statement was true. The aspect took place because the defendant had the registration document that contained the correct capacity, and it was not factual as to why they had chosen Lloyds register over the correct document.

From the above case, it is evident that under the English law two basic components are essential for proving that a false statement was used to induce a party into entering a contractual agreement (Craswell 2006). The two components include material grounds and reliance.

Material

The aspect requires an act of misrepresentation to be material in that it should be based on the relevant facts to induce someone reasonable to get a contract. In the case of Redhill v Muse prize Properties[1990]36 EG 114, t he judge on his referral approved the viewpoint of Jones and Goff under the restitution law that any form of misrepresentation that convinces a person to enter into the contractual agreement should provide enough grounds for the rescission or cancellation of the given contract (Craswell 2006). In other words in case it is proved that the misrepresentation was not enough to induce a reasonable person to get engaged in a contract then the onus or burden would be purely laid on the misrepresented person to prove that the misrepresentation made him/her to sign the contract.

Reliance

In this case, the victim must have dependant on the given misrepresentation.

The case of Hurd v Redgrave [1907] AC 351 further proves that the courts will consider an act of over-reliance even in the case when misrepresentation is not the only influencing factor for the victim to enter into a contract.

Duress

In contract law, duress is related to an act through which a person enters into a contractual agreement because of being threatened. In case a given party makes a contract under duress, they might have the right to have the contract set aside (Hadjiani 2002). Traditionally the law tends to recognize the threat of physical violence but with the change in time the various courts have recognized the inclusion of economic duress that they have seen as giving rise to an important claim. The main basis of duress as a vitiating factor under contract law is the absence of free-will consent. The vitiating factor operates majorly under the common law. In case of termination, the victim has the right to cancel the contract and make a claim for damages. The underlying point though is that the definition of duress is universal and cut across the different laws.

Duress under English Law

Under the English law, the most important aspect is to differentiate between illegitimate pressures from other kinds of pressure which are deemed permissible and which are not likely to lead to the invalidation of a contract (Hadjiani 2002). This happens as a result of common pressure that arises and is associated with any competitive society. The act of duress in the English law, therefore, applies to certain combinations. The combinations include:

Forms of Pressure

The English law provides the different form of pressure that could be classified under duress. Duress to the person involves a threat on the part of an individual to the health, life physical comfort and liberty of the other party (Hadjiani 2002). The English law under this component refutes the claim that threats of violence and violence itself can cause duress under certain circumstance. The law claims that it is a very rare occurrence for violence to force an individual into signing a contract that can later be considered to have been done under duress. The use of violence itself is viewed by the law as a way of preventing a person from entering into a contract. For instance, in case one party is physically forced or made to sign a given contract with the arm held, it will result in  that it will not be viewed as a contract since there has been no contractual relationships between the two parties. Economic duress is another form of pressure recognized by the English law. In the present times, economic and commercial pressures are of vital importance and give a clear reflection of the major underlying political conflicts (Weitzenböck 2012). Although this is a legitimate economic pressure, recent cases in courts have established the concept as one of the economic duress. The act is defined as threatening in terms of causing harm to another party’s interest but avoiding harming him/her physically or even damaging his/her property.

Illegitimacy of the Pressure

A given pressure must have sufficient proof of illegitimacy in order to be considered duress. The most difficult aspect of this is drawing out the difference between pressures that are considered legitimate and those which are illegitimate. According to the English law even in case a conduct of threatening is considered to be lawful, the process in which the given pressure was exerted might still be considered illegitimate (Friedman 2011). This aspect implies that even in case one threatens to commit what can be viewed as a lawful act, the act can still be viewed as illegitimate if the given threat consists of certain unreasonable demands. The English courts have sometimes held that any individual under no obligation to get a contract with another has the right to threaten another person not to get into any contract unless the terms of the one threatening are met.

The final combination of the English law lies in determining whether the victim of duress had a reasonable alternative. In case it is proved that there was an alternative to submitting to the demands given by the other party, whether the alternative was practical or legal then the victim of duress will likely fail to obtain the given relief (Weitzenböck 2012). The law states that it is fundamental to find out whether the coerced victim did or did not raise a voice of protest, whether he/she received independent advice and whether he/she took the necessary steps to avoid getting into the contract.

Duress under UAE Law

The United Arab Emirates law provides a different dimension to the laws that govern the act of duress. The aspect of duress is clearly defined in section 2(4) of the UAE civil code. Article 182 states that an individual who exercises the act of duress to complete a given contract may not have the right to enforce the contract, but the given contract will still stand valid in case the victim or anybody with the right to handle the contact permits after the threat has ceased (Nassif 2011). Unlike the English law, the United Arab Emirates law considers violence to be a means of determining duress and furthermore an individual does not have to prove the legitimacy or illegitimacy of any economic pressure to determine if the underlying economic contract was taken out of pressure. In the case of a claim, the UAE civil code under article 184 provides that in case the duress is caused by the other party then the coerced person might not claim the contract is defective until he/she provides sufficient evidence to prove that the party has been aware of the duress.

Conclusion

The contract laws of different countries are similar since they serve the same purpose under the law. There might be certain differences in terms of how the vitiating factors are handled under the laws of the different countries but still the outcome is often to arrive according to the fundamental principle of law - fairness. Another aspect is the fact that different countries borrow ideas of law-making process from other countries that they believe share a common legal system. The countries, in which these laws are borrowed, form the foundation or act as feeder parents as with time they tend to consult them when some laws become unclear to them.