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Key Judgments from DIFC Courts: A Contractual Dispute

Hexagon Holdings (Cayman) Limited v (1) Dubai International Financial Centre Authority (2) Dubai International Financial Centre Investments LLC [2019] DIFC CFI 013 (2 March 2022).


Background

The parties entered into a joint venture agreement to in the development of a valuable parcel of land in the DIFC. The joint venture agreement was terminated by the claimant nearly 15 years after it was entered into, at which point there was no finalised design for the mixed-use development envisaged, nor any building on the site.


Issues

The claimant blamed the defendants for this situation, instituting proceedings in the DIFC Courts (for over AED 1 billion) and seeking a declaration that it had validly terminated the joint venture agreement.


Decision

The Court dismissed all the claims: the joint venture agreement had not been lawfully terminated, there had been no non-performance by the defendants, and the claimant was not entitled to damages of any kind or restitution for unjust enrichment or wrongful act. By the time the claimant chose to terminate the agreement, any anticipatory non-performance had been remedied and the claimant had already lost the right to terminate for any earlier breaches that were not time barred.


Relevance

To businesses contracting in the DIFC, this case and its appeals offer some key takeaways:

  1. If the right to terminate a contract arises, the terminating party should take prompt and decisive action either to terminate or waive the breach. The DIFC Contract Law requires parties to terminate within a reasonable timeframe. Terminations effected after the breach is remedied will not be effective, nor will indefinite reservations of rights. Parties should assess their termination rights with this in mind.

  2. Limitation periods can be fatal to a party’s claim. Once a party becomes aware of a breach, they should seek immediate legal advice to understand the limitation period and bring any claims within the relevant period.

  3. A long-standing reservation of rights will be unlikely to overcome an expired limitation period. Parties should act decisively upon uncovering a breach of contract.

  4. DIFC Contract Law co-exists with the English common law concerning contracts. The DIFC Court may continue to rely on common law principles whilst establishing its own precedent.


Reach Out

Kartik is an English barrister and has a broad commercial and corporate practice focusing on banking and financial litigation, civil fraud, commodities, corporate insolvency, restructuring, shipping, insurance, sanctions law, and issues pertaining to company law such as shareholder disputes, breach of director duties, and schemes of arrangement. If you require clarification on any of the above, or assistance generally, please feel free to reach out by clicking here, or here.

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