Agreement to Agree UAE Law: Understanding the Legal Implications

In business, contracts are important documents that outline the terms and conditions that govern the relationship between two parties. These agreements can be simple or complex, depending on the scope of the business transaction. Some contracts contain an “agreement to agree” clause, which is a legal term used to describe a provision that obligates the parties to negotiate the terms of a future agreement. If you are doing business in the United Arab Emirates (UAE), it is important to understand the legal implications of an agreement to agree clause.

What is an Agreement to Agree Clause?

An agreement to agree clause, also known as a “future agreement” clause, is a provision in a contract that obligates the parties to reach a future agreement. This type of clause is commonly used in contracts that cover long-term business arrangements, such as joint ventures or strategic partnerships. The agreement to agree clause sets out the major terms and conditions of the future agreement, but leaves some details to be negotiated later.

However, an agreement to agree clause does not create a legally binding contract. If one party refuses to negotiate or fails to come to an agreement, the other party has no legal recourse. In other words, the agreement to agree clause is a statement of intent rather than a legally enforceable obligation.

UAE Law and Agreement to Agree

In the UAE, an agreement to agree clause is generally recognized as a valid provision in a contract. However, it is important to note that UAE law places great importance on the parties’ intent when entering into a contract. If the parties’ intent is unclear or ambiguous, the courts may interpret the agreement to agree clause differently.

In addition, UAE law requires that contracts must be specific and certain in its terms. Therefore, an agreement to agree clause must have specific details about the future agreement and the negotiation process. The clause must also have a clear timeline for the negotiation process and a deadline for reaching a final agreement.

In UAE law, a contract that has an agreement to agree clause is generally drafted in two stages. The first stage is the initial agreement, which sets out the major terms and conditions of the future agreement. The second stage is the final agreement, which elaborates on the details of the future agreement.

Conclusion

An agreement to agree clause can be a useful provision in a contract if used properly. However, it is important to understand that this clause is not a legally binding obligation. In addition, it is important to make sure that the clause is specific and certain in its terms, and that the parties’ intent is clear and unambiguous. If you are considering using an agreement to agree clause in your contract in the UAE, it is advisable to work with an experienced attorney who can help ensure that the clause is properly drafted and legally enforceable.