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Rights and Obligations of Parties under Contract

Rights and Obligations of Parties under Contract

Duties Overview, Sample Clause 

The best way to define contractual obligations is to say that they are the legal responsibilities of each party involved in a contractual agreement. In a contract, both parties will exchange an item or service of value, but certain expectations must be met in order for the exchange to be properly completed. Such expectations will be defined by the terms of the contract. Failure to meet these expectations by either party will in most cases mean a breach of contract, which may result in damages being awarded to the non-breaching party. Thus, one’s contractual obligations must be given great consideration.

The Contracts or agreements between various parties are framed and validated by the UAE Contract Act. Contract Act is one of the most central laws that regulates and oversees all the business wherever a deal or an agreement is to be reached at. The following section will tell us what a contract is.


Rights and Obligations of Parties under Contract

Rights and Obligations of Parties under Contract


Contract obligation to act in good faith

In the realm of contract law, the principle of acting in good faith encompasses a fundamental expectation that all parties involved will conduct themselves honestly, fairly, and with integrity. This implied covenant of good faith and fair dealing serves as a general presumption, ensuring that the parties do not undermine or deprive each other of the intended benefits outlined in the contract.

When entering into a contract, there is an inherent understanding that the parties will act honestly and honorably, with a genuine intention to fulfill their respective obligations. This obligation requires more than simply adhering to the explicit terms and conditions of the contract; it extends to the broader duty to act in a manner that upholds the spirit and purpose of the agreement.

Acting in good faith entails a variety of responsibilities. Firstly, it requires transparency and openness in all dealings related to the contract. The parties should provide accurate and complete information, avoiding any deliberate misrepresentation or concealment of relevant facts. Furthermore, they should communicate promptly and effectively, sharing pertinent updates or changes that may impact the contract’s performance or outcomes.

In addition to transparency, good faith requires a cooperative and collaborative approach. The parties should strive to find mutually acceptable solutions when conflicts or disputes arise, rather than resorting to tactics that may undermine the other party’s interests or unfairly advantage themselves. This collaborative spirit extends to the performance of contractual obligations, where the parties should make reasonable efforts to meet the agreed-upon standards and deadlines.

Moreover, acting in good faith involves refraining from engaging in actions that would hinder or frustrate the other party’s ability to benefit from the contract. This includes avoiding any intentional interference, sabotage, or undermining of the contractual relationship. Parties should not exploit ambiguities or loopholes in the contract to gain an unfair advantage or to deprive the other party of the intended benefits.

By upholding the principle of good faith, the parties demonstrate their commitment to the underlying principles of fairness, honesty, and trust that form the foundation of contractual relationships. When disputes arise, courts and legal authorities may interpret the parties’ actions through the lens of good faith, evaluating whether they have fulfilled their obligations in a manner consistent with the reasonable expectations and intentions of the contract.

It is important to note that the specific requirements and application of good faith may vary across different jurisdictions. Legal systems may have nuanced interpretations and standards for determining whether a party has acted in good faith. Nevertheless, the overarching objective remains consistent: to foster an environment of trust and fairness in contractual dealings, ensuring that all parties can reasonably expect to receive the benefits and protections they are entitled to under the agreement.

Can you impose an express duty of good faith on contracting parties?

Many commercial contracts specifically require a party to perform particular obligations or exercise specified discretions acting “in good faith”. It is less common but also possible to impose an express duty to perform the whole contract in good faith. Any express term will be interpreted carefully, in the context of the entire contract and the commercial relationship between the parties.

In commercial contracts, it is not uncommon to include an express duty of good faith that specifically outlines the obligations or discretions a party must fulfill while acting in good faith. This contractual provision serves to emphasize the importance of honesty, fairness, and integrity in the performance and exercise of rights under the contract. While less common, it is also possible to impose a broader duty that requires the entire contract to be performed in good faith.

When a contract includes an express duty of good faith, the language and intent of this provision will be carefully examined and interpreted within the context of the entire contract and the underlying commercial relationship between the parties. Courts and legal authorities will consider the specific wording used, as well as the surrounding circumstances and the parties’ reasonable expectations.

The inclusion of an express duty of good faith in a contract acknowledges that the parties have contemplated the need for a higher standard of conduct beyond what is implied by law. It serves to clarify and reinforce the parties’ intention to promote trust, fairness, and cooperation in their dealings.

When a particular obligation or discretion is required to be performed in good faith, it means that the party must exercise that obligation or discretion honestly, fairly, and with a sincere intention to fulfill the objectives and purposes of the contract. This duty ensures that the party does not use their position to exploit or harm the other party, and that they act in a manner consistent with the reasonable expectations of the contract.

Imposing a broader duty to perform the entire contract in good faith goes beyond specific obligations or discretions. It establishes a higher standard of conduct that applies to the overall performance and enforcement of the contract. This duty requires the parties to act honestly, fairly, and in a manner that upholds the spirit and purpose of the entire agreement. It prohibits any intentional acts or omissions that would undermine or frustrate the other party’s right to receive the benefits and protections set forth in the contract.

The interpretation and application of an express duty of good faith will depend on the specific language used in the contract, as well as the applicable laws and legal precedents in the relevant jurisdiction. Courts will carefully consider the intentions of the parties, the commercial context, and the overall fairness of the contractual relationship when determining whether a party has fulfilled their duty of good faith.

It is important for parties to clearly define the scope and extent of any express duty of good faith in their contracts. This can help prevent ambiguity or misunderstanding and ensure that both parties have a shared understanding of their obligations and expectations. By explicitly incorporating a duty of good faith, the parties foster an environment of trust and cooperation, promoting fair and equitable contractual relationships.

For a contract to be formed four basic elements must be present:

Offer, acceptance, consideration and the intention to create legal relations. Generally much negotiation takes place between the parties before an agreement becomes binding and a contract is formed. It is important therefore to recognise the precise moment when a contract is formed as this is when the parties assume contractual obligations and the consequent risk of liability if the terms of the contract are breached

A contract is an agreement between parties which is binding in law. Furthermore the rights and obligations of the parties under a contract may be enforced by the courts. The courts may compel performance of contractual obligations by the party in default or, more commonly, may award damages for breach of contract.

For a contract to be legally formed, four basic elements must be present: offer, acceptance, consideration, and the intention to create legal relations. These elements provide the foundation for the enforceability of contracts and establish the rights and obligations of the parties involved.

  1. Offer: The first element, the offer, refers to a clear and unequivocal proposal made by one party to another. It demonstrates the intention to be bound by specific terms and conditions. The offer sets out the key terms of the contract and expresses a willingness to enter into a contractual agreement.

  2. Acceptance: The second element, acceptance, occurs when the offeree agrees to the terms of the offer. Acceptance must mirror the terms of the original offer and be communicated to the offeror. It creates a meeting of the minds between the parties, indicating their mutual consent to be bound by the terms of the contract.

  3. Consideration: Consideration refers to something of value exchanged between the parties as part of the contract. It can take the form of money, goods, services, or even a promise to do or refrain from doing something. Consideration serves as an indication that each party has provided something of value and ensures that the contract is not based on gratuitous promises.

  4. Intention to create legal relations: The final element is the intention to create legal relations. This element establishes that the parties have a genuine intention to be legally bound by the terms of the contract. It distinguishes contractual agreements from mere social or domestic arrangements where legal consequences are not typically intended.

Negotiations often take place between the parties before an agreement becomes binding and a contract is formed. During this negotiation phase, parties may propose, modify, and counteroffer terms until a consensus is reached. It is crucial to identify the precise moment when the contract is formed, as it signifies when the parties assume contractual obligations and the associated risks and liabilities if the contract terms are breached.

Once a contract is formed, it becomes a legally binding agreement between the parties. This means that the rights and obligations outlined in the contract can be enforced through legal means. If one party fails to fulfill their contractual obligations, the courts can intervene to ensure compliance. This may involve compelling the defaulting party to perform their obligations or awarding damages to the non-breaching party as compensation for the breach of contract.

Enforcing a contract involves interpreting its terms, assessing the actions of the parties, and applying relevant legal principles. The courts play a vital role in upholding the integrity of contracts and ensuring that the parties receive the benefits they are entitled to under the agreement. By providing a legal framework for contractual relationships, the courts promote trust, fairness, and accountability in business transactions.

Common law

Law and the rights and protections formed under them are also created by judges’ decisions in court. This is known as common law. Common law has its basis in precedent – this means that judges follow decisions made in similar cases to create a consistent, just and fair system. However, there are cases when the circumstances or facts of the case are very different, have not arisen before or are viewed by a senior judge as not reflecting current society, so that a decision is made to create or amend th

Express terms are terms that have been specifically mentioned and agreed by both parties at the time the contract is made. They can either be oral or in writing.

Breach of express term:

When a party fails to fulfill an express term in a contract, it constitutes a breach of that term. Express terms are specific provisions that are explicitly stated and agreed upon by the parties involved. In the context of discussing a product or service with a customer, the responsible party assumes the obligation of providing and agreeing upon certain information, forming express terms that define the scope of the agreement.

For services, these express terms may include details such as the timing or schedule of when the service will be performed and the agreed-upon price for the complete service. By communicating this information to the customer, the service provider creates a contractual obligation to deliver the service within the specified timeframe and for the agreed-upon price.

On the other hand, when discussing a product, the express terms typically encompass factors such as the price of the product and its availability. By explicitly stating the price and confirming the product’s availability, the seller assumes the responsibility of providing the product to the customer at the agreed-upon price and within the specified availability period.

If a party fails to fulfill these express terms, it amounts to a breach of contract. For instance, if a service provider fails to deliver the service within the agreed-upon timeframe or demands a higher price than initially discussed, they would be in breach of the express terms of the contract. Similarly, if a seller fails to provide the product at the agreed-upon price or within the specified availability period, it constitutes a breach of the express terms.

When a breach of an express term occurs, the non-breaching party may be entitled to various remedies. These remedies can include seeking damages to compensate for any losses suffered due to the breach or pursuing specific performance, which involves compelling the breaching party to fulfill their obligations as originally agreed. The specific remedies available will depend on the governing laws and the circumstances of the breach.

It is important for both parties to a contract to clearly communicate and agree upon the express terms that define their rights and obligations. By doing so, they establish a foundation of trust and certainty, facilitating a smoother transaction and reducing the risk of disputes arising from misunderstandings or unmet expectations.


The UAE Federal Judiciary

The UAE Federal Judiciary is an integral component of the United Arab Emirates government and operates as one of the five federal authorities. This judicial system comprises various entities, including the Federal Supreme Court, Federal courts, and the Public Prosecution. At the apex of the judicial hierarchy stands the Federal Supreme Court, which serves as the highest judicial authority in the UAE.

  1. Federal Supreme Court: The Federal Supreme Court assumes the role of the ultimate judicial authority in the UAE. It holds the power to adjudicate on matters related to constitutional issues, disputes between the federal and local authorities, conflicts between different emirates, and appeals concerning judgments rendered by lower courts. The Federal Supreme Court ensures the uniform application of the law and provides final interpretations of legal provisions in the UAE.

  2. Federal Courts: The Federal Courts, operating under the umbrella of the Federal Judiciary, handle a wide range of civil, criminal, and administrative cases. These courts are responsible for resolving disputes between individuals, corporations, and government entities that fall within the jurisdiction of the federal legal framework. They ensure the fair and impartial administration of justice at the federal level.

The Federal Courts encompass various specialized courts, such as the Civil Court, Criminal Court, Administrative Court, Commercial Court, and Labor Court, among others. Each court specializes in a particular area of law and is competent to hear cases falling within its jurisdiction. These courts diligently apply the relevant laws, regulations, and legal principles to determine the rights and obligations of the parties involved.

  1. Public Prosecution: The Public Prosecution is an essential component of the UAE Federal Judiciary. It serves as an independent body responsible for investigating and prosecuting criminal offenses. The Public Prosecution operates with the objective of upholding justice, safeguarding the rights of individuals, and ensuring the application of the law. It conducts thorough investigations, collects evidence, and initiates criminal proceedings against individuals suspected of committing crimes under the federal jurisdiction.

The UAE Federal Judiciary plays a crucial role in maintaining the rule of law, protecting individual rights, and ensuring the proper functioning of the legal system. It upholds the principles of fairness, transparency, and impartiality in the administration of justice. The Federal Judiciary’s commitment to upholding the law and providing accessible and efficient judicial services contributes to the overall development and stability of the UAE’s legal framework.


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1 comment

  1. Rights of parties to a contract are the rights that are guaranteed through a legally valid contract to the parties that have made the agreement

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