UAE Commercial Transactions Law — articles 401–500

A current account shall between a bank and its customer shall be deemed closed at the end of the bank's financial year. Such closure shall not be considered as a closure of the account; however, it shall remain open with…

Where the current account is closed, the balance shall be deemed a payable debt, unless both parties agree on otherwise, or where some of the transactions required to be entered into the account are still current and the…

The general rules prescribed for the limitation of actions shall apply to the debit balance and its interests.

Where the sum of a debt entered into the account is released or reduced due to a reason after being entered in the account, such entry shall be removed or reduced, as the case may be, and the account shall be adjusted ac…

A creditor of either party to the current account may garnish the credit balance of the judgment debtor at the time of the garnishment.

1. Where either party to the current account is declared bankrupt, no garnishment made over its properties after the date fixed by the court for the suspension of payment may be invoked against the Body of Creditors, in …

1. Where the proceeds of deducting a commercial paper is entered in the current account but the value thereof is not paid on the date of maturity, the person who deducted the instrument may remove the entry of its value …

In case of denial and lack of lawful excuse, a legal action for the rectification of the current account shall barred with regard to entries made one year after the date of receipt of the statement of account, even if su…

1. A bank loan is a contract under which the bank lends an amount of money to the borrower or credits it to the borrower's bank account in accordance with the agreed conditions and terms. 2. Banks shall obtain sufficient…

A bank loan shall be considered a commercial activity irrespective of the capacity of the borrower or the purpose for which the loan is allocated.

1. A bank guarantee is an undertaking by the bank to discharge the customer's debt to a third party in accordance with the agreed conditions contained in the guarantee. The guarantee may be for a fixed or indefinite term…

A bank guarantee may be issued under different forms, including: 1. A bank signs a commercial paper as a reserve guarantor, or gives such reserve guarantee by a separate instrument to allow that several commercial papers…

A bank guarantee shall be considered a commercial activity, regardless of the capacity of the guaranteed person or the purpose for which it has been allocated.

A letter of guarantee is an undertaking issued by the guarantor bank, at the request of one of its customers (the person making the order), to pay, unconditionally and without restrictions, a certain or determinable sum …

1. The bank may require that security or guarantee be furnished against the issuance of the letter of guarantee. 2. The security or guarantee may be in cash or in the form of commercial papers, securities, goods or assig…

A beneficiary may only assign his right that had arisen from the letter of guarantee to a third party with the approval of the bank.

1. A bank may not refuse payment to the beneficiary for a reason attributed to the bank's relationship with the person making the order or the relationship of the latter with the beneficiary. 2. Notwithstanding the provi…

1. The bank shall be discharged vis-a-vis the beneficiary if within the validity period of the letter of guarantee no request for payment is received from the beneficiary, unless it had been expressly agreed to renew sai…

Where the bank pays to the beneficiary the sum agreed in the letter of guarantee, it shall subrogate him for recourse against the person making the order for the sum it had paid.

1. Opening credit is a contract under which the bank undertakes to place a specified amount of money at the customer's disposal, which the customer may draw in one or more payments. 2. Credit may be opened for a fixed or…

A contract for opening a credit is not considered a loan, and the customer shall not be bound to use the letter of credit opened in his favor.

1. Where a letter of credit is opened for an indefinite term, the bank may at any time terminate it, based upon a notice to be served to the beneficiary at least thirty days before the date set for the termination. Any a…

1. The bank may not terminate the letter of credit before the expiry of the term specified therefor, except where the beneficiary dies, becomes legally incompetent or suspends payment, even though a judgment declaring hi…

Where a substantial decrease occurs to the real or personal guarantees presented by the customer, the bank may request an additional guarantee or reduce the letter of credit sum in proportion to such decrease.

A credit may be transferred only with the approval of the bank which opened it.

A contract for opening a credit shall be considered a commercial activity, regardless of the capacity of the customer or the purpose for which the letter of credit is allocated.

The contract for opening a credit shall specify the maximum limit of the letter of credit sum and the method of using the letter of credit.

Where a credit is terminated pursuant to the provisions of this Chapter, the bank shall not be required to pay payment orders or cheques drawn on the letter of credit, as long as they are presented to the bank after the …

1. A documentary credit is a contract under which, at the request of its customer (the applicant), the bank opens credit up to a specified amount and for a specified period in favour of another person (the beneficiary), …

Every documentary credit shall contain a time limit date for its validity and for presenting the documents for payment, acceptance or deduction. Where the date set for the expiry of the validity of the letter of credit i…

1. The documents regarding the opening of the documentary credit or its confirmation or notice thereof shall describe precisely the documents against which the operations of payment, acceptance or discount are executed. …

1. A documentary credit may be revocable or irrevocable. 2. A documentary credit shall be irrevocable, unless it is expressly agreed to the contrary. 3. A documentary credit may either be divisible, transferable, indivis…

1. A revocable documentary credit shall not create any obligation on the bank towards the beneficiary. The bank may at any time amend or terminate it of its own accord or at the request of the person who ordered the lett…

1. Where the documentary credit is irrevocable, the obligation of the bank shall be strict and direct to the beneficiary and to any bona fide holder of the instrument drawn, in pursuance of the contract which caused the …

1. An irrevocable documentary credit may be confirmed by a bank other than the one that opened it. Such confirming bank shall in turn assume an absolute and direct obligation towards the beneficiary and any bona fide hol…

1. The documents shall be presented to the bank before the expiry of the letter of credit term. If the documents are presented beyond such a term, the bank shall reject them, unless the person ordering the opening of cre…

The bank is only obligated to examine the documents to ensure that, at first sight, are in conformity with the documents required in the letter of credit, but it is not obligated to check if the goods conform with the do…

Where the bank accepts the documents, it shall immediately send them to the person ordering the opening of the letter of credit, and where the bank rejects the same, it shall forthwith serve a notice of rejection to the …

1. The beneficiary may not assign the letter of credit in whole or in part to another person or persons, save with an express authorization to that effect from the bank and provided it is expressly stipulated in the lett…

1. The person ordering the opening of documentary credit shall be bound to repay to the bank the sum it has paid to the beneficiary, within the limits of the letter of credit opened, as well as paying the bank the expens…

1. Discount is an agreement under which the bank undertakes to pay the value of a commercial paper in advance to its beneficiary in return for transfer of ownership of the paper to the bank. 2. The bank deducts interest …

1. The interest shall be calculated on the basis of the time elapses from the date on which the commercial paper is presented for discount until its maturity date, unless otherwise agreed upon. 2. A commission shall be e…

1. The bank shall acquire the ownership of the discounted commercial paper and it may use all rights of the bearer and it may have recourse against the signatories of the commercial paper. 2. The bank shall further have,…

1. Where the value of the commercial paper is not paid or the customer becomes bankrupt, the bank may reserve for itself the right to make a counter-entry to the value of the commercial paper and the expenses in the debi…

Acceptance credit is a contract under which the bank acts as drawee and, in that capacity, accepts a commercial paper drawn on it by its customer or by another party dealing with that customer, and undertakes to pay the …

Where the bank pays the value of the commercial paper accepted thereby, it shall enter its value and the expenses in the debit side of the customer's account, and shall have recourse against the customer for the sums pai…

The holder of a commercial paper may endorse it to a bank by procuration endorsement. By virtue of that endorsement, the bank becomes an agent for collecting the value of the paper for the endorser's account.

Upon maturity of the commercial paper, the bank shall claim payment from the drawee or the executor. Where the payment is made, the bank shall enter the value of the commercial paper in the credit side of the customer's …

1. The bank shall be liable for fault or omission in the execution of its power of attorney. 2. The bank may require its relief from liability for delay in drawing up the protest. Such requirement shall be effective betw…

The power of attorney arising from the procuration endorsement shall not lapse upon the endorser's death or legal incapacitation.

1. Lending against securities is a loan secured by a pledge. 2. If the securities are registered instruments, their pledge shall be evidenced in writing by an assignment stating that it is made as security, noted on the …

1. The ownership of pledged securities shall be transferred from the pledger to the pledgee bank. 2. The bank shall may withhold such instruments.

The bank shall maintain the pledged securities by collecting their profits and receiving their value upon amortization and deducting such sums from the principal debt.

Where the bank fails to receive its dues on the maturity date thereof, it may apply to the competent court to authorize it to sell the pledged instruments by public auction or at their price in the capital market, in ord…

Where the instruments are presented by a person other than the debtor, the owner thereof shall not be bound to pay the debt guaranteed by the pledge, except in his capacity as a guarantor in rem.

A third party appointed by the two contracting parties to acquire the pledged instruments shall be deemed as having waived his right to foreclose the pledge for any reason prior to such pledge, unless he had reserved suc…

Where the full value of an instrument is not paid at the time of being presented as a pledge, the debtor shall, upon maturity of the unpaid part, pay it at least two days prior to its maturity date, otherwise, the pledge…

The lien of the pledgee shall remain in the same ranking as between the contracting parties and vis-a-vis third parties over the profits of the pledged instrument, its interest, the commercial papers replacing it and its…

A deposit of securities with a bank is a contract under which the customer delivers to the bank the securities agreed to be deposited. On receiving them, the bank gives the customer a receipt stating the contract terms a…

1. In safekeeping the securities deposited with it, the bank shall exercise such care as is exercised by a depository who receives remuneration and shall take to that effect all the precautionary measures as is required …

A bank may not use the securities deposited with it, whether by disposing thereof, pledging the same or exercising the rights derived therefrom, except with a special authorization by the customer to do so.

1. The bank shall undertake the management of the securities deposited with it, by collecting the profits and value of such due or redeemed securities, and it shall notify the customer depositor of the transactions made …

1. The bank shall be entitled to a remuneration against the obligations it assumes. Such remuneration shall, in the absence of an agreement, be determined according to the custom, subject to the number and value of the s…

1. The bank shall return the securities deposited with it on the demand of the depositor with due consideration to the time needed for preparation of the securities for such return. 2. The return shall be effected at the…

The return of securities shall be to the depositor in person, his legal representative, his heirs or his special attorney, as the case may be, even if the security contains something indicating that it is owned by a thir…

1. Where the bank loses possession of securities for a reason beyond its control, it may file a claim for recovery of the same against the person who acquired them. 2. Where financial securities made to the bearer are lo…

Where an action is brought for the maturity of the securities deposited with the bank, the bank shall send notice directly to the depositor accordingly and shall abstain from returning the securities to him until the act…

1. The provisions of this Part apply to commercial transactions and contracts to which Islamic financial institutions are a party. 2. For the purposes of this Part, an Islamic financial institution is any institution who…

Save as specifically stipulated in this Part, the provisions of this Law and of the relevant laws shall apply to commercial transactions and contracts concluded in compliance with the Rules of Islamic Sharia.

The provisions contained in this Part shall be interpreted and construed according to Sharia standards and controls issued or approved by the Sharia Supervisory Board set forth in Federal Decree-Law No. (14) of 2018, wit…

The Board of Directors of the Central Bank shall issue the regulations and statutes that lay down the controls and rules of commercial transactions of Islamic financial institutions and Takaful companies, licensed by suc…

The following transactions, whenever carried out by an Islamic financial institution, shall constitute commercial transactions governed by the Rules of Islamic Sharia: 1. Deposit; 2. Investment account; 3. Takaful insura…

1. Islamic financial institutions shall neither borrow nor lend funds with an interest or benefit, in any way whatsoever, nor arrange or charge an interest or benefit for any overdue debt sum, including a late payment in…

Financial obligations arising from commercial transactions and contracts governed by the provisions of this Part shall be of specific and definite sum, and shall be deemed debts whose sums may not be increased where thei…

1. A promise to contract is an undertaking by one of the contracting parties to conclude a specified contract in the future. The undertaking binds only the promisor. 2. If the promisor fails to perform the promise withou…

For the purposes of this Section, an instalment sale is every sale concluded for financing purposes, or forming part of a financial transaction, under which non-monetary property is exchanged for deferred monetary consid…

The installment sale provisions set forth in this Section shall be applicable if it is agreed under the contract that the property ownership burdens, or the risks of its loss or deficiency for a matter beyond control wou…

1. The sold item's price, properties, form, volume and other distinguishing features thereof shall be specified upon signing the contract, and no agreement to contrary may be made. 2. The sold item's price shall be fixed…

Where the contracting parties agree that the sale would be made at the market price, the price shall be fixed at the time and place where the contract is made. In case of multiple market prices, the average price shall p…

The contracting parties may agree to authorize a third party to fix the sold item's price to the best interests of both parties; provided that such price be fixed at the time of signing the contract.

Murabaha is a contract under which, following a purchaser's financing request, the seller sells an asset to the purchaser after the seller has acquired ownership and actual or constructive possession of it. The sale pric…

1. The Murabaha sale price shall, after the contract is concluded, be fixed, and may not be variable or associated with an indicator or otherwise. 2. An agreement may be made to pay Murabaha sale price in installments, b…

Istisna'a is a contract under which the seller sells to the purchaser an item described as an obligation and required to be manufactured, for a fixed total price stated in the contract. The contract specifies the class, …

A seller involved in an Istisna'a contract shall provide both the work and the manufacturing materials, and may manufacture the sold item by itself or may assign the same to third parties under a contract independent of …

1. The sale price, after the contract is concluded, may not be variable or associated with an indicator or otherwise. 2. An agreement may be made to pay Istisna'a sale price in installments of specific sum and specific p…

1. The sold item shall be handed over on the maturity date as agreed in the contract. A free-defect delivery may not be stipulated and any agreement to the contrary shall be null and void. 2. Where the sold item is deliv…

The Istisna'a contract may include a stipulation that the buyer shall be entitled to compensation if the seller fails to timely deliver the manufactured item, based on an sum to be agreed in the contract; save where the …

Salam is a contract under which the seller sells to the purchaser property for deferred delivery, the manufacture of which is not stipulated, against a price paid immediately.

1. The price in the Salam contract shall be of a specific quantity and type and shall be recorded in the contract, and the period of its future delivery may not exceed (3) three days. 2. Debts may not serve as a price in…

1. The sold item's sort, type, quantity and required specifications shall all be indicated in the Salam contract, along with the date of delivery, whether the seller provides the sold item by his own or buys it from a th…

Ijarah is a contract under which the lessor leases specified or described property owned or leased by the lessor, for fixed rent specified in the contract or variable rent paid in one payment or in instalments of specifi…

Specific property may be leased out only after being owned, leased or received by the lessor.

A promise may be given to the Lessee to transfer thereto the title to the leased property upon expiration of the ijarah term or as mutually agreed. The title transfer shall not be stipulated in the ijarah contract, but s…

The rent shall be variable for each lease term set out in the contract; however, the first lease term rent shall be specified in the contract in a specific sum. The rent of every subsequent term shall be calculated befor…

1. The object of an ijarah contract shall be the benefits of property, and its handover shall be fulfilled where such benefits are handed over, and must be capable of being satisfied and specified so as to resolve any di…

The provisions set forth in the Law of Finance Lease shall apply to any ijarah where no particular provision is stipulated in this Chapter.

The Board of Directors of the Central Bank shall issue decisions concerning banking operations conducted in accordance with Islamic Sharia and the administrative sanctions and financial penalties imposed by the Central B…

1. Rental of safe deposit boxes is a contract whereby a bank undertakes to place a certain safe deposit box at the disposal of its renter customer, and allows the latter to take advantage of it against a fixed rent. 2. T…

1. Rented safe deposit boxes shall be openable by two keys, one of which shall be handed by the bank to the renter customer and the other one shall be kept by the bank. The bank may neither give a copy of the key to any …

1. The bank shall be liable for the safety, custody and usability of the safe deposit box, and may only deny such liability by proving a force majeure event or a third party's action that amounts to a force majeure event…