Expert Drafting Sale of Shop Contract in UAE Services

A commercial sale of shop contract in the UAE is a significant legal step that requires careful preparation to ensure the rights of both the seller and buyer. This contract differs from a regular real estate sale in that it includes the sale of the “commercial premises” with all its tangible and intangible elements, not just the property itself.

What Is a Sale of Shop Contract in the UAE?

A sale of shop contract in the UAE is a legal agreement whereby the ownership of a commercial store is transferred from a seller to a buyer for an agreed-upon sum of money. This contract aims to document the transaction and protect the rights of both parties, and is subject to the provisions of the UAE Commercial Transactions Law.

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Elements and Components of a Sale of Shop Contract

The sale of a commercial store in the UAE includes both the tangible and intangible elements of the store.
Tangible elements: include equipment, furniture, merchandise, and machinery.
Intangible elements: include the trade name, trademark, goodwill, intellectual property rights, and employment contracts.

Requirements for the Validity of a Sale of Shop Contract

For a sale of a commercial store contract to be valid and legal in the UAE, the following conditions must be met:

Legal Capacity: Both the seller and buyer must have full legal capacity to enter into the contract.
Consent: The contract must be the result of the full consent of both parties, without any coercion or fraud.
Valid Premises: The commercial store must be owned by the seller and not subject to any undisclosed mortgages or liens.
Legitimate Purpose: The purpose of the sale must be in compliance with local laws and regulations.

Key Legal Requirements for Drafting a Shop Sale Contract

To draft a sale of shop contract in the UAE, a set of legal requirements must be met to ensure the validity and effectiveness of the contract. These requirements are influenced by various laws, most notably the Civil Transactions Law, the Companies Law, and the Commercial Register Law:

1. Basic Elements of a Contract

According to the UAE Civil Code, any contract must meet the following elements:
Consent: There must be a clear and explicit agreement between the seller and buyer, based on free will, without any coercion or fraud.
Subject: The subject of the contract, which must be legitimate and precisely defined. In the case of a shop sale contract, the subject matter includes tangible elements (such as tools, equipment, and furniture) and intangible elements (such as the trade name, trademark, goodwill, and intellectual property rights).
Reason: The legal purpose of the contract, which must be legitimate and consistent with the laws and public morals of the UAE.

2. Elements of a Sale of Shop Contract

The contract must specifically include the following information and details to be valid and legally binding:

Parties to the contract: Both parties (seller and buyer) must be clearly identified, including their full names, nationalities, addresses, and identification document numbers (such as passport or Emirates ID).
Business details: The business must be accurately and comprehensively described.
Trade name, trade license number, and expiry date.
Location and address of the business.
Physical elements of the business (fixed and movable assets).
Intangible elements of the business (reputation, trademarks, patents, other intellectual property rights).
Commercial registration number and date.
Price and payment method: The price of the business must be clearly specified, and the method of payment must be clearly specified (one payment, installments, etc.).
Seller’s obligations: The seller’s obligations include delivering the business to the buyer free of any unauthorized concerns or obligations, and ensuring that there are no hidden defects that would affect the value of the business.
Buyer Obligations: The buyer’s obligations include paying the agreed-upon price on the specified dates.

3. Legal and Administrative Procedures

In addition to drafting the contract, there are legal and administrative procedures necessary to complete the sale:

Government Approval: Some commercial activities may require additional approvals from certain government entities before the sale is completed.
Changing the Trade Name: If the buyer wishes to change the trade name, they must ensure that the new name does not violate UAE laws and is not registered to another company.
Amendment of the Commercial Register: After the sale is completed, the parties must notify the relevant authorities (such as the Department of Economic Development in the relevant emirate) to update the commercial register data and transfer ownership of the store from the seller to the buyer.

To ensure the integrity of the Sale of Shop Contract, it is always advisable to consult a POA&MORE Power of attorney dubai lawyer, as they specialize in UAE commercial law. This will ensure all legal requirements are met and avoid any future disputes.

Essential Clauses to Include in a UAE Shop Sale Agreement

The contract is the foundation of any commercial transaction, and when it comes to selling a business in the UAE, it becomes a vital document to guarantee the rights of both the seller and buyer. The contract must be comprehensive and detailed to avoid any future disputes. Below, we outline the essential items that must be included in a sale of shop contract in the UAE:

1. Information of the contracting parties

The contract must include full details of both the seller and buyer, including:

Full name.
Nationality.
Date and place of birth.
Passport or Emirates ID number.
Address.

2. Subject of the sale of shop contract

The business must be described accurately and comprehensively, indicating:

Name of the business.
Detailed address.
Business license number, issue date, and expiry date.
Determine whether the sale includes tangible assets (such as furniture and equipment) and intangible assets (such as trade name and reputation).
If the sale includes inventory, determine how it will be valued and delivered.

3. Selling Price and Payment Method

The total selling price of the business and the method of payment must be specified, including:

The agreed-upon amount in figures and words.
The payment method (cash, checks, bank transfer).
The payment schedule (down payment, subsequent payments, final payment).
If paying by installments, the value of each installment and its due date must be specified.

4. Terms and Conditions of the Business

This section is important to ensure that the buyer is aware of the business’s commercial and legal status. It must be clarified that:

The business is free of any debts or financial obligations.
The business is not facing any legal or judicial disputes.
Whether there are any existing contracts or agreements with suppliers or employees.

5. Transfer of Ownership and Handover of the Business

The manner and time of the actual transfer of ownership of the business must be specified, including:

The date the business is handed over to the buyer.
Procedures for transferring the business license and name to the relevant authorities.
Each party’s responsibility for the costs and fees of transferring ownership.

6. Seller’s Liability After the Sale

The contract may include a clause specifying the seller’s liability for any hidden defects that appear after the sale. It is preferable to include a specific time period within which the buyer may claim compensation.

7. Dispute Resolution

The mechanism for resolving any disputes that may arise between the parties must be specified. This clause may include:

Attempting an amicable settlement.
Recourse to commercial arbitration.
Identifying the competent courts (such as the courts of Dubai or Abu Dhabi).

8. Other Provisions

Other clauses may be added as needed, such as:

Seller’s Warranties and Covenants: Undertaking to provide all documents required for the transfer of ownership.
Contract Costs and Fees: Determining who bears the costs of drafting the contract and the notarization fees.
Termination: Conditions for terminating the contract and the effects of termination on the parties.

These clauses are essential, but it should be noted that each sale may require additional clauses or specific amendments. It is very important to consult a POA&MORE lawyer, as they specialize in UAE commercial law, to draft and review the contract. This ensures that the contract is comprehensive and legally and effectively protects the interests of both the seller and buyer.

Why Professional Drafting of a Shop Sale Contract Matters?

Drafting a sale of shop contract in the UAE is a vital and complex process that requires specialized legal expertise. The importance of professionally drafting this contract lies in protecting the rights and interests of all parties involved (seller and buyer) and ensuring the transaction proceeds smoothly and in compliance with local laws and regulations. The following are the importance of professionally drafting a sale of shop contract in the UAE:

1. Protecting Rights and Defining Obligations:

The contract clearly defines the rights and obligations of each party, such as the seller’s obligation to deliver the shop in the agreed-upon condition, and the buyer’s obligation to pay the price on the specified dates.
This prevents any ambiguity or misunderstanding that may arise later regarding the terms of the sale, thus avoiding costly and time-consuming legal disputes.

2. Compliance with Laws and Regulations:

Professional drafting ensures that the sale of shop contract is fully compliant with UAE laws, such as the Commercial Transactions Law, the Companies Law, and laws related to intellectual property.
This includes mandatory requirements imposed by law, such as the need to notarize the contract with the relevant authorities and transfer ownership to the commercial register.

3. Detailing the elements of the business:

The sale of a shop contract must clearly specify all tangible and intangible elements included in the sale, such as:

Tangible elements: building, furniture, equipment, inventory, etc.
Intangible elements: trade name, trademark, patents, copyright, goodwill, and a list of customers and suppliers.
This precision helps prevent future disputes over what was sold and what was not.

4. Determining the price and payment mechanism:

The contract must clearly specify the total price of the business, the payment method (one payment, installments, checks), and the payment deadlines.
It must also specify the penalties for non-payment, such as the seller’s right to terminate the contract.

5. Addressing potential risks:

The contract must include clauses that address potential risks and provide solutions for them, such as:

Termination clause: Specifies the circumstances in which either party has the right to terminate the contract.
Compensation: Specifies the compensation due in the event of a party breaching their obligations.
Dispute Resolution: Explains how to resolve disputes that may arise (through arbitration or competent courts).

6. Avoid Legal Loopholes:

Poor drafting may create legal loopholes that can be exploited by one party to void the contract or evade their obligations.
A specialized lawyer ensures that all clauses are clear and unambiguous, making the contract a strong and enforceable official document.

7. Promote Trust and Transparency:

A professional contract contributes to building trust between the seller and buyer, as each party feels reassured that their rights are fully protected and that the transaction is proceeding within a sound legal framework.

8. Facilitate Ownership Transfer Procedures:

A professionally drafted sale of shop contract contains all the necessary information and data to facilitate the ownership transfer procedures with official authorities in the UAE, such as the Department of Economic Development and the Commercial Registry.

A sale of shop contract is not just a piece of paper to register a deal; it is a binding legal document that protects your investment and determines the future of your business. Therefore, hiring a POA&MORE lawyer who specializes in drafting commercial contracts in the UAE is not an option, but rather a necessity to ensure the successful and safe completion of the transaction and avoid any legal problems that may threaten it in the future.

Common Mistakes in Drafting Sale of Shop Contracts in UAE

In the UAE, drafting a sale of shop contract is a delicate legal process that requires expertise and knowledge of applicable laws and regulations. Drafting errors can lead to legal disputes and significant financial losses. The following are the most common mistakes to avoid in a sale of shop contract:

1. Errors related to basic data:

Inaccurate identification of the parties: The full names, identification numbers (such as ID or passport numbers), and addresses of both the seller and buyer must be included. Any spelling error or missing information may invalidate the contract or make it difficult to prove their identities in the event of a dispute.
Inaccurate description of the business premises: The contract must include a complete and detailed description of the business premises, including its exact location, area, unit number, and the building in which it is located. All physical components of the premises (such as furniture and equipment) and intangible components (such as the trade name and reputation) must also be listed.
Incomplete financial data: The sale price must be clearly and accurately specified, along with the payment method and installment schedule. Failure to clarify these points may open the door to disputes over the amounts due and the methods of payment.

2. Mistakes Related to Obligations and Conditions:

Lack of clear definition of obligations: The contract must clearly define the obligations of each party, such as the seller’s obligation to deliver the property in a specific condition, and the buyer’s obligation to pay the price within the specified deadlines.
Lack of penalty clauses: It is advisable to include clear penalty clauses in the contract to specify the compensation due to the aggrieved party in the event of the other party’s breach of the terms of the contract.
Lack of reference to applicable laws: It is important for the contract to specify the applicable laws, especially if one of the parties is a foreigner or in the case of international commercial contracts.
Writing vague or unspecific clauses: The wording of the sale of a shop contract must be clear and straightforward to avoid multiple interpretations that could lead to misunderstandings or disputes.
Omission of jurisdiction clauses: The contract must specify the competent court or arbitration center to hear any disputes that may arise from the contract.

3. Mistakes Related to Legal Procedures:

Lack of attestation of the sale of a shop contract: In some cases, especially when selling real estate, the law requires the contract to be documented by the competent authorities (notary public or land department). Failure to do this may render the contract legally weak and unenforceable.
Not Verifying Documents: The buyer must verify the seller’s ownership of the store and obtain a copy of the title deed or any other document proving this. They must also verify that the store is free of any mortgages or debts.

Neglecting Legal Review: It is best to hire a POA&MORE lawyer, who specializes in drafting sale of shop contracts, to review the contract and ensure it complies with local laws and protects the rights of both parties.

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Role of Notary Public in Shop Sale Contract Drafting

POA&MORE notary publics play an important role in drafting a sale of shop contract in the UAE, ensuring the validity of the transaction and protecting the rights of all parties. Their role is characterized by impartiality and adherence to legal regulations, as follows:

1. Document Verification

The notary public verifies all documents required to complete the sale, such as:

Identity of the seller and buyer: Verify the validity of their IDs (passport or Emirates ID).
Business license: Verify that the license is valid and owned by the seller.
Business lease contract: If the shop is rented.
No-objection certificate: From the relevant government entities (such as the Department of Economic Development).

2. Drafting the Sale of Shop Contract

The Notary Public Dubai drafts a legally sound sale contract, including all necessary details:

Party information: Names and full details of the seller and buyer.
Description of the business: Location, area, and license number.
Sale price and payment terms: Specify the agreed-upon amount and payment method.
Terms and responsibilities of the parties: Specify the obligations of both the seller and buyer.

3. Contract Notarization

After the contract is drafted and both parties agree to its terms, the notary public officially notarizes it. This notarization gives the contract legal status and makes it binding before the courts.

4. Rights Protection

The notary public ensures that all terms stipulated in the contract are fair and legal, protecting the rights of both the seller and buyer, reducing the likelihood of future disputes.

How to Ensure Your Shop Sale Contract Is Legally Valid?

To ensure the validity of the sale of shop contract, it is not enough to simply write it; the necessary legal procedures must be followed:

Verify the documents: The seller must provide the following documents:
A copy of a valid trade license.
A financial clearance certificate for the shop from the relevant authorities (Department of Economic Development).
A copy of the Emirates ID or passport.
Authenticate the sale of shop contract: It is highly recommended to notarize the contract with a notary public or the relevant official authorities in the emirate. This notarization gives the contract official status and legal force in the event of any dispute.
Transfer the trade license: Transferring the trade license from the seller to the buyer is an essential step to legally complete the transaction, as the required documents must be submitted and the prescribed fees paid.
Consult a specialized lawyer: To ensure your rights are protected and avoid any legal errors, it is always preferable to consult a POA&MORE lawyer, as they specialize in commercial laws and contracts in the UAE. The lawyer can draft and review the contract, ensure its compliance with local laws, and assist you in completing the necessary procedures.

Read more: Notary Public Dubai Fees

Benefits of Hiring a Legal Expert for Shop Sale Contracts

A legal expert specializing in sale of shop contracts in the UAE can offer numerous benefits that ensure your rights are protected and facilitate the process. Therefore, in the following lines, we explain the benefits of using POA&MORE for commercial sale contracts in the UAE:

Drafting a sale of shop contract: The legal expert ensures that the contract is comprehensive and accurate, containing all essential clauses such as identifying the parties, description of the shop, price, and payment terms. He also ensures that any legal loopholes that might be exploited by either party are avoided.
Document inspection: The expert reviews all documents related to the shop, such as the title deed and commercial licenses, to ensure they are valid and free of any restrictions or liens that might hinder the sale process.
Verifying legal compliance: The legal expert ensures that the contract complies with UAE laws and regulations, especially those related to real estate ownership and commercial licenses, thus avoiding any legal violations that could lead to the contract being invalidated.
Negotiation: The expert helps negotiate the terms of the sale of shop contracts, such as payment terms, guarantees, and responsibilities, to achieve your best interests.
Dispute Resolution: In the event of any disputes arising after signing the Sale of Shop Contract, a legal expert can represent your interests and seek to resolve the dispute amicably or through court if necessary.

UAE Laws Governing Sale of Commercial Shops and Property

UAE laws strictly regulate the sale of commercial premises and real estate to ensure the rights of both the seller and buyer. Procedures and regulations vary slightly from one emirate to another, but a general legal framework governs these transactions, as follows:

Laws for the Sale of Commercial Premises

The sale of a commercial premises is a commercial transaction subject to the UAE Commercial Transactions Law, which defines the rights and duties of the merchant. The laws regulating the sale of commercial premises include the following key points:

Legal Capacity: Both the seller and buyer must be legally competent to complete the transaction, i.e., of sound mind.
Sale Contract: A sales contract is prepared specifying all the terms of the transaction, such as the price, payment method, and the components of the premises (trade name, trademark, equipment, goods, etc.).
Transfer of Ownership: Transferring ownership of the premises requires completing certain procedures with the relevant government authorities.
Trademark: If the premises own a registered trademark, transferring its ownership requires separate procedures with the Ministry of Economy. The transfer of the trademark must be recorded in the commercial register and a notice must be published.
Fees: Specific fees must be paid to transfer ownership of a trademark, which includes service fees and publication fees.

Real Estate Sale Laws

Real estate sales are subject to different laws and regulations in each emirate, and the Land Department in each emirate is the entity responsible for regulating these transactions. In general, the main laws and procedures include:

Ownership System: Real estate ownership laws in the UAE differ between free zones and non-free zones.
Freehold Zones: Foreigners can own real estate in these zones with absolute and unlimited ownership.
Usufruct and Musataha: Laws, such as those in Abu Dhabi, allow non-nationals to acquire usufruct or musataha rights for a fixed term (up to 99 years).

Step-by-Step Guide to Drafting a Shop Sale Contract in UAE

You should know that drafting a sale of shop contract is a legal process that requires a high degree of precision. While this guide will provide you with the basic steps and necessary content, it is always best to consult a POA&MORE lawyer, as they specialize in UAE commercial law, to ensure that the contract fully complies with local laws and fully protects your rights.

1. Contracting Parties

The contract must begin by clearly identifying the parties:

Party One (Seller): Full name, nationality, Emirates ID (or passport) number, full address, and telephone number.
Party Two (Buyer): Full name, nationality, Emirates ID (or passport) number, full address, and telephone number.
If one of the parties is a company, the full name of the company, trade license number, licensing authority, address, and the name of the company’s legal representative must be included.

2. Subject of the Sale of Shop Contract

Clearly state the details of the business being sold:

Business name: as stated on the trade license.
Commercial license: Number, date of issue, and issuing authority.
Full store address: including unit or office number, building, street, and area.
A detailed description of the store: size, physical contents (equipment, furniture, decorations), and inventory (if included in the sale).
Nature of business: as specified in the license.

3. Sale Price and Payment Method

Total Amount: The agreed-upon sale price must be written in figures and letters, specifying the currency (AED).
Payment Method: Explain how the price will be paid. Will it be paid in one lump sum? Will there be a down payment (deposit) and the remainder upon transfer?
Payment Terms: Indicate any payment terms, such as a bank transfer or certified check.

4. Transfer of License

Seller’s Obligation: The seller must sign a contract with the Department of Economic Development or the relevant authority to transfer the business license to the buyer.
Timing: Specify when this transfer will take place, usually after receiving all or a substantial portion of the sale proceeds.
Fees: Explain who will bear the government transfer fees.

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Frequently asked questions

How to write a contract for a sale?

To write a sale of shop contract in the UAE, the contract must include some basic elements to be valid and clear. Here are the key points to focus on:

1. Details of the contracting parties

The contract must include full details of the seller and buyer. This information includes:

Full name.
Nationality.
Address.
Identity or passport number.

2. Details of the item being sold

The item being sold must be accurately described, whether it is real estate, a car, or anything else. The description must include all necessary details, such as:

Specifications of the item being sold (such as the type of property, its area, location, license plate number, etc.)
The current condition of the item being sold
Any known defects or defects.

3. Sale price and payment method

The sale price must be clearly and explicitly stated, as well as the payment method:

Will the amount be paid in a single payment or in installments?
Will a deposit be paid?
The date and method of payment of each installment must be specified (if payment is in installments).

What is the contract for the sale of goods?

A contract for the sale of goods in the UAE is a binding legal agreement that sets out the terms and conditions for the sale and purchase of goods between two parties, the seller and the buyer. These contracts are primarily governed by the provisions of UAE Civil Law No. (5) of 1985, in addition to UAE Commercial Transactions Law No. (18) of 1993, and the Consumer Protection Law.

What should a sales contract include?

A sale of shop contract in the UAE requires a set of essential elements to be valid and legally enforceable. These elements are based on the UAE Civil Transactions Law and the General Rules of Contracts. Below, we explain the basic elements of a contract:

Mutual consent (offer and acceptance): There must be complete agreement between the seller and buyer on all terms of the contract, clearly expressed in the form of an offer and acceptance.
Legal capacity of the contracting parties: The seller and buyer must be legally qualified to enter into the contract.
Subject matter: The sold item (subject) must exist or be capable of existing, be accurately and clearly specified, and not violate public order or public morals.
Legitimate cause: The cause of the contract must be legitimate and legal.

It is always advisable to consult a POA&MORE lawyer, as they specialize in drafting or reviewing sale of shop contracts in the UAE, to ensure that the contract complies with applicable laws and regulations and protects the rights of all parties.

What is a sales agreement contract?

A sale of shop contract in UAE law is a legal agreement whereby a seller is obligated to transfer ownership of a property or other financial right to a buyer in exchange for an agreed-upon cash price. This definition is derived from Article 489 of the UAE Civil Transactions Law. A sale of shop contract is a bilaterally binding contract, imposing mutual obligations on both the seller and buyer.