Judgment in Commercial Dispute between Supplies Trading and a Restaurant LLC – SHCFICICOMS2025/0000659

In the public session held at the Sharjah Federal Court (Civil Court of First Instance)

Companies Dissolution and Liquidation Department

Commercial / SHCFICICOMS2025/0000659

Date: 13/03/2025

Facts

The facts of this lawsuit can be summarised as follows:

The plaintiff sued the defendant by virtue of a petition registered in this case, the plaintiff the sum of .... thousand dirhams and legal interest at a rate of 9% annually from the date of the claim until payment, fees, and expenses.

Based on the statement that Supplies Trading LLC (the plaintiff) is a limited liability company licensed to operate under commercial license No. ....... - registration number ....., hotel supplies trading activity - wholesale.

And that ........ Restaurant LLC) the defendant (a limited liability company under commercial license .....,,, commercial registration number ...., operates as a restaurant activity. Whereas, ....,,,, Restaurant LLC (the defendant) purchased and received goods (restaurant materials) from ....... Supplies Trading LLC (the plaintiff).

Its purchase and receipt of the goods was proven in writing on the front of a number of purchase invoices signed by the defendant (acknowledging receipt. According to these invoices, an amount of ........ and..... fils is owed to the defendant).

Despite the plaintiff company's repeated amicable requests to urge the defendant to fulfil its obligation, the defendant has been delaying fulfilment.

On 21/07/2024, the office of Attorney……… (the disputing company's Attorney) sent a warning to My …….. Restaurant LLC (the defendant) via the office's official email ……[email protected].

The warning was accompanied by an account statement supported by copies of invoices proving the remaining amounts owed by the disputing company, amounting to ……… dirhams.

The plaintiff company was forced to file Dispute No....... of 2024 before the Mediation and Conciliation Centre to settle the dispute amicably.

On 12/11/2024, the Preliminary Mediation and Conciliation Centre decided to refer the file to the competent court due to the inability to resolve the dispute.

This prompted the plaintiff to file his lawsuit and submitted a document portfolio as evidence. The court reviewed and was aware of the documents it contained. It contained:

The license of ....  Supplies Trading LLC (the plaintiff is a limited liability company licensed to operate under commercial license No. ...., xxx, registration number ...., hotel supplies trading activity). A copy of the commercial license of ... Restaurant LLC (the defendant is a limited liability company) Limited under the commercial license.

Copies of invoices signed for receipt from the company / …… Restaurant LLC, the defendant in the dispute, proving that the defendant purchased and received goods from the company / ....Supplies Trading LLC, in the amount of ..... dirhams).

A copy of the email sent from the office of Attorney / ……., the agent of the disputing company, which included a warning to the defendant in the dispute. Attached to the warning is an account statement supported by copies of invoices proving the remaining amounts owed by the defendant company, in the amount of .....).

A copy of the referral decision from the Mediation and Conciliation Centre in the dispute filed by Plaintiff No. …….

Whereas the case was referred to the case manager and discussed in the meetings, as recorded in its minutes. The plaintiff appeared and insisted on his requests. The defendant also attended and submitted a memorandum in response, requesting at the end of it to dismiss the case.

Whereas it was decided to refer the case to this circuit after presenting it to the supervising judge, and the case was discussed in the sessions, and at the final session, the court decided to reserve the case for judgment.

The court indicates in this regard that contracts are among the most important sources of commitment in daily dealings between members of society, between members of society and its public or private institutions, or between public and private institutions of society.

Many of us in our daily lives conclude many contracts without being aware of their importance and the consequences resulting from them. Therefore, we must know and be aware of the terms of the contracts we have concluded and the obligations resulting from them. Contracts have many definitions, both in Islamic jurisprudence and among legal experts, including a contract, which is a binding, also known as a covenant or pact.

Islamic jurisprudence defines it as the meeting of two or more wills to create a specific obligation and fulfil it. Legal experts define it as the agreement of two or more wills to create or transfer a legal effect.

Analysis from Mariam Alshamsi

Contracts serve the crucial role of safeguarding individuals and entities from potential deceit and misconduct. It is imperative that the terms and clauses within a contract hold legal validity and can be upheld in a court of law to ensure the effectiveness of the contract drafting process.

A contract is formed when one party makes an offer and the other party accepts it, as outlined in Article 125 of the Federal Civil Transactions Law. This agreement establishes the obligations of both parties regarding the subject of the contract.

Multiple wills can coincide to establish a legal impact. As stated in Article 131, both the offer and acceptance represent the expressions of will necessary to form a contract, with the offer being made first and the acceptance following.

As per the provisions of Article 141/1, a contract shall only be deemed valid upon mutual agreement between the two parties regarding the fundamental aspects of the obligation and other pertinent legitimate conditions deemed essential by both parties.

In the event that the two parties reach an agreement on the fundamental aspects of the obligation and other legitimate conditions, while deferring the resolution of specific details for a later time, and do not explicitly state that the contract is contingent upon agreement on these details, then the contract shall be deemed as finalised.

In case of a disagreement arising from undisclosed terms, the judge will make a decision based on the transaction's nature and legal regulations.

Articles 125, 130, 257, and 265/1 of Law No. 5 of 1985 on civil transactions clarify that a contract serves as the connection between an offer made by one party and the acceptance by the other party. This mutual agreement establishes the contract's validity, leading to each party's obligation to fulfil their respective responsibilities.

The foundation of the contract lies in the mutual agreement of the parties involved and their obligations outlined in the contract. The contract becomes binding once the offer is accepted. It is crucial to adhere to the clear terms of the contract without attempting to interpret them in a way that goes against the intentions of the parties.

The Federal Supreme Court has ruled that contracts must be executed according to their contents, in alignment with their requirements, and in accordance with customary practices, laws, and the nature of the transaction. Appeal No. 515 of 2015 dated 2/10/2016 - Federal Supreme Court.

The plaintiff is required to provide evidence of their right, as per Article (1) of the Law of Evidence in Civil and Commercial Transactions outlined in Federal Law No. (10) of 1992, while the defendant retains the option to refute the claim.

The facts that need to be established should pertain to the lawsuit, be relevant to it, and be admissible. As per the decisions of the Federal Supreme Court, it is stated that "the court with jurisdiction must assess the dispute based on the evidence and documents presented to it, without neglecting to request evidence from the parties for their defence or highlight the necessary elements of said defence" (Appeal No. 164 of 15 Q - session of 2/15/1994).

The subject court has the authority to gain insight into the case's reality, interpret contracts, agreements, and other documents, and evaluate evidence. Appeal No. 106 of 2015 Commercial, session of December 9 (2015).

The Defence

The defendants have formally contested and refuted all invoices presented by the plaintiff. As per legal obligations, the plaintiff must provide substantiating evidence for their claims. It is a fundamental principle that one cannot utilise their own work as evidence against others.

Hence, the invoices and account statements provided by the plaintiff lack credibility as evidence against the defendant. Consequently, the defendant is not bound to settle the invoices, particularly since they dispute the accuracy and validity of the contents therein.

It is important to note that the defendant neither explicitly nor implicitly acknowledges the contents of the invoices issued by the plaintiff. Therefore, these documents cannot be considered as valid evidence. Furthermore, they pertain to periods when the restaurant was non-operational and the shop was closed.

Additionally, the first defendant's lease agreement had expired on... The leased property was subsequently returned to the lessor company, and a clearance certificate was acquired from the Electricity and Water Authority on 5/22/2022. It should be noted that the invoices provided cover the period from June 2022 to December 2022.

Dates beyond those specified in the aforementioned documents are being considered, specifically after the restaurant had ceased to exist and was no longer in operation.

The current case lacks evidence of a legally binding contract between the disputing parties, with the plaintiff failing to demonstrate the existence of a supply agreement.

Articles 125, 129, and 141 of the Civil Transactions Law state that a contract serves as the connection between an offer made by one party and the acceptance by the other, solidifying their agreement in a manner that validates its impact on the contract. The parties are bound by their obligations to each other, as outlined in the contract.

Essential components of both sales and supply contracts include mutual agreement on the item being sold and the price. In the event that the contracting parties fail to specify or make determinable the price, the sale cannot be considered finalised as it is missing a fundamental element, namely the price.

It is imperative that both parties come to an agreement regarding the determination of the price or its determinability, as neither party should be reliant on the other. If the two parties to the contract do not reach a mutual agreement on a specific cash price or the method by which this cash price is established, the sale cannot be finalised, rendering the contract completely void.

The responsibility of determining the price or making it ascertainable lies with the subject court, taking into consideration the context and conditions surrounding the contract, and is not influenced by any external factors.

A supply contract is a formal agreement where a merchant or manufacturer commits to consistently provide the employer with goods or services, either produced by themselves or by others. The contract outlines mutually agreed specifications, quantities, and delivery schedules to the employer or their representative at the designated location. Payment is made by the employer at specified intervals or upon contract completion.

This indicates that the sales contract functions as an instant agreement, whereas the supply contract operates on a time basis. In light of the absence of any documentation proving the existence of either a supply or sales contract between the involved parties, the plaintiff's assertion lacks legal standing and, therefore, must be respectfully dismissed due to its lack of substantiation and evidence.

The Court Judgment

The lawsuit was initiated without due regard for the standard of care and caution necessary to safeguard the interests of both parties involved. The plaintiff neglected to formalise a contract or agreement outlining the nature of the contractual relationship, payment details, outstanding amounts, and penalties for non-compliance. As a result, it is imperative to request the defendant to fulfill their obligations as outlined in the lawsuit.

Hence, the plaintiff bears full responsibility for his actions, as he proceeded without due diligence prior to making any financial transactions and without formalising an agreement or contract concerning the transaction with the defendant. Consequently, the lawsuit lacks a solid foundation in both fact and law.

Regarding the legal costs associated with the lawsuit, such as attorney fees, the plaintiff is required by the court to cover these expenses in the event of losing the case, as outlined in the legal regulations specified in Articles 133 and 135 of Federal Decree-Law No. 42 of 2022 concerning civil procedures.

For these reasons, the court ruled in the presence of the party to dismiss the lawsuit and obligated the plaintiff to pay the lawsuit fees and expenses and an amount of ….. dirhams for Attorney's fees.

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