Contract F Cancellations In Dubai: Seller Rights And The 10% Deposit

The cancellation of a property sale and purchase agreement (“SPA” or “Contract F”) in Dubai commonly raises one central issue: whether the seller is entitled to retain the buyer’s security deposit following the buyer’s failure to complete.

In Dubai secondary market transactions, the relevant SPA is usually the standard sale contract known as Contract F or Form F. It records the principal terms of the transaction, including:

• purchase price;
• payment obligations;
• transfer date;
• handover obligations;
• deposit mechanism; and
• any additional conditions agreed between the parties.

The Dubai Land Department publishes the standard real estate sale agreement template, commonly referred to as Contract F.

In practice, the deposit is commonly 10% of the purchase price. Its legal treatment depends on the wording of the signed contract, the reason for non-completion, and whether any additional terms alter the ordinary consequences of buyer default.

What Happens if the Buyer Defaults?

The default terms provide that the deposit cheque is held on trust with the agent, and may not be disposed of, cashed, or released without written instructions from both the buyer and the seller. Where entitlement to the deposit is disputed, the security amount is not to be returned to either party except pursuant to a court order identifying the party entitled to receive it.

Where the buyer fails to pay the agreed amounts or complete the transfer on the agreed date due to the buyer’s own act or omission, the seller may terminate the agreement and retain the deposit, unless the parties agreed different dates. The deposit mechanism therefore protects the seller where the buyer is responsible for the failure to complete.

This position is also reflected in the civil law treatment of earnest money. Article 137 of Federal Decree-Law No. 25 of 2025 provides that payment of earnest money at the time of concluding the contract indicates that the contract has become final and may not be revoked, unless agreement or custom provides otherwise. It further provides that where the parties agree that the earnest money is a penalty for revocation, the party who paid the earnest money forfeits it if they revoke, while the party who received it must refund it together with an equivalent amount if they revoke.

• whether the buyer failed to pay or complete on time;
• whether the failure was caused by the buyer’s own act or omission;
• whether the parties agreed any extension;
• whether any additional condition gives the buyer a valid exit; and
• whether the seller requires a court order to release the deposit.

Additional Terms and Finance Conditions in the SPA

Contract F permits the parties to include additional conditions. These commonly address:

• mortgage approval;
• employment termination;
• visa cancellation;
• property valuation;
• vacant possession;
• service charge liabilities;
• NOC requirements; or
• extended transfer timelines.

Importantly, Contract F expressly provides that additional conditions “should not conflict with the above conditions”. However, in practice, parties often insert clauses that create tension or conflict with the standard wording.

Examples include clauses providing that:

• if the buyer’s finance is not approved by the lending bank, the SPA shall be null and void without penalty and the deposit cheque shall be returned; or
• if the buyer’s employment is terminated during the transaction, and the buyer proves that final mortgage approval could not be obtained as a direct result, the agreement becomes void with no penalty to either party.

At first glance, such clauses may materially affect the outcome of a deposit dispute. However, the inclusion of an additional term does not, by itself, determine the matter. The clause must be reviewed to assess:

• whether it is sufficiently clear;
• whether it conflicts with the standard SPA terms;
• whether it operates as a valid condition precedent;
• whether the buyer satisfied the conditions required to trigger it;
• whether the correspondence supports or contradicts the buyer’s position; and
• whether there are recent court judgments dealing with comparable wording.

Even where an additional condition appears to have been satisfied, enforcement may still remain subject to judicial assessment, particularly where the clause conflicts with the standard RERA/DLD terms or seeks to displace the default consequences under Contract F.

This is where legal review is often decisive. In some cases, an additional condition may give the buyer a valid contractual exit. In others, the buyer may have failed to satisfy the clause, or the clause may be treated as insufficient to displace the standard consequences of default, leaving the seller with a strong claim to retain the deposit.

The Treatement of Force Majeure

Buyers may seek to rely on force majeure, foreign cause, or circumstances beyond their control to justify cancellation and recovery of the deposit. These arguments are generally assessed narrowly by the UAE courts.

Article 249 of Federal Decree-Law No. 25 of 2025 issuing the Civil Transactions Law provides that if a person proves that the harm arose from a foreign cause beyond their control, such as an act of God, a sudden accident, force majeure, the act of a third party, or the act of the victim, that person shall not be liable for reparation, unless the law or an agreement provides otherwise. The new Civil Transactions Law is scheduled to come into force on 1 June 2026.

The distinction is important:

• Commercially unattractive means the transaction has become less profitable, less convenient, or more financially difficult.
• Impossible to perform means performance is genuinely prevented by an external event beyond the party’s control.

A buyer’s loss of employment, failure to obtain financing, financial pressure, or change in commercial appetite does not automatically make performance impossible. These matters may be relevant if expressly addressed in the SPA, but they do not automatically amount to force majeure or foreign cause.

UAE courts have historically applied force majeure restrictively. In Dubai Court of Cassation, Civil Appeal No. 249 of 2023, judgment dated 16 May 2024, the Court reaffirmed that force majeure or exceptional circumstances will not arise unless the event is exceptional, sudden, unusual, unforeseeable, unavoidable, and could not have been prevented despite reasonable precautions and without fault by the party relying on it. The Court further confirmed that whether an event satisfies this threshold is a matter for the trial judge to assess based on the facts of each case.

For sellers, the practical point is clear: a buyer cannot rely on ordinary financial difficulty, loss of employment, failed funding, or a change in personal circumstances unless the event genuinely made performance impossible, rather than merely inconvenient or commercially unattractive.

This is particularly relevant for sellers because the deposit exists to protect against the consequences of non-completion. After signing the From F, the seller may have:

• withdrawn the property from the market;
• declined alternative offers;
• lost another buyer;
• incurred delay; or
• suffered prejudice in a related transaction.

Accordingly, where the buyer’s inability to complete arises from personal circumstances rather than genuine impossibility, the seller may still argue that the buyer is in default and that the deposit should be retained.

Practical Takeaways for Sellers

A seller facing cancellation should not assess the dispute only by asking whether the buyer failed to complete. The stronger analysis is whether the buyer had any valid contractual or legal basis to withdraw without consequence.

Before filing or defending a deposit claim, the seller should review:

• the signed SPA;
• the agreed completion date;
• the deposit wording;
• any additional conditions;
• any written extension or amendment;
• the buyer’s stated reason for non-completion;
• the parties’ correspondence; and
• whether recent court authority affects the clause relied upon.

Additional terms often conflict, or appear to conflict, with the standard RERA/DLD terms. Personal hardship also does not automatically constitute force majeure. Loss of employment, failed mortgage approval, or a change in financial position may only assist the buyer if properly covered by the contract F or if the legal threshold for force majeure or foreign cause is satisfied.

Ultimately, the key questions are:

• why did the transaction not complete;
• was the failure caused by the buyer;does the contact contain an enforceable condition allowing the buyer to withdraw;
• what evidence does the buyer have; and
• was performance genuinely impossible, or merely commercially unattractive?

MIO & Partners advises on Form F cancellations, buyer default, deposit disputes, and real estate litigation before the competent courts in the UAE.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.