Civil Transactions Law · Federal Decree-Law 25 of 2025
Article 340
Section Two: Effects of the Obligation > Chapter Two: Means of Performance > Part Three: Compulsory Performance
English translation
1. The contracting parties may pre-determine the amount of compensation by stipulating it in the contract or in a subsequent agreement, subject to the provisions of the law.
2. The court may reduce the amount of agreed compensation if the debtor proves that the assessment was excessive or that the original obligation has been partially performed.
3. The court may reduce the amount of the agreed compensation if the creditor contributed by their own fault to the occurrence of or increase in the damage, or may refrain from awarding compensation if the creditor’s fault predominates over the debtor’s fault.
4. The creditor may claim an amount exceeding the agreed compensation if they prove that the debtor has committed fraud or gross fault.
5. Any agreement contrary to the provisions of this Article shall be void.
Official translation, as published by the portal.
Official Arabic text
.1 يجوز للمتعاقدين أن يُحددا مقدمًا قيمة التعويض بالنص عليها في العقد أو في اتفاق لاحق، مع مراعاة أحكام القانون.
.2 يجوز للمحكمة أن تُخفض من مقدار التعويض الاتفاقي، إذا أثبت المدين أن التقدير كان مبالغًا فيه أو أن الالتزام الأصلي قد نُفذ جزء منه.
.3 يجوز للمحكمة أن تُخفض من مقدار التعويض الاتفاقي، إذا كان الدائن قد اشترك بخطئه في إحداث الضرر أو زاد فيه، أو ألا تحكم بالتعويض إذا استغرق خطأ الدائن خطأ المدين.
.4 يجوز للدائن أن يطالب بأكثر من مقدار التعويض الاتفاقي، إذا أثبت أن المدين قد ارتكب غشًا أو خطأً جسيمًا.
.5 يقع باطلاً كل اتفاق يخالف أحكام هذه المادة.
What it means when you sign
This article deals with compensation that the parties agree in advance, in the contract or in a later agreement, subject to the provisions of the law. The court may reduce the agreed amount if the debtor proves it was excessive, or that part of the original obligation has been performed. It may also reduce it, or refrain from awarding compensation, if the creditor's own fault contributed to the damage or increased it, or outweighs the debtor's fault. The creditor may claim more than the agreed amount if they prove the debtor committed fraud or gross fault. Any agreement contrary to this article is void.
For a contract about to be signed, this article is relevant to penalty clauses, liquidated damages and fixed charges for delay or breach. It means an agreed figure is not necessarily final: it can be reduced in the situations listed, and an agreement to exclude these rules is void.
In Fahm reports this article usually sits under: Risky commercial terms
Related articles
- Article 338Before a creditor can treat a debtor as late, formal notice to the debtor is normally needed.
- Article 339Cited in Fahm reportsIf the amount of compensation is not fixed by law or by the contract, the court assesses it at an amount equal to the damage actually suffered.
- Article 18This article says which country's law governs property.
- Article 19Cited in Fahm reportsThis article says which country's law governs a contract's obligations, both its form and its substance.
- Article 20This article says which country's law governs obligations that do not come from a contract, such as those arising from an act that causes harm.
- Article 28This article deals with what happens once a foreign law has been found to apply.