Is it permissible to recover the deposit in the UAE?

Short answer: yes, UAE law allows an earnest deposit (arbun) to be recovered in specific circumstances under the UAE Civil Transactions Law - most notably mutual agreement to rescind, breach of contractual obligations by the other party, or a material defect in the subject matter. However, if the party who paid the deposit withdraws from the deal on their own initiative, without a legitimate reason and without a contract clause permitting this, they forfeit the deposit to the other party. Under UAE law, paying a deposit is treated as evidence that the contract has become final and binding, and neither party may withdraw except as provided by agreement or established commercial custom. This guide from AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS explains every case in which a deposit can be recovered, the court procedure, and answers to the most common questions.

An earnest deposit (arbun) is a sum of money or property paid by one contracting party to the other at the time of contracting, as a guarantee of serious intent and confirmation of the wish to complete the deal in future. It is commonly used in real estate, vehicle, and commercial sale contracts. The UAE Federal Civil Transactions Law treats the deposit as evidence that the contract has become final, not as a means of withdrawing from it except within narrow limits, under Article 148 of Federal Law No. 5 of 1985 on Civil Transactions.

The general rule under UAE law is that paying a deposit does not, by itself, give either party the right to withdraw from the contract. Once the deposit is paid, the contract becomes final and binding on both parties, unless they expressly agree otherwise in the contract terms, or an established commercial custom between the parties permits withdrawal. Recovering the deposit is therefore not an absolute right, but is conditional on a recognised legal ground that justifies the claim.

If the party who paid the deposit withdraws from completing the deal on their own initiative, without a legitimate reason and without a clause in the contract permitting this, they forfeit the deposit to the other party, as a form of liquidated compensation for unjustified withdrawal from a contract that had already become final once the deposit was paid.

Conversely, if the contract includes a clause permitting withdrawal, and the party who received the deposit (usually the seller) withdraws from completing the deal, the settled legal rule requires them to refund double the deposit received - that is, to return the amount paid multiplied by two - as compensation to the other party for the resulting harm.

An earnest deposit differs from a down payment (booking payment) in legal intent. A deposit is evidence that the contract has become final and may be subject to forfeiture or double repayment upon withdrawal, whereas a down payment is generally treated as part of the total price, deducted from the deal value on completion, and can typically be recovered more easily if the deal does not proceed, unless the contract states otherwise. The precise wording of the clause covering the amount paid is therefore essential to determining its legal nature.

The process begins with documenting all contract-related records - payment receipts, correspondence, and the original sale contract - followed by an attempt at amicable communication with the other party to explore a settlement without litigation. If that fails, a formal legal notice may be issued, followed by filing a recovery claim before the competent civil court or the relevant real estate dispute settlement centre, depending on the nature of the dispute, supported by all evidence backing the claim.

AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS is a licensed UAE law firm serving all emirates of the country, combining practical legal expertise with careful, personal follow-up on every file. The firm is committed to explaining legal terms clearly to clients and providing realistic, candid legal opinions rather than unguaranteed promises.

Whether you are seeking to recover a deposit in a real estate or commercial deal, our team will connect you directly with the specialist lawyer best suited to your file, with continuous follow-up through to judgment or settlement.

AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS provides legal services across the Emirate of Dubai, covering deposit disputes, real estate and commercial contracts, and representation before Dubai courts and real estate dispute settlement centres.

The firm also provides legal consultations and services in Abu Dhabi, Sharjah, Ajman, Ras Al Khaimah, Fujairah, and Umm Al Quwain, covering all types of deposit, real estate, and commercial disputes before the federal and local courts in each emirate.