6/11/2019 Oman Law Blog: Key Differences between English and Omani Contract Law

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Key Differences between English and Omani
Contract Law
Oman Contacts
Introduction Simon Ward, Managing Partner
Bruce Palmer, Partner
Many of the corporate lawyers advising on cross-border transactions in the Leopold Zentner, Partner
Sultanate of Oman will have been trained in common law jurisdictions. Mehdi Mohammed Al Lawati, Counsel
Often such transactions will be governed by English or New York law, Hamood Al-Rawahi, Counsel
irrespective of the origin of the parties involved. Occasionally, however, the Zainab Aziz, Counsel
Dominic Pilkington, Counsel
relative bargaining power of one of the parties may result in the contract
Alessandra Zingales, Counsel
being governed by Omani law. And certain contracts must, by law, be
Ali Naveed Arshad, Counsel
governed by Omani law. Malcolm Abaza, Associate
Sawsan Al Balushi, Associate
Common law practitioners should be wary of a number of pitfalls regarding Michael Dunmore, Associate
instances in which Omani law differs significantly from English law and that Moosa Al Lawati, Associate
of other common law jurisdictions. Below we set out some of the more Reem Al Mahrizi, Trainee Lawyer
common examples: Budoor Al Zadjali, Trainee Lawyer

Curtis, Mallet-Prevost, Colt & Mosle LLP

1. Agreements to agree Qurum Plaza
108 Al Wallaj Street
Under English law, agreements to agree are not generally enforceable P.O. Box 1803; PC 114
(Associated British Ports v. Tata Steel UK Limited [2017] EWHC 694 (Ch)). Muscat, Sultanate of Oman
Tel: +968 24 564 495
The position is very different under Omani law. Under Article 79 of the Civil www.curtis.com
Transactions Law promulgated by Sultani Decree 29/2013 (the “Civil
Code”), the parties may agree on the essential elements of the contract, but
leave matters of detail to be decided later.

However, in the event of a dispute the court may, unless the parties have
stipulated that the contract shall not be regarded as having been entered
into in the absence of agreement upon such matters, rule that the contract Blog Archive
has been concluded.
► 2019 (20)

Further, the court may adjudicate on any missing terms in accordance with ► 2018 (42)
the nature of the transaction, the provisions of the law, and custom. ▼ 2017 (50)
▼ December (4)
In Oman, the matter is further complicated in that the courts may rule that a Environmental Law Framework and
Developments in Om...
party has failed in its obligation to perform in good faith if it hasn’t taken
sufficient steps to reach final agreement with the other party. Key Differences between English and
Omani Contract...
Counterparts Clauses and Virtual
In contracts to be governed by Omani law, the parties would be advised to
Signing
include terms clearly providing that Article 79 of the Civil Code is not
Does State Audit Law or the Law for
intended to apply until the agreement has been duly executed.
Safeguarding S...

2. Misrepresentation in Omani law must involve fraud ► November (3)

► October (5)
“Misrepresentation” is a concept of wide importance in common law ► September (4)
jurisdictions. In English contract law and tort law, a misrepresentation is a
► August (4)
false statement of past or present fact made by one contracting party to
► July (4)
another, which has the effect of inducing the other party to enter into a
contract. ► June (4)
► May (3)
It is often used as an alternate cause of action to breach of contract, ► April (5)

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6/11/2019 Oman Law Blog: Key Differences between English and Omani Contract Law

because the remedies for a successful claim for misrepresentation are ► March (5)
different from those available for breach of contract. Importantly, among the ► February (3)
possible remedies for misrepresentation is rescission, where the contract is ► January (6)
annulled and the parties restored to the position they were in before the
contract was entered into. ► 2016 (56)
► 2015 (62)
Misrepresentation, under English law, does not necessarily require intent to ► 2014 (68)
deceive. “Negligent” and even “innocent” statements may constitute ► 2013 (55)
misrepresentation if they are false and their effect was to induce the other
► 2012 (60)
party into the contract.
► 2011 (44)

Entire agreement clauses in common law jurisdictions typically aim to ► 2010 (58)
exclude liability for misrepresentation, but carve out liability for fraudulent ► 2009 (68)
misrepresentation. In other words, the parties agree not to claim for ► 2008 (26)
“negligent” or “innocent” misrepresentation in connection with the
agreement, but also state expressly that they are not seeking to limit or Subscribe To Oman RSS
exclude claims for fraudulent misrepresentation.
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Such distinctions are not, however, meaningful under Omani law. Article 103
of the Civil Code defines misrepresentation as follows:

};
Misrepresentation is when one of the two contracting parties deceives the
other by means of trickery of word or deed which leads the other to consent
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to what he would not otherwise have consented to. Deliberate silence
concerning a fact or set of circumstances shall be deemed to be a
misrepresentation if it is proved that the person misled thereby would not Enter your email address:
have made the contract had he been aware of that fact or set of
circumstances.
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Omani law does not recognise negligent or innocent misrepresentation:
there must be an intention to deceive. The onus is on the party alleging
About Curtis
misrepresentation to establish that (a) they were deceived by the
misrepresentation; and (b) the deception was intentional. Headquartered in New York, Curtis is a leading
international law firm with 17 offices worldwide.
Accordingly, the wording relating to misrepresentation in standard entire The firm represents a variety of clients across
a wide range of practice areas. Curtis’
agreement clauses should be drafted bearing in mind the more narrow
international outlook has been a hallmark of its
definition of the term under Omani law. Any attempt to limit or exclude
practice since its founding in the 1830s.
liability for negligent or innocent misrepresentation would be at best
superfluous and at worst confusing; and any attempt to exclude liability for Curtis Muscat was established in 1997 and is
fraud would be void under Article 183 of the Civil Code. served by Oman, US, UK, Canada, Australia,
India, Pakistan and Italy qualified lawyers. We
3. Liquidated damages offer a full range of domestic and international
legal services in the fields of real estate,
corporate and commercial law, banking,
Liquidated damages clauses are used in common law jurisdictions to
energy, arbitration, insurance, shipping and
protect a party’s “legitimate interests” and are generally enforceable so long
port development, tourism, employment and
as the “penalty” stipulated is not exorbitant or out of proportion to the public procurement, amongst others.
interests the party is trying to protect (Cavendish Square Holding BV v Talal
El Makdessi [2015] UKSC 67). Visit http://www.curtis.com/ for more
information about Curtis and its full range of
Article 267 of the Civil Code deals with liquidated damages as follows: practice areas.

(1) If the subject matter of obligation is not a sum of money, the contracting
M&A Chair Lawrence Goodman to
parties may determine the amount of compensation in advance by making a speak at The M&A Advisor's
provision of same in the contract or in a subsequent agreement. 2019 Global Corporate Growth Summit
Curtis secures 6 practice-level rankings
(2) In all cases, the court may, upon the application of either of the parties, and 21 Individual Recognitions in Legal
500 USA 2019
amend such agreement to make the compensation equal to the damage,
Partner Charles Howland to Moderate
and any agreement to the contrary shall be null and void. Panel at American Bar Association
Master Class on Complex Environmental
Article 267(1) determines that the contracting parties may agree to a Liability Resolution
liquidated damages amount but Article 267(2) gives certainty to the Partner Claudia Frutos-Peterson to
speak at ICC CLA Arbitration Day and XI
generally accepted position that, regardless of the liquidated damages
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6/11/2019 Oman Law Blog: Key Differences between English and Omani Contract Law

amount included in the contract, the Omani courts are specifically permitted Congreso de Arbitraje
to re-open liquidated damages clauses and adjust the amounts so that they Michael S. Schwartz named to the Board
of Directors of The Estate Planning
are commensurate with the value of the actual damage incurred.
Council of New York City

Article 267(2) is obviously in direct conflict with the freedom to contract for
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which Oman has previously been well known. However, this provision of the
Civil Code merely follows established precedent applied by courts of the Muscat Office
UAE, Qatar and Saudi Arabia who all take a similar position in that they are Dubai Office
also not opposed to re-opening pre-agreed liquidated damages clauses. Notizen zum Aufsichtsrecht (Frankfurt
Regulatory Blog)
4. Good faith www.curtis.com

Good faith under Omani contract law can be interpreted as a requirement to Traffic Stats
act reasonably and moderately, not to use the terms of a contract to abuse
the rights of the other contracting party, and not to cause unjustified damage
to the other party.

In Omani law an act of bad faith by one party may constitute a cause of
action for the other party to the contract. Accordingly, the duty of good faith
is overarching, in contrast with the position at English law.

Under English law the extent of the obligation depends on the context and
how explicitly it is defined. However, it is clear that the English courts are
reluctant to construe a good faith obligation as imposing a positive
obligation on a party to act against its commercial interest, or to give
precedence to such an obligation over an express contractual right.
5. Indemnity
The Arabic language – and consequently Omani law – does not distinguish
between the terms “indemnity” and “compensation.” Consequently, an
obligation on one party to a contract to indemnify the other in specified
circumstances is not likely to provide a full indemnity in the English law
sense of the term.
This difficulty should not be insurmountable, however, and it ought to be
possible to achieve the effect of an indemnity by explaining carefully how
the concept is intended to work in the relevant provisions of the contract.
6. Termination for convenience
Typically, under English law there are no restrictions on one or more parties
being allowed to terminate a contract “for convenience” or “without cause.”
However, under Omani law, Article 133 of the Civil Code suggests that the
inclusion of such a provision would render the contract voidable:
A contract shall not be binding on one or both of the contracting parties
despite its validity and enforceability if it contained a condition that such
party may terminate it without mutual consent or legal proceedings. Either
party may act unilaterally in terminating the contract if by its nature the
contract is not binding on him or if he reserved to himself the right to
terminate it.
In the UAE, there is an exception to this principle, but only in relation to
“muqawala,” or construction, contracts.
A recent UAE Court of Appeal judgment, citing the Egyptian Civil Code,
ruled that employers in construction cases could be entitled unilaterally to
terminate a contract, on the grounds that “muqawala contracts often take a
long time to complete and circumstances may change in the period between
contract formation and completion of the contract work.”
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6/11/2019 Oman Law Blog: Key Differences between English and Omani Contract Law

No such exception exists in Omani jurisprudence. In the section of the Civil

Code dealing specifically with muqawala contracts, Article 646 provides:

A contract of muqawala shall terminate upon the completion of the work

agreed or upon the cancellation of the contract by consent or by order of the
court.

Posted by Curtis at 11:43 PM

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