Draft Sales Agreement in the UAE
A sales agreement establishes the terms under which a seller transfers goods or other assets to a buyer in exchange for an agreed price. It should identify what is being sold, when delivery and payment must take place, and what happens if the subject of the sale does not meet the agreed requirements.
For businesses in the UAE, sales transactions may involve substantial quantities of goods, specialised equipment, imported products, or assets requiring additional transfer procedures. An agreement that addresses only the price may leave important questions unresolved concerning ownership, delivery, inspection, and liability.
Abdulrahman Alshaali Advocates & Legal Consultants assists businesses and individuals with preparing and reviewing sales agreements under UAE law, taking into account the nature of the transaction and the responsibilities of both parties.
Sales Agreements Under UAE Law
Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law establishes the general legal framework governing contracts of sale.
Article 445 defines a sale as a contract under which the seller undertakes to transfer ownership of the subject matter of the sale, or another financial right, to the buyer in exchange for a monetary price.
Article 446 addresses the buyer’s knowledge of the subject matter. It recognises that sufficient knowledge may be established by inspecting the item or through a contractual description identifying its essential characteristics.
Federal Decree-Law No. 50 of 2022 Promulgating the Commercial Transactions Law provides additional rules for commercial sales.
The applicable provisions depend on whether the transaction is commercial, the nature of the item sold, and any specialised legislation governing the asset.
For example, selling industrial equipment between businesses may involve different legal requirements from transferring real estate or selling shares in a company.
The agreement should therefore be prepared according to the actual subject of the sale rather than using identical provisions for every transaction.
Identifying the Seller, Buyer, and Subject of the Sale
A sales agreement should correctly identify the contracting parties and establish precisely what is being sold.
Where a company is involved, its registered legal name should be used. The authority of the individual signing on its behalf should also be verified.
The subject of the sale must be identifiable.
Depending on the transaction, relevant details may include:
- Product names, models, and serial numbers.
- Quantities, dimensions, and technical specifications.
- Asset descriptions and identifying references.
- Agreed condition and accompanying accessories.
- Relevant documentation or certificates.
For example, an agreement for the sale of industrial machinery should identify the model, technical capacity, included components, and any accessories forming part of the transaction.
A general description such as “one industrial machine” may be insufficient where several configurations are available.
The objective is to ensure that both parties understand what the seller has agreed to provide.
Where the sale involves property or another asset subject to formal registration, the applicable identification and transfer requirements must also be addressed.
Confirming Ownership and the Seller’s Right to Sell
Before completing a significant purchase, the buyer should establish whether the seller is legally entitled to transfer the asset.
The relevant checks depend on what is being sold.
For example, a business purchasing used equipment may need to determine whether the equipment is owned by the seller or subject to an existing financing arrangement.
An asset may also be affected by third-party rights or restrictions on its transfer.
The agreement should accurately describe the seller’s position and address any relevant warranties or obligations concerning title.
Where third-party consent, release of security, or registration is necessary, the transaction should establish how and when those requirements will be satisfied.
A contractual statement that an asset is free from encumbrances should not replace appropriate verification when the transaction involves substantial financial exposure.
The buyer should consider which documents are necessary to establish the seller’s ownership and ability to complete the sale.
Establishing the Purchase Price and Payment Terms
The agreement should identify the purchase price or establish a sufficiently clear method for determining it.
Payment arrangements may involve a single payment, an advance deposit, instalments, or amounts linked to delivery and acceptance.
For example, a company purchasing specialised equipment may agree to pay an initial deposit, a further amount upon delivery, and the balance following successful testing.
The contract should clarify whether these amounts are refundable and what happens if either party fails to meet the conditions associated with a payment.
Relevant provisions may address:
- The agreed currency.
- Payment deadlines.
- Accepted payment methods.
- Applicable taxes and additional charges.
- Conditions for releasing deposits or final payments.
- Documentary requirements for invoicing.
The parties should also distinguish a payment made as part of the purchase price from any amount intended to have a different contractual purpose.
Where the sale is payable by instalments, specific requirements under the Commercial Transactions Law may apply.
Article 111 requires an instalment sale contract falling within its scope to be prepared in two copies and contain details identifying the goods, price, instalment period, and payment conditions. The seller must provide the buyer with a copy.
The payment structure should reflect the transaction and comply with any applicable statutory requirements.
Setting Delivery Obligations and Deadlines
Delivery provisions should identify when, where, and how the seller must provide the item sold.
For a straightforward transaction, delivery may involve handing over goods at the seller’s premises.
More complex arrangements may involve transportation, installation, customs procedures, or delivery to several locations.
For example, a UAE buyer purchasing equipment from an overseas supplier may need the agreement to establish which party is responsible for transportation, customs documentation, and delivery to the final destination.
The agreement should distinguish the delivery date from any subsequent installation or commissioning obligations.
It should also clarify who is responsible for arranging transportation and bearing the associated costs.
Where delivery depends on the buyer providing information or access to premises, those responsibilities should be documented.
If a delivery deadline is commercially critical, the parties should consider how delays will be addressed and whether the proposed contractual consequences are appropriate under the applicable law.
When Do Ownership and Risk Pass to the Buyer?
The transfer of ownership and the allocation of risk should not automatically be treated as the same issue.
Ownership concerns the buyer’s legal rights in the asset.
Risk concerns who bears the consequences of specified events affecting the item, such as accidental loss or damage.
The applicable legal position depends on the nature of the asset, the contractual arrangements, and any mandatory statutory requirements.
For example, machinery may be delivered to a buyer’s premises before installation and testing have been completed.
The parties should consider whether delivery, acceptance, or another event affects the allocation of relevant risks.
The agreement should identify the intended arrangements while remaining consistent with applicable law.
Where the asset requires formal registration to complete the transfer of ownership, the agreement must account for those requirements.
A contractual provision should not assume that signing alone completes every type of asset transfer.
Inspection and Acceptance of the Goods
The buyer may need an opportunity to inspect the goods before confirming acceptance.
This is particularly important where the transaction involves specialised equipment, large quantities, or goods manufactured to the buyer’s specifications.
An inspection procedure may establish who conducts the inspection, which criteria apply, and how any identified problems must be reported.
For example, a company purchasing 500 components may agree to inspect the shipment against the required specifications upon delivery.
The agreement should address the procedure for dealing with shortages, incorrect products, and defects.
Acceptance should also be distinguished from the physical receipt of goods where the parties intend different consequences.
The drafting must take account of the statutory rules concerning non-conforming commercial goods and the applicable notification periods.
A buyer should not assume that an open-ended inspection clause automatically displaces mandatory legal requirements.
Defective Goods and the Buyer’s Rights
A buyer may discover that delivered goods differ from the agreed quantity or type, or that they contain defects.
Article 107 of the Commercial Transactions Law addresses discrepancies in quantity or type and defective goods in commercial sales.
It establishes rules concerning rescission and other consequences, taking into account the effect of the discrepancy or defect on the intended purpose of the goods and any applicable agreement or commercial custom.
Article 108 establishes notification and claim periods for the circumstances addressed by Article 107.
The provision includes a general requirement to notify the seller of a difference or defect within 15 days of actual delivery, with specified periods for relevant claims. Different requirements apply to latent defects that cannot be discovered through ordinary inspection, and the article also addresses permissible agreements concerning these periods.
The specific deadlines and available remedies should be assessed against the full provision and the circumstances of the transaction.
For example, a buyer discovering an obvious shortage immediately after delivery should not assume that it can wait indefinitely before notifying the seller.
A hidden manufacturing defect discovered later may require a different analysis.
The agreement should establish practical inspection and notification procedures that reflect the applicable legal framework.
Warranties and After-Sales Responsibilities
A sales agreement may include warranties concerning the quality, performance, or condition of the item sold.
The appropriate warranty depends on the asset and the commercial arrangement.
For example, a manufacturer may provide a limited warranty covering specified components for an agreed period.
The contract should explain what the warranty covers and identify any agreed exclusions that are legally permissible.
It should also establish the procedure for making a warranty claim.
Where repair or replacement is contemplated, the parties should consider who bears transportation, labour, and related costs.
A warranty should not be drafted as though it automatically eliminates statutory rights or liabilities.
The parties should distinguish voluntary commercial warranties from obligations imposed by applicable legislation.
This is particularly important where consumer protection rules apply.
Sales Agreements Involving Installation or Training
Some sales involve obligations extending beyond delivery.
A seller of specialised equipment may also agree to install the machinery, test its performance, and train the buyer’s employees.
These additional obligations should be identified separately.
For example, the agreement may establish that installation must be completed within a specified period after delivery.
It may also require the buyer to provide suitable premises, utilities, or access to relevant personnel.
The contract should explain how completion will be assessed and whether the final payment depends on successful commissioning.
Where ongoing maintenance is required, the parties should determine whether it forms part of the sale or requires a separate service arrangement.
A Draft Service Agreement may be relevant where continuing technical support or maintenance creates obligations that extend beyond the initial sale.
Sales Agreements for Used Assets
Purchasing used machinery, vehicles, or other business assets involves considerations that may differ from buying new goods.
The buyer may need information about the asset’s condition, maintenance history, previous use, and outstanding defects.
The agreement should identify which representations the seller has made and whether the buyer has conducted an inspection.
For example, a company purchasing a used generator may wish to record its operating hours, maintenance history, and agreed condition.
A general description stating that an item is sold in its existing condition should not be assumed to eliminate every potential legal responsibility.
The effect of such wording depends on the transaction, the relevant statutory provisions, and the circumstances.
Where a technical assessment is important, the buyer may arrange an inspection before becoming contractually committed.
The agreement should accurately record any conditions associated with that assessment.
A Practical Example: Purchasing Equipment That Does Not Meet Specifications
Consider a UAE manufacturing company purchasing an automated packaging machine.
The supplier’s proposal states that the machine can process 2,000 units per hour.
The parties agree on the purchase price and delivery date but sign a contract that does not incorporate the proposal or establish a performance-testing procedure.
After installation, the buyer discovers that the machine consistently processes substantially fewer units.
The supplier argues that the contract does not guarantee a particular production capacity.
The buyer maintains that the stated capacity was a central reason for the purchase.
A more detailed sales agreement could have incorporated the technical specifications and established a testing procedure.
It could also have addressed the consequences of failing to achieve the agreed performance requirements.
The buyer’s legal position would depend on the complete contractual documentation, the evidence concerning the negotiations, and the applicable legislation.
This example demonstrates why important commercial representations should be reflected accurately in the agreement rather than left in informal discussions.
Documents Required to Draft a Sales Agreement
The documents needed depend on the asset and transaction.
Relevant materials may include:
- Identification or corporate documents of the parties.
- Documents establishing the seller’s ownership or authority to sell.
- Quotations, proposals, and agreed term sheets.
- Technical specifications and product descriptions.
- Pricing and payment schedules.
- Inspection or valuation reports, where relevant.
- Existing warranty documentation.
- Details of any financing, security, or transfer restrictions.
- Required regulatory approvals or registration documents.
The drafting process should identify which documents form part of the agreement.
Where several proposals or specifications have been exchanged, the parties should establish which version governs the final transaction.
Sales Agreement Drafting Assistance from Abdulrahman Alshaali Advocates & Legal Consultants
A sales agreement should identify the subject of the transaction, establish the parties’ obligations, and address the legal and practical consequences of performance.
Abdulrahman Alshaali Advocates & Legal Consultants assists businesses and individuals with preparing and reviewing sales agreements under UAE law.
Our services may include examining transaction documents, developing delivery and payment provisions, reviewing ownership and transfer requirements, and addressing contractual risks associated with defects or non-performance.
Where a transaction involves an ongoing relationship rather than a single sale, a Draft Supply Agreement may be appropriate.
Clients seeking assistance with other contractual arrangements can explore our contract drafting services.
We assist clients in developing agreements that reflect their intended transactions and the applicable UAE legal framework.
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Request Assistance with Drafting Your Sales Agreement
Whether you are purchasing equipment, selling commercial goods, or transferring a valuable business asset, the agreement should accurately describe the transaction and establish the parties’ responsibilities.
Abdulrahman Alshaali Advocates & Legal Consultants assists clients with preparing and reviewing sales agreements under UAE law.
Contact our team to discuss your proposed sale and contractual requirements.
Frequently Asked Questions
Can a Sales Agreement Be Signed Before the Goods Are Manufactured?
Yes. Parties may enter into an agreement concerning goods to be manufactured or supplied in the future, subject to the applicable legal requirements and sufficient identification of the contractual obligations.
The agreement should establish the specifications, production timetable, and relevant payment arrangements.
The transaction’s legal classification should also be considered where manufacturing or work obligations form a substantial part of the arrangement.
Can a Buyer Purchase Goods Through an Agent?
A buyer may use an authorised representative to enter into a transaction, subject to the applicable rules governing representation and authority.
The agreement should establish whether the representative contracts on behalf of the buyer or in their own name.
The parties should verify the relevant authority and identify the entity responsible for payment and other contractual obligations.
Does a Sales Agreement Need to Be Notarised in the UAE?
Not every sales agreement requires notarisation.
The formalities depend on the asset, the transaction, and any applicable registration requirements.
Certain transfers may require specific documentation, authentication, or registration with a competent authority.
The parties should identify these requirements before assuming that a privately signed agreement is sufficient to complete the transaction.
Can the Buyer Resell Goods Before Paying the Full Purchase Price?
The answer depends on the agreement, the legal structure of the sale, the ownership position, and any applicable restrictions.
Where goods are sold on credit or through instalments, the parties should examine the relevant statutory provisions and any valid arrangements concerning ownership or disposal.
The buyer should not assume that possession of the goods automatically provides an unrestricted right to resell them.
Sources
Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law.
UAE Legislation Platform – Official Legislation
Federal Decree-Law No. 50 of 2022 Promulgating the Commercial Transactions Law.
