Unjust Enrichment in UAE Commercial Disputes: Article 318 Ensures Recovery of Wrongfully Retained Payments

Commercial relationships in the United Arab Emirates are built on contracts, trust, and the principle that each party should receive value in exchange for the benefits they confer. Yet disputes often arise when one party retains money or property without fulfilling their obligations. A supplier may keep advance payments without delivering goods, a contractor may be paid for services never performed, or an individual may receive funds by mistake.

 

In such cases, the UAE legal system provides a clear solution: no enrichment can be lawful unless it is founded on a legitimate reason.

 

The Legal Foundation

The Civil Transactions Law, which governs most private and commercial dealings in the UAE, expressly codifies this principle. Article 318 states: “It is not permissible for anyone to take the money of another without a legitimate reason, and if he takes it, he must return it.”

 

This provision embodies the doctrine of unjust enrichment. It ensures that no party can profit at another’s expense unless there is a lawful cause to justify that enrichment.

 

While brief in wording, its application is far-reaching. It applies not only to contractual disputes, but also to situations outside formal agreements. For example, where funds are mistakenly transferred to the wrong account, Article 318 compels the recipient to return them. Similarly, if a contract is void or becomes unenforceable but money has already been paid, restitution will be ordered.

 

Application in Commercial Disputes

In practice, Article 318 is frequently invoked in disputes involving advance payments, failed deliveries, and unperformed services. For instance, if a company transfers funds to a supplier but no goods are shipped, the buyer may still bring a claim under Article 318, even if the contract does not explicitly provide for refunds. The supplier has no lawful reason to retain the payment, and restitution becomes mandatory.

 

The principle also applies in shareholder and partnership disputes. If a partner withdraws company funds for personal use without authorization, Article 318 provides the legal basis for recovery. UAE courts consistently uphold this rule, affirming that unjust enrichment will not be tolerated in either personal or commercial dealings.

 

Evidentiary Considerations

Because unjust enrichment depends on whether a lawful reason exists for receiving money, evidence is crucial. UAE civil courts give priority to written contracts, invoices, receipts, and correspondence. Oral testimony plays a limited role.

 

A claimant must provide clear proof of payment and demonstrate that the other party lacks lawful justification for retaining it. Conversely, the recipient may defend themselves by showing that the enrichment was based on a valid contractual or statutory ground.

 

Commercial Implications

Article 318 is more than a technical rule; it is a safeguard for businesses in a fast-growing commercial hub. It reassures companies that if funds are wrongfully retained, the law provides a direct remedy. It also deters parties from attempting to profit unfairly, reinforcing accountability and good faith in business.

 

For companies operating in the UAE, the practical lesson is clear: maintain strong documentation. Payments should be supported by contracts and invoices, while obligations should be backed by written correspondence. Without such records, a party risks exposure to restitution claims -- or may find it difficult to prove its right to recovery.

 

Conclusion

Article 318 of the UAE Civil Transactions Law enshrines a fundamental doctrine of justice: unjust enrichment is not permissible. Whether involving mistaken transfers, undelivered goods, or unauthorized withdrawals, the law empowers courts to restore fairness by ordering restitution.

 

In a jurisdiction like the UAE, where commerce is dynamic and transactions often cross borders, Article 318 remains a cornerstone of legal certainty and business confidence. By making clear that no one may retain another’s property without lawful cause, the law keeps fairness and good faith at the heart of commercial dealings.

 

 

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