As per Federal Law No. 8 of 1980 (UAE Labour Law), there are mainly two types of contracts: limited term and Unlimited term contracts. The former one is made for a specific period whereas the latter contract is open ended and doesn’t have any end term.
When a contract is executed, it must be performed. However, in certain cases, one party fails to fulfil its obligations which causes great harm to the other party. This led to the dissolution or termination of the contact. In other words, the “termination of a contract” refers to the breaking down of the contractual relationship between the parties.
How to Terminate a Limited Term Contract
As per Article 113 of the UAE Labour Law, a limited contract can be terminated through any of the following 3 ways-
- By mutual agreement between the parties;
- Upon expiry of the term mentioned in the contract;
- Termination by employer or by the employee for their legitimate convenience.
- Termination by Mutual Consent
In UAE labour law, the autonomy of the parties are duly taken care of. They have been allowed to end a contract through mutual consent and restore to their previous position, even if the contract is not fully executed.
While terminating through mutual consent, it is essential that there must be an offer and acceptance between the parties. The “free consent” plays a vital role in determining the validity of such termination.
- Termination After Expiry of the term
This is the most common way of ending a limited term contract. As this type of contract clearly spelt out the duration in advance, the contract automatically gets terminated after the completion of the period or the performance of the liability provided in the contract. - Termination by the Employer
In addition to the aforementioned 2 ways, the employer has a right to terminate the contract even without giving a notice to its employee, if the employee is involved in any of the acts provided under Section 120 of the UAE Labour Law. These grounds are as follows-
- If the employee conceals his original identity and furnishes forged documents or certificates;
- If the employee is dismissed during the probation period;
- If the employee has acted in a manner which has caused substantial material loss to the company. For invoking this subsection, it is essential to notify the labour department within 48 hours of the incident happening.
- If the employee disobeys or refuses to abide by the rules framed by the employer;
- If the employee fails to fulfill his basic duties provided in the contract and didn’t redress even after multiple reminders;
- If the employee is convicted of a crime against honour, honesty or public morals;
- If the employee breaches the non-disclosure agreement and reveals the secret or sensitive information of the company;
- If the employee consumes narcotics or alcohol during the working hours;
- If the employee misbehaves or assaults his colleagues at the workplace;
- If the employee remains absent from the work for 20 non successive days without providing any legitimate reason.
- Termination by Employee
In UAE, along with the employer, the employee is also vested with the right of terminating the limited term contract on the following grounds-
- If the employer fails to fulfil his obligations toward the employee as provided in the contract. It includes non payment of salary, bonus, allowances that were provided in the employment agreement.
- If the employee is assaulted by his employer.
Conclusion
The termination results in the ending of contractual relationship between the parties, and as soon as the contract is terminated, the parties will not be subject to the rights and liabilities provided therein. The aggrieved party not only terminates the contract but also claims compensation from the defaulting party to compensate for the loss suffered. Before terminating, legal assistance should be taken to analyse the plausible consequences of such an action.