Civil Law and UAE: Restitution Principles

1. Introduction

Restitution is the legal process of restoring money, property, benefits, or other value that one party has received when the legal basis for retaining that benefit has ceased or where the law otherwise requires restoration.

In UAE civil law, restitution is particularly relevant in:

• rescission of contracts;
• termination of contracts;
• invalid or void transactions;
• mistaken payments;
• failure of consideration;
• unjust enrichment;
• misrepresentation;
• recovery of deposits;
• property transactions;
• construction and service contracts.

The modern statutory position should be read against the Federal Decree-Law No. 25 of 2025 promulgating the Civil Transactions Law, which came into force on 1 June 2026 and replaced the former Civil Transactions Law of 1985. The new law expressly regulates dissolution of contracts and provides that a valid and binding contract may be rescinded through mutual consent, litigation, or operation of law.

2. Simple Meaning of Restitution

The simplest way to understand restitution is:

"Return the benefit that was received."

For example:

A pays B AED 500,000 under a contract.

The contract is subsequently lawfully rescinded.

B may be required to return the AED 500,000, while A may have to return anything received from B.

Thus:

Contract → Performance → Rescission/other legal event → Restoration

3. Purpose of Restitution

Restitution is principally concerned with restoration, rather than punishment.

Its objectives include:

1. reversing an unjustified transfer;
2. restoring parties after rescission;
3. preventing unjust enrichment;
4. returning property or money;
5. correcting the consequences of an invalid transaction;
6. achieving reciprocal restoration where both parties performed.

Restitution should therefore be distinguished from ordinary damages.

4. Restitution Versus Damages

Example

A pays B AED 1 million.

B breaches the contract and the contract is rescinded.

A may seek:

AED 1 million → restitution

and, if independently established:

additional loss → damages.

The claimant cannot obtain double recovery for the same loss.

5. Restitution After Rescission

The new Civil Transactions Law provides that a valid and binding contract cannot ordinarily be revoked, modified or rescinded except by:

• mutual consent;
• litigation; or
• operation of law.

It also provides for mutual rescission and judicial rescission.

Where rescission occurs, the consequences may include restoration of what the parties exchanged.

Example

Seller → property

Buyer → AED 2 million

After lawful rescission:

Seller ← property

Buyer ← AED 2 million

This is the basic model of reciprocal restitution.

6. Mutual Rescission and Restoration

The current Civil Transactions Law expressly addresses mutual rescission (Iqala).

The parties may agree to rescind their contract after its conclusion.

For complete mutual rescission, it must be possible for the parties to return to the state in which they were before the contract.

The law also distinguishes between the effect of mutual rescission:

• between the original contracting parties; and
• against third parties.

Against third parties, mutual rescission is treated as a new contract.

This prevents the parties from treating private rescission as automatically destroying rights that third parties may have acquired.

7. Judicial Rescission and Restitution

Under the current law, where a party to a bilateral contract fails to perform its obligation when due, the other party may, after notice, seek:

• performance; or
• rescission.

The court may also:

• order performance;
• grant additional time;
• refuse rescission where the breach is minor;
• award compensation where justified. 

If rescission is granted, the court must then determine the consequences of previous performance.

This is where restitution becomes important.

8. Automatic Rescission and Restitution

The parties may agree that a contract will automatically be rescinded when specified obligations are not performed.

This can be particularly important in:

• real estate;
• construction;
• financing;
• commercial supply;
• investment agreements.

However, an automatic-rescission clause does not eliminate the need to determine:

• whether the triggering event occurred;
• whether the contractual condition was satisfied;
• what each party received;
• what must be returned.

9. Restitution in Kind

The preferred form of restitution may be return of the actual thing received.

For example:

A transfers a machine to B.

The contract is rescinded.

If the machine still exists and can be returned, B may return the machine.

This is restitution in kind.

10. Monetary Restitution

Sometimes physical restoration is impossible.

Examples:

• services have already been consumed;
• goods have been destroyed;
• money has been spent;
• construction has been incorporated into property;
• digital services have already been delivered.

The court may then require a monetary equivalent or adjustment.

The former DIFC Contract Law expressly illustrated this approach by providing that where restitution in kind was impossible or inappropriate, an appropriate monetary allowance could be made.

11. Reciprocal Restitution

Restitution normally operates in both directions where both parties have performed.

Suppose:

• A pays AED 1 million;
• B transfers property;
• contract is rescinded.

A cannot generally demand AED 1 million while continuing to retain B's property.

The appropriate approach is:

Each party restores what it received, subject to the applicable law and practical possibility of restoration.

This principle was expressly applied in the DIFC cases concerning termination and restitution.

12. Restitution and Unjust Enrichment

Restitution and unjust enrichment overlap but are not identical.

Restitution

Asks:

What benefit must be returned following a legal event?

Unjust enrichment

Asks:

Why should this person be allowed to retain a benefit received at another's expense?

Thus:

Rescission → restitution

may be a direct contractual consequence.

Where there is no adequate legal basis for retention, unjust enrichment may provide an additional or alternative basis for recovery.

13. Enrichment Alone Is Not Enough

The DIFC Court of Appeal's decision in DAMAC Park Towers v Ward is particularly important.

The Court explained that unjust enrichment requires:

1. enrichment; and
2. an unjust factor affecting that enrichment.

The defendant had received payments and was therefore enriched. But the Court concluded that the payments were made voluntarily under the contract and that the defendant was legally entitled to receive and retain them in the circumstances.

Therefore:

Enrichment does not automatically equal unjust enrichment.

This is an important limitation on restitutionary claims.

14. Case Law 1 — Youssef Issa Ward v DAMAC Park Towers Company Limited [2014] DIFC CFI 001

The claimant sought restitution of payments made toward a property transaction.

The first-instance court found that:

• the claimant was not in breach;
• the defendant's termination was wrongful;
• the defendant had materially breached the agreement.

The court ordered the defendant to return AED 2,626,335 in restitution.

The court relied upon the applicable DIFC restitution provisions.

Principle

Where a party has been wrongfully deprived of its contractual rights and the contract is lawfully terminated, restitution may restore payments previously made.

Importance

This is a strong illustration of:

wrongful termination → valid termination by innocent party → restitution.

15. Case Law 2 — DAMAC Park Towers Company Limited v Youssef Issa Ward [2015] DIFC CA 006

The Court of Appeal reversed the first-instance outcome on the restitution issue.

The Court held that restitution under the applicable DIFC provisions would only be available where the claimant was lawfully entitled to terminate.

It further explained that unjust enrichment requires an unjust factor.

Although DAMAC had been enriched by receiving the payments, it was legally entitled to receive and retain them under the contractual arrangements in the circumstances of the case.

Principle

A claimant cannot obtain restitution merely by showing that the defendant received money.

The legal basis of the payment and the circumstances of termination must be examined.

16. Case Law 3 — Amit Dattani & Others v DAMAC Park Towers Company Limited [2012] DIFC CFI 034

The claimants had validly terminated their agreements and sought restitution.

The court applied the former DIFC Contract Law provision concerning restitution after termination.

It concluded that the claimants were entitled to restitution of sums paid to the defendant.

Principle

Valid termination can create a restitutionary obligation.

The case also illustrates the importance of reciprocal restoration.

17. Case Law 4 — Amit Dattani & Others v DAMAC Park Towers Company Limited [2014] DIFC CA 007

The Court of Appeal considered the consequences of valid termination and reproduced Article 90 of the former DIFC Contract Law.

That provision allowed a party, following specified forms of termination, to seek restitution of what it had supplied, subject to making restitution of what it had received.

Where restitution in kind was impossible or inappropriate, a monetary allowance could be made.

Principle

Restitution is fundamentally reciprocal.

It is not simply a mechanism for giving one party a refund while ignoring the benefits received by that party.

18. Case Law 5 — Mr Salem Dwela v DAMAC Park Towers Company Limited [2020] DIFC CA 009

The claimant sought rescission of a property sale and purchase agreement based on alleged misrepresentation.

The Court of Appeal explained that the court could potentially order rescission together with restitutio in integrum—restoration to the position existing before the transaction—if the misrepresentation case were established.

Principle

Rescission can be accompanied by restoration.

This demonstrates the close relationship between:

rescission + restitution + compensation.

19. Case Law 6 — Salem Dwela v DAMAC Park Towers Company Limited [2018] DIFC CFI 083

The first-instance court examined claims arising from alleged misrepresentation in connection with a property transaction.

The court discussed its remedial powers and recognized that an order for restitution or rescission could, in an appropriate case, form part of the available remedies.

Principle

Restitution is part of a broader remedial framework and must be connected to an established legal ground.

A party cannot simply request restitution without establishing the underlying legal entitlement.

20. Case Law 7 — Basin Supply Corporation v Rouge LLC & Claude Barret [2018] DIFC CFI 057

The claimant advanced alternative bases for recovering money, including contractual recovery and unjust enrichment.

The case illustrates how restitutionary principles can operate as an alternative basis of recovery when the contractual foundation of a transaction is challenged.

Principle

Where the validity or enforceability of the contractual basis is uncertain, a claimant may formulate alternative restitutionary arguments, subject to proving the relevant elements.

This is particularly useful in:

• failed loans;
• mistaken payments;
• invalid agreements;
• failed consideration.

21. Case Law 8 — Dagny v Dag & Company International Limited [2011] DIFC CFI 007

This case involved a claim relating to a mistaken payment.

The court considered unjust enrichment and the circumstances in which the recipient might have a change-of-position defence.

Principle

Restitutionary recovery may be affected where the recipient has, in good faith, changed position in reliance on the receipt.

This demonstrates that restitution is not necessarily an automatic refund mechanism.

22. Case Law 9 — Larmag Holding B.V. v First Abu Dhabi Bank PJSC [2019] DIFC CFI 054

The court considered claims based on UAE law and discussed the former UAE Civil Code's provisions on:

• unjust enrichment;
• unjustified expropriation;
• related restitutionary principles.

The judgment is useful because it shows how UAE-law unjust-enrichment principles have been considered by a UAE specialist court.

Principle

UAE civil law recognizes restitutionary concepts extending beyond ordinary contractual damages.

Important qualification: the statutory provisions cited in this older case were provisions of the former Civil Code, so current cases must be checked against the 2025 Civil Transactions Law.

23. Case Law 10 — Hexagon Holdings Cayman Limited v DIFC Authority & DIFC Investments LLC [2019] DIFC CFI 013

The claimant attempted to rely upon restitution.

The court rejected the restitutionary claim because the necessary enrichment of the defendants had not been established.

Principle

A claimant's loss alone is insufficient.

For unjust enrichment, there must be a corresponding benefit/enrichment satisfying the requirements of the doctrine.

24. Main Restitutionary Situations in UAE Civil Law

Restitution can arise in several different situations.

A. Rescission

A valid contract is dissolved.

Result: previous performance may need to be restored.

B. Nullity

The transaction is legally ineffective.

Result: benefits transferred under it may need to be returned.

C. Mistake

Money or property is transferred when it should not have been.

Result: restitution may arise.

D. Failure of consideration

The expected contractual basis for payment fails.

Result: repayment may be required.

E. Unjust enrichment

A party retains a benefit without adequate legal justification.

Result: restitutionary recovery may arise.

25. Restitution After Invalidity

Suppose:

A pays B AED 500,000 under a transaction that is later found legally void.

If B has no valid legal basis for retaining the money, restitution may be required.

The conceptual sequence is:

Invalid transaction

↓

No valid legal basis for retention

↓

Benefit retained

↓

Restitution

This differs from rescission because a rescinded contract was originally valid.

26. Restitution After Mistake

Suppose:

A intends to transfer AED 100,000 to C.

Because of a banking error, A transfers it to B.

B has received:

AED 100,000

A has suffered:

AED 100,000 impoverishment

If B has no legal entitlement to the payment, restitution may be appropriate.

The analysis then considers:

• mistake;
• enrichment;
• absence of legal basis;
• recipient's conduct;
• change of position.

27. Failure of Consideration

Failure of consideration is another important restitutionary situation.

Example:

A pays B AED 1 million for goods.

B never delivers the goods.

If the contractual basis for retaining the payment has failed, A may have a claim for recovery.

Depending on the facts, this may involve:

• breach of contract;
• rescission;
• repayment;
• unjust enrichment;
• damages.

The legal characterization matters because the elements and available remedies can differ.

28. Restitution in Property Transactions

Real estate is one of the most important contexts for restitution in UAE practice.

Potential situations include:

• cancellation of a sale;
• developer default;
• purchaser default;
• rescission for misrepresentation;
• failure of contractual conditions;
• invalid transfer;
• return of deposits.

The Ward/DAMAC and Dattani/DAMAC cases demonstrate the importance of restitution in property transactions.

29. Restitution in Construction Contracts

Construction presents special difficulties because performance is progressive.

Suppose:

• Employer pays AED 10 million.
• Contractor completes 60%.
• Contract is rescinded.

It may be impossible to return the construction work.

The court may have to calculate:

Value of work completed

minus

payments already made

plus/minus

cost of defective work

plus/minus

other legally recoverable amounts.

Thus, restitution may become a detailed accounting exercise.

30. Restitution of Services

Services create another problem.

A service cannot always be physically returned.

For example:

• legal services;
• consultancy;
• marketing;
• software development;
• accounting;
• maintenance.

If the contract is rescinded after services have been consumed, the court may need to determine the monetary value of the benefit actually received.

31. Restitution and Interest

Suppose a party must return:

AED 1,000,000

A further question is whether additional sums should be awarded for the period during which the recipient retained the money.

This requires distinguishing:

• principal restitution;
• compensation for delay;
• contractual interest;
• statutory/judgment interest.

The answer depends upon the applicable law and the circumstances.

The Ward first-instance judgment, for example, included interest on the restitution judgment sum, illustrating that the financial consequences of restitution can extend beyond merely identifying the principal amount.

32. Restitution and Third-Party Rights

Third-party rights complicate restitution.

Example:

A → B → C

A transfers property to B.

B transfers it to C.

A later obtains rescission against B.

The court must consider:

• whether C acquired protected rights;
• whether C acted in good faith;
• whether registration occurred;
• whether the property can be recovered;
• whether monetary restitution should instead be ordered.

The current Civil Transactions Law expressly recognizes that mutual rescission has one effect between the original parties but constitutes a new contract as against third parties.

33. Restitution and Benefits Derived From Property

A party may have received more than the original asset.

For example:

A transfers property to B.

B possesses the property for two years and receives rental income.

The contract is rescinded.

The court may need to consider:

• return of the property;
• return of purchase price;
• rental income;
• expenses;
• improvements;
• deterioration;
• occupation benefits.

Restitution can therefore require accounting for secondary benefits, depending on the applicable legal rules.

34. Restitution and Improvements

Suppose B improves property before rescission.

The court may need to determine:

• whether the improvement remains attached to the property;
• whether B acted in good faith;
• whether the improvement increased the property's value;
• whether removal is possible;
• whether compensation should be made.

Therefore, restitution is not always as simple as:

"Give back exactly what you received."

35. Restitution and Digital Assets

Modern civil transactions can involve:

• cryptocurrency;
• digital tokens;
• online accounts;
• electronic money;
• software licences;
• digital subscriptions;
• NFTs;
• platform credits.

If a digital transaction is rescinded, the court may have to determine:

• whether the asset can still be transferred;
• whether its value has changed;
• whether the original asset still exists;
• whether monetary restitution is appropriate.

This illustrates how traditional restitution principles can apply to modern forms of property and economic value.

36. Restitution and Smart Contracts

Automated contractual performance creates another issue.

Suppose:

Smart contract → automatically transfers digital asset

Later:

Court → determines transaction should be rescinded

The legal question becomes:

How is the automated transfer reversed?

The underlying principle remains the same:

legal rescission → restoration

But technological implementation may require:

• reversal of the transaction;
• transfer of equivalent assets;
• monetary compensation;
• freezing of assets;
• tracing.

Automation does not itself eliminate restitutionary principles.

37. Restitution and Quantum Meruit

Quantum meruit concerns reasonable payment for services or work provided where the contractual basis for payment is absent, incomplete or otherwise unavailable.

It can overlap with restitution but is not identical.

Restitution

Focus:

Return the benefit.

Quantum meruit

Focus:

What reasonable amount should be paid for the benefit of services/work actually provided?

This distinction becomes particularly important when a partially performed contract is terminated.

38. Restitution and Reliance

Reliance losses concern expenditures incurred because a party relied upon the transaction.

Example:

A spends AED 200,000 preparing to perform a contract.

The contract is later rescinded.

A may seek:

• restitution of money actually transferred;
• potentially reliance damages for qualifying expenditure.

The two remedies should not be confused.

39. Restitution and Expectation

Expectation damages ask:

What would the claimant have received if the contract had been performed?

Restitution asks:

What should the claimant get back from what was transferred?

For example:

Contract price = AED 1 million.

Expected profit = AED 300,000.

After rescission:

• AED 1 million may represent restitution;
• AED 300,000 may represent expectation loss if independently recoverable.

They have different legal purposes.

40. Limits on Restitution

Restitution is subject to important limitations.

1. No underlying legal basis

The claimant must establish why restoration is legally required.

2. Reciprocal performance

A party may need to return benefits it received.

3. Impossibility

Physical return may be impossible.

4. Third-party rights

Restitution cannot automatically destroy protected third-party interests.

5. Change of position

Particularly in unjust-enrichment claims, good-faith change of position may affect recovery.

6. Contractual allocation

A valid contract may provide a legal basis for retaining a benefit.

7. No double recovery

A claimant cannot recover the same loss twice through different legal labels.

41. Restitution and Change of Position

This defence is particularly important in unjust enrichment.

Suppose:

A mistakenly transfers AED 500,000 to B.

B genuinely believes the money is his and irreversibly changes his financial position.

The court may need to consider whether requiring full repayment would be inequitable under the applicable unjust-enrichment principles.

This issue was considered in the older DIFC authority Dagny v Dag.

The lesson is:

Restitution must consider the circumstances of the recipient as well as the claimant.

42. Restitution and Good Faith

Good faith can become relevant in assessing:

• recipient's conduct;
• change of position;
• improvements;
• knowledge of invalidity;
• retention of benefits;
• third-party transfers.

A person who knowingly retains property despite knowing that the legal basis has failed may be treated differently from a person who innocently received a payment.

43. Restitution and Contractual Clauses

Contracts often contain provisions dealing with:

• deposits;
• termination;
• forfeiture;
• refunds;
• cancellation charges;
• agreed compensation.

The court must determine whether such provisions constitute the applicable legal basis for retaining a benefit.

The DAMAC v Ward decision demonstrates the importance of contractual terms in determining whether the recipient had a legal entitlement to retain payments.

44. Practical Legal Test

For an examination problem, use the following sequence:

Step 1 — Identify the transaction

Was there a contract, payment, transfer, service or other transaction?

Step 2 — Identify the legal event

Was there:

• rescission?
• termination?
• nullity?
• mistake?
• failure of consideration?
• unjust enrichment?

Step 3 — Identify the benefit

What did each party receive?

Step 4 — Determine whether restoration is possible

Can the original property or benefit be returned?

Step 5 — Determine monetary equivalent

If return in kind is impossible, what monetary adjustment is required?

Step 6 — Examine reciprocal performance

What must the claimant return?

Step 7 — Examine unjust enrichment

Does one party retain a benefit without adequate legal justification?

Step 8 — Examine defences

Consider:

• change of position;
• contractual entitlement;
• third-party rights;
• limitation;
• good faith.

Step 9 — Consider damages

Are losses beyond the transferred benefit legally recoverable?

Step 10 — Prevent double recovery

Ensure that restitution and damages do not compensate the same loss twice.

45. Restitution Flowchart

Contract/Transaction

↓

Benefit transferred

↓

Legal event occurs

↓

Rescission / invalidity / failure of basis / mistake

↓

Identify recipient's benefit

↓

Can benefit be returned?

YES → Return in kind

NO → Monetary equivalent

↓

Was there reciprocal performance?

↓

Examine third-party rights

↓

Examine unjust enrichment

↓

Consider damages/interest

↓

Final restitutionary order

46. Case-Law Revision Table

Jurisdictional caution: Most of the reported authorities above are DIFC Courts decisions, so they are useful UAE authorities illustrating restitutionary principles but should not be described as binding precedents on mainland UAE courts. The current mainland statutory framework is the 2025 Civil Transactions Law, effective from 1 June 2026.

47. Current-Law Importance of the 2025 Civil Transactions Law

For current UAE civil-law research, older references to the 1985 Civil Transactions Law require care.

The new Civil Transactions Law:

• reorganizes the law of civil obligations;
• modernizes contractual rules;
• regulates dissolution of contracts;
• recognizes mutual rescission;
• regulates judicial rescission;
• permits agreed automatic rescission;
• addresses restoration in the context of mutual rescission.

For example, Article 233 requires that, for complete mutual rescission, it must be possible for the parties to return to their pre-contractual state. Article 234 regulates judicial rescission for non-performance, while Article 235 recognizes agreed automatic rescission.

Thus, restitution should now be studied as part of the modern UAE law of contractual dissolution and obligations, rather than relying exclusively on the old 1985 article numbering.

48. Conclusion

The central principle of restitution in UAE civil law is:

A person should not retain a benefit when the legal basis for retaining it has disappeared or the law otherwise requires its restoration.

The major forms include:

1. restitution following rescission;
2. restitution following invalidity;
3. recovery of mistaken payments;
4. restitution for failure of consideration;
5. unjust-enrichment recovery;
6. restoration of property;
7. monetary restitution where return in kind is impossible.

The most important distinctions are:

Restitution ≠ damages.

Restitution ≠ unjust enrichment in every case.

Enrichment ≠ unjust enrichment automatically.

Rescission ≠ automatic one-sided refund.

The leading UAE/DIFC authorities demonstrate that courts examine the legal basis of the transfer, validity of rescission, reciprocal performance, enrichment, unjust factors, contractual rights, and practical possibility of restoration before granting restitution.

Exam formula

Legal Transaction → Legal Event → Identify Benefit → Establish Right to Restitution → Return in Kind → If Impossible, Monetary Restitution → Reciprocal Restoration → Check Unjust Enrichment → Check Defences/Third Parties → Add Damages Where Legally Justified.