This judgment clarifies the limitations of invoking force majeure in the absence of an express contractual provision and underscores the necessity of strict compliance with equipment "off-hiring" procedures in DIFC commercial disputes.
What was the specific monetary dispute between Lerdan Rental and Linana Engineering regarding the rental agreement?
The dispute centered on the non-payment of rental invoices for construction equipment provided by the Claimant to the Defendant. Despite the delivery and receipt of the equipment, the Defendant failed to settle the outstanding balance, leading the Claimant to initiate proceedings in the Small Claims Tribunal.
The underlying dispute is in regards to the alleged non-payment of invoices issued to the Defendant by the Claimant pursuant to a Rental Agreement (the “Agreement”) in the total amount of AED 62,834.10.
The Claimant maintained that it had fully discharged its obligations under the contract by delivering the equipment as agreed. Consequently, it sought the full recovery of the unpaid invoices, asserting that the Defendant remained contractually bound to pay for the duration the equipment remained in its possession.
Which judge presided over the Lerdan Rental v Linana Engineering hearing in the DIFC Small Claims Tribunal?
The matter was heard before SCT Judge Nassir Al Nasser. Following a consultation that failed to produce a settlement, the hearing took place on 27 October 2020, with the final judgment issued on 1 November 2020.
What arguments did Linana Engineering advance to justify non-payment based on COVID-19 lockdowns?
The Defendant argued that the global pandemic and subsequent government-mandated lockdowns in the UAE rendered the performance of its construction project impossible. It contended that these external circumstances constituted a force majeure event, which should have relieved it of its payment obligations under the Rental Agreement.
The Defendant argues that the project for which the Defendant had leased the equipment from the Claimant had halted, under the circumstances of the COVID-19 pandemic.
Furthermore, the Defendant attempted to shift the burden of the financial loss by noting that it was a sub-contractor. It argued that it had requested the main contractor to settle the rental charges on its behalf, a request that was ultimately denied. The Defendant maintained that these difficulties amounted to force majeure, which it believed should be applied to the contract despite the lack of specific language in the agreement.
Did the absence of a force majeure clause in the Lerdan Rental agreement preclude the Defendant from relying on the doctrine?
The court had to determine whether the doctrine of force majeure could be implied into a commercial contract that was silent on the matter. Specifically, the issue was whether the COVID-19 pandemic and the resulting government lockdowns provided a legal basis for the Defendant to unilaterally suspend its payment obligations when the contract contained no express provision for such an event.
How did Judge Nassir Al Nasser apply the contractual off-hiring procedure to determine liability?
Judge Al Nasser focused on the specific terms of the agreement, noting that the contract was strictly between the Claimant and the Defendant, independent of any third-party main contractor. The judge found that the Defendant had failed to adhere to the mandatory notice requirements for returning the equipment.
I find that the Defendant is liable to pay the Claimant the sum of AED 62,834.10, seeing as the leased equipment was in the possession of the Defendant and was not off-hired at any stage.
The reasoning was twofold: first, the contract lacked any clause that would relieve the parties of their obligations due to force majeure. Second, the Defendant failed to follow the "off-hiring" procedure stipulated in Clause 6 of the Agreement, which required written notice at least two days in advance. Because the equipment remained in the Defendant's possession without a formal off-hire request, the contractual obligation to pay continued unabated.
Which specific contractual provisions and procedural rules governed the court's decision in Lerdan Rental v Linana Engineering?
The court relied primarily on the express terms of the Rental Agreement, specifically Clause 6, which governs "Equipment Off-hiring." This clause mandates that the "Lessee should inform off hire date and time in writing at least two days in advance." The court also operated under the Rules of the DIFC Courts (RDC) applicable to the Small Claims Tribunal, which facilitate the resolution of disputes where parties have failed to reach a settlement during the mandatory consultation phase.
How did the court interpret the applicability of force majeure in the absence of a written clause?
The court held that the Agreement between the Claimant and the Defendant contained no clause which would relieve the parties of their obligations towards one another in the event of Force Majeure. By strictly interpreting the four corners of the contract, the court rejected the Defendant’s attempt to import external legal doctrines to override the clear, agreed-upon terms of the rental arrangement. The court emphasized that the Defendant’s failure to provide evidence of a formal off-hire request rendered the force majeure argument moot, as the equipment remained under the Defendant's control throughout the period for which payment was claimed.
What was the final disposition and the total amount awarded to Lerdan Rental?
The court allowed the claim in full, finding the Defendant liable for the total outstanding invoice amount. Additionally, the court ordered the Defendant to reimburse the Claimant for the costs associated with the court fees.
In light of the above, I find that the Defendant is liable to pay the Claimant pursuant to the Agreements and the invoices issued the sum of AED 62,834.10.
The Defendant shall pay the Claimant the Court fees in the sum of AED 3,141.70.
What are the practical implications for DIFC practitioners regarding equipment rental contracts and force majeure?
This case serves as a reminder that the DIFC Courts will prioritize the express terms of a contract over implied doctrines like force majeure. Practitioners must ensure that clients strictly adhere to notice provisions, such as "off-hiring" clauses, regardless of external market disruptions or project delays. The ruling confirms that in the absence of a well-drafted force majeure clause, parties cannot rely on the COVID-19 pandemic or similar events to excuse performance. Litigants must anticipate that the court will enforce the letter of the contract, and any failure to follow administrative termination procedures will likely result in continued liability for rental charges.
Where can I read the full judgment in Lerdan Rental Llc v Linana Engineering Llc [2020] DIFC SCT 330?
The full judgment is available on the official DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/small-claims-tribunal/lerdan-rental-llc-v-linana-engineering-llc-2020-difc-sct-330
Cases referred to in this judgment:
| Case | Citation | How used |
|---|---|---|
| N/A | N/A | No external precedents cited in the judgment. |
Legislation referenced:
- Rules of the DIFC Courts (RDC)
- Rental Agreement (Clause 6)