Abu Dhabi, UAETuesday 19 November 2019

'I lent money to a friend who never repaid me. What can I do?'

The Dubai resident has no official paperwork to prove the existence of the loan

The friend says she cannot repay the money because the business failed. Getty Images
The friend says she cannot repay the money because the business failed. Getty Images

I lent a large amount of money to a friend a couple of years ago to start her own business. I trusted her so I didn’t get any paperwork or agreements signed, however, she has not paid the money back even though the date we agreed has passed. The only proof I have is a payment to her on a bank statement. She says she can’t pay because her business hasn’t been a success but that isn’t my fault. What can I do to get my money back from her? NT, Dubai

Without any proof of money being lent on a temporary basis, as opposed to it having been a gift, NT’s case is poor. The added complication is that, strictly speaking, no individual is permitted to lend money and charge interest under Central Bank of the UAE regulations, so this could only be considered a ‘friendly agreement’ without any interest payable. If proper documentation was in place then a criminal case could be registered. The best option would be to engage a lawyer who can send a legal notice, essentially an official letter, demanding the return of monies lent with a deadline to repay.

If the other party does not repay the money, and if there is any evidence such as emails or messages, it might be possible to file a court case but NT will face costs for taking this course of action. There is no guarantee of the case succeeding if there is little evidence to prove this was a loan.

The lesson here is never to lend anyone money without a proper written agreement. If anyone does wish to lend to a friend in the UAE, it must be without interest and documented for the protection of both parties. I recommend seeking legal advice in all cases.

If an employee has a two-year limited contract but continues to work under the same conditions after its expiry, does this roll into another two-year contract or is it an unlimited one? My employment has continued as before but my manager won’t confirm the basis. I want to know as this will affect my future plans and when I decide to move on. If I am now working on an unlimited basis, will it be easier for me to leave but also easier for them to terminate my employment? BW, Abu Dhabi

At the end of the initial period of the contract it can be renewed for a further fixed period or roll over into an unlimited contract but this should be with the agreement of both the employee and employer. Such matters should be raised prior to the end of the contact so that all parties are clear. Article 40 of UAE Labour Law states: "Should the parties pursue the application of the contract after the expiry of the original period thereof or the end of the agreed job without an explicit agreement, the original contract shall be deemed implicitly extended under the same conditions mentioned therein with the exception of the term.” This means that unless specified or a new contract is issued with a fixed term, the employment continues on an unlimited basis.

Where someone is on an unlimited contract, they can leave employment by giving the appropriate notice and without financial penalty. If someone is on a fixed-term contract, Article 116 of Labour Law is relevant and this says: “If the contract has been terminated on part of the employee … the employee becomes liable for compensating the employer against losses incurred by him in consequence of contract termination, provided that the amount of compensation, may not exceed half a month's pay for a period of three months or for the remaining period of contract whichever is shorter, unless the terms of the contract provide otherwise.”

If an employee is made redundant on an unlimited contract the employer must simply pay the salary for the agreed notice period plus any days of accrued annual leave not yet taken and the end-of-service gratuity from the start date of employment. There is only an additional payment in the case of arbitrary dismissal. If however, an employee is on a fixed-term contract and the employer wants to break this, they must provide compensation as per Article 115 of law. This states: “Should the employment contract be of a determined term, and the employer rescind same … he shall be bound to compensate the worker for the damage incurred thereto, provided that the compensation amount does not exceed in any case the total wage due for the period of three months or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract.”

In addition, the gratuity is not payable to anyone on fixed contracts who resigns with fewer than five years of continuous service, as per Article 138 of the law.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with over 25 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE

The advice provided in our columns does not constitute legal advice and is provided for information only

Updated: October 12, 2019 09:47 AM

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