Unpaid Purchase Orders in UAE

A purchase order is a legal and formal representation of the agreement between the buyer and the seller. They are widely used across various industries in UAE and throughout the world, ranging from construction to retail, logistics to manufacturing, and much more. It has a good importance in business sector. Despite several opportunities, there are some threats and challenges attached to it. Unpaid purchase orders pose a serious threat that risks different stakeholders’ businesses in UAE may face this problem quite often, especially in pandemic and post-pandemic times. The buyers may fail to honor their commitments which impacts the smooth business operations, suppliers, and other business operations.  It leaves financial setbacks and also upsets the profitability, revenues, and cash flows of the business. Consequently, it also increased the legal complications for the business.

Purchase order PO is defined as a legal and formal binding document. Primarily it is issued by the buyer to the seller as proof of purchase. This indicates that the product or service is requested. It mentioned the quantities, agreed prices, delivery schedules, and payment terms. Once the purchase order is accepted by the seller, it becomes legally binding, and contractual obligation is established.

In UAE, the purchase orders are mainly administered by federal law no 18 of 1993 under commercial transaction law. This allows purchase orders PO to be enforced contract. The contract terms and conditions are clearly outlined and accepted. Learn more about Federal Law # 18, 1993.

• Liquidity Issues: The prime causes of unpaid purchase orders are numerous. One of the very common reasons is the cash flow issues. The buyer may face liquidity issues that may be due to internal financial distress or mismanagement of payments. This delay or default of payment can have serious legal implications.
• Product or service quality: Secondly, in case there are disputes over the delivery of a product or service. This could happen if the delivered goods and services do not meet the quality, requirements, or timelines promised by the seller. The buyer may show reluctance to pay and thus withhold payments until the dispute is resolved. This often happens due to dissatisfied customers.
• Ambiguity: Any ambiguity in the contracts or purchase orders PO can leads towards unpaid purchase order. Unclear terms and conditions or lack of proper documentation related to warranty, time, payment, and delivery deeply impact the payments shortly.
• Delay or Fraud: any intentional delay or fraud can halt the payments. Some businesses and entities issue purchase orders with no real intent to pay and thus, suppliers can take full benefit from this failure and verify the financial credibility before the deal is finalized.

Unpaid purchase orders can easily trigger substantial legal implications.  Nonetheless, the UAE law is strict in this matter and they treat the unpaid PO as a serious breach of contract. This possibly led to a civil lawsuit or litigation. Our lawyers can teach you about UAE laws, specific laws about business in UAE, and several other relevant things.

This can result in blacklisting of the buyer and some extreme cases. It could result in criminal charges as well. Criminal charges often arise when there is fraudulent intention present.

The legal remedies for it include filing a commercial case. The UAE courts welcome the filing of the commercial case also serves justice in this regard.

Secondly, they may obtain the payment order. They are expert in the legal procedure regarding overdue debts. Therefore it is advisable to involve debt collection agencies in UAE.

Another legal remedy is freezing the buyer’s bank accounts, property, or assets. The will stipulate the payment of unpaid PO.

Another lucrative option available is arbitration or mediation. The timely action acts as a damage control. This will delay pursuing the lawsuit or litigation which is an expensive arrangement.

Internal follow-up will certainly assist. It is a way of communication that is initiated before heading towards legal action or court proceedings. The business should make sincere efforts to resolve the delinquent payments through structures and active communication channels.

This involves sending legal and formal payment reminders to the debtors. Additionally, share the updated statements of accounts with the debtors to encourage them to prompt payments.  Also, offer them a revised payment plan to provide them the ease of payment. This is a feasible option that is friendly for both stakeholders.

Furthermore, bring the matter to the notice of the seniors escalate the matter, and highlight it for quick recovery of debts. Always maintain full-fledged records of all correspondence. This can easily be used later on as evidence and witness in case of unpaid PO. Creditors can lodge the litigation or can also hire the lawyers for mediation.

Professional Debt Recovery with the help of debt collection experts and lawyers, in Dubai is also a lucrative option. It is a strategic move that will give it a professional touch. Our law firm also provides the debt recovery services, court services as well as legal mediation. We assist in filing commercial lawsuits in the civil courts, conducting debt recovery services, legal mediations, serving legal notices, drafting the documents and much more. We suggest book a legal appointment with our experts, consult them and acquire our result oriented legal support. We have one of the top lawyers and debt collection experts. Our experts offer debt collection services or court services with trust and professional approach.