Your Customer Cancelled a Three-Year Software Licence and Stopped Paying: What Can You Recover in the DIFC?

Usually the whole price, but not all of it on the same footing. When a customer cancels a software licence contract it had no right to cancel, an instalment already due is a debt: you sue for the agreed sum without proving loss or mitigating, and agreed late-payment interest can run on it. Instalments not yet due when the contract ended are normally damages in a DIFC claim on a DIFC-law contract, so credit is given for costs saved and money received early, and interest may follow the statute, not the contract. In a 2026 DIFC judgment, a software reseller was awarded all three annual instalments of a three-year licence deal, USD 476,768.68, with 18 percent interest on the first year and 9 percent on the second.

But the customer defended the claim until the eve of trial, then told the Court it could not fund representation at trial and that its witnesses would not attend. Its witness statements were disregarded and nobody argued the penalty point for it. The findings are one judge's, on one contract, untested on appeal. October 2026 searches of the DIFC Courts' published orders, Court of Appeal listings and Conflicts of Jurisdiction Tribunal decisions found no appeal, set-aside or Tribunal application, only a later order of 26 February 2026 assessing costs.

The table shows how the judgment of 2 February 2026 in CFI 076/2024 treated each year.

Is a customer that cancels a software licence contract still bound to pay?

Yes, if the contract cannot be cancelled, and probably even if it is silent. The reseller's quotation set a three-year term with three annual instalments payable on receipt of invoice, made delivery of the licences contingent on the first payment, barred cancellation within three years and charged 1.5 percent a month, 18 percent a year, on overdue sums. The customer, a company incorporated in the DIFC, returned a signed purchase order two days later, adding that the buyer could withhold payment for disputed invoice items. The Court held that purchase order a counter-offer, accepted when the reseller issued its three invoices.

The judge added that a right to cancel appeared unlikely even without that term, and that a fixed or minimum period could not be a penalty, because parties freely and commonly agree them. Where DIFC law governs the contract, Article 10 of the DIFC Contract Law points the same way: a valid contract binds the parties and can be modified or terminated only under its terms, by agreement or as the Law provides. Any cancellation by the customer, which it dated variously to March, April and May 2024, could only be a repudiatory breach, so the Court did not need to decide whether or when it happened.

Three documents made the contract, and each did separate work.

Which years can you claim as a debt, and which only as damages?

The year already due is a debt. The later years depend on whether the contract was alive when they fell due. The first instalment became due when the contract was formed, so the reseller sued for it as a debt, and the judge said no question of mitigation can arise on a debt. Article 83 of the Contract Law gives the same right to require payment of money due.

The later instalments turned on how the reseller ran its case. It pressed for performance and in October 2024 sued for the first invoice only. When it widened the claim to all three, the judge treated that as accepting the repudiation before the second and third instalments fell due, so they were recoverable only as damages. The customer argued that no repudiation had been pleaded, but the judge found the damages claim apparent on a fair reading of the amended particulars.

The statutes frame the choice differently. Articles 86 to 89 of the Contract Law allow termination for fundamental non-performance, including in advance where it is clear, exercised by notice, releasing both sides from future performance while preserving damages. Article 41C of the Law of Damages and Remedies, in its March 2024 consolidation, lets a party sue for the agreed sum without proving loss or mitigating, unless the counterparty's non-performance is anticipatory and the claimant has no legitimate interest in performing. The judgment mentions none of these provisions, so their effect on a customer that walks away early in the term is untested.

Key takeaway. Whether a later instalment is a debt or damages turned on when the contract ended, and in this case a change in the claim decided that. Record your choice to affirm or to terminate in a dated notice instead of leaving it to inference.

Must a reseller cut its losses before claiming the later years?

In principle yes for the damages years, but not by walking away from its own supplier. Article 117 of the Contract Law excludes liability for harm the claimant could have reduced by reasonable steps, and Articles 110 and 111 deduct costs avoided by not having to perform. The judge accepted a duty to mitigate the damages, as distinct from the debt, but held the reseller had no obligation to avoid or reduce its payment to the software publisher. It had bound itself to the publisher before the earliest date the customer said it cancelled, the publisher was entitled to the benefit of that bargain and could supply as much software as it had orders for, and there was no legal basis on which the reseller could escape its own obligations.

The judge then looked for anything the reseller gained or was released from when the contract ended and found only early receipt of money. Applying an English Court of Appeal decision, he accepted that early receipt should be discounted, but held the discount negligible because the second invoice date had passed and the third was days away. The whole price was awarded.

Both features are facts, not rules. A hosted-software provider that saves hosting, support or licence costs when a customer leaves, or that sues early in the term, faces the same question and may get different answers. The finding was made without the customer's witnesses or oral argument and is untested on appeal.

Will the Court enforce 18 percent interest, or is it a penalty?

It did here, but the ruling is narrow and was never argued. The defence called the rate an unenforceable penalty, but the customer's skeleton argument said nothing on it. Noting that the High Court of Australia and the UK Supreme Court disagree on the principles, the judge said a first-instance case where one side does not appear and offers no argument is not the occasion to choose. On either approach the rate was not penal: not "extravagant and unconscionable", the UK requirement, nor in terrorem, the Australian one.

The reasons were specific to the parties. The reseller owed its publisher the same 18 percent under its own contract, carried the risk of the later invoices going unpaid, and was owed an unsecured debt, and the rate was broadly equivalent to what credit card companies charge. Interest ran on the first instalment from 15 February 2024, when the contract was formed, not from the 13 February invoice date the reseller claimed.

Nor does the judgment decide which test DIFC law follows or how the statutes apply. Article 122 of the Contract Law allows a sum specified for non-performance to be reduced to a reasonable amount where it is grossly excessive in relation to the harm and other circumstances. Article 21 of the Law of Damages and Remedies, which applies to the same contracts, allows reduction where it is manifestly disproportionate to the loss envisaged. Neither was mentioned.

Common mistake. Citing this judgment as proof that 18 percent, or any high rate, is enforceable in the DIFC. The finding was unargued, rested on the reseller's matching upstream rate and left the governing test open.

What interest runs on the years claimed as damages?

In the 2026 case, statutory interest under Article 118, and none on an instalment not due by judgment. The later instalments were claimed as damages, not under the contract, so the judge did not apply the contractual rate to them. He awarded nothing on the third, which would not have been due until 13 February 2026, and 9 percent a year on the second under Article 118 of the Contract Law.

Article 118 gives interest on money not paid when due, from the due date to payment, whether or not non-payment is excused, at the average bank short-term lending rate to prime borrowers for the currency of payment at the place for payment. The judgment does not explain how 9 percent relates to that reference, so do not assume it is the statutory rate. Rule 17.18 of the Rules of the DIFC Courts requires a claimant seeking interest to state its basis and, for a specified sum, the rate, dates and daily rate, so plead each basis separately.

Small Claims Tribunal or Court of First Instance: where does the claim go?

Confirm DIFC jurisdiction first, then let the claim value choose the route. Article 14(A)(1) of Dubai Law No. 2 of 2025 gives the DIFC Courts exclusive jurisdiction over civil and commercial claims against DIFC Establishments, which include any entity established, licensed or registered to operate in or through the DIFC. A customer elsewhere needs another gateway, such as a contract concluded or performed in the DIFC under Article 14(A)(2), or an express written agreement under Article 14(B). This claim was issued in October 2024, before that Law superseded the earlier courts law, and the judgment does not discuss jurisdiction.

The Small Claims Tribunal hears claims up to AED 500,000 under Rule 53.2(1), and up to AED 1,000,000 where all parties elect it in writing, in the contract or later, under Rule 53.2(3). Splitting the claim by year may not help, because Rule 53.3(2) lets the Tribunal treat several claims against one defendant as one when applying the limits. Each party generally bears its own costs there, apart from fees and costs of unreasonable behaviour under Rule 53.79, and its orders are enforced like those of the Court of First Instance under Rule 53.82.

Larger claims go to the Court of First Instance, as this one did. If the customer's only answer is a change of mind, Rule 24.1 allows immediate judgment where the defence has no real prospect of success and no other compelling reason calls for a trial.

The cards restate what the judgment did not settle.

What if the customer stops defending, and what will the claim cost?

You still prove your case, but the customer's untested evidence drops away. Under Rule 29.41 a party relying on a witness statement must call the witness unless the Court orders otherwise or the statement goes in as hearsay. Neither happened, so the judge disregarded both statements. Documents in the agreed bundle were admissible under Rule 29.122, and the written submissions counted only so far as evidence supported them. The complaint that the software was unfit failed: nothing showed it was sold for a defined purpose or unfit for one, and proving that would almost certainly have needed expert evidence.

The reseller was awarded court fees of USD 23,838.43 and its costs, with USD 25,000 of the costs ordered on account, and on 26 February 2026 the Court assessed the costs at USD 45,000, the sum claimed, after the customer made no submissions. Rule 38.7 makes costs follow the event as the general rule, and those figures belong to that case. A party that missed trial may apply under Rules 35.16 to 35.18 to set the judgment aside if it acted promptly, had a good reason and has a reasonable prospect of success, and none appears in the published record. A judgment is also not payment: this customer had told the Court it could not fund trial representation.

How should a supplier prepare the claim?

Work through the questions the Court asked, in order.

1. Assemble the documents that made the contract, with the term, cancellation, interest and governing-law clauses in final form, and date every message in which the customer refused to proceed.
2. Decide whether to keep the contract alive or end it, and record that in a dated notice.
3. Split the claim: instalments due before the contract ended as debts with contractual interest, later ones as damages with statutory interest, pleading repudiation expressly.
4. Prepare mitigation evidence: what you committed upstream and when, what you saved or resold, and what you would receive early.
5. Plead each interest basis with the details Rule 17.18 requires.
6. Choose the forum from the jurisdiction gateway and the claim value, checking the contract for a written Small Claims Tribunal election.
7. Assess whether the customer can pay before spending on a trial.

The point a supplier can most easily miss is that its own conduct classifies the later years. A supplier that presses for payment, sues for one year and then amends for the rest may find, as this one did, that the amendment is read as the moment it ended the contract. Here it cost only the contractual rate on year two, 9 percent instead of 18. Early in a three-year deal it could cost a discount for early receipt and open a mitigation inquiry a debt claim never faces. Court searches are not a court-file certificate, and the statutory points are readings of the DIFC Authority's consolidated texts.

Frequently Asked Questions

Can my customer cancel a fixed three-year software licence because it no longer needs it? Not unless the contract or the law gives it that right. Article 10 of the DIFC Contract Law says a valid contract can be modified or terminated only under its terms, by agreement or as the Law provides, and the 2026 judgment treated a change of mind under a non-cancellable three-year deal as a repudiatory breach.

Do I have to deliver or activate the licences before I can claim the first year? Not if the contract makes payment come first. In the 2026 case the quotation made delivery of the licences contingent on the first-year payment, and the Court held that payment due when the contract was formed and recoverable as a debt. The customer said it never accessed the software, and the reasoning on the first instalment did not depend on access.

Is 18 percent interest always enforceable in the DIFC? No. The 2026 finding was made at first instance with no argument from the customer, for reasons tied to the reseller's own matching rate with its publisher, and the judge declined to choose between the UK and Australian penalty tests. Article 122 of the Contract Law separately allows a sum agreed for non-performance to be reduced where it is grossly excessive, and the judgment did not consider it.

What interest applies if my contract has no interest clause? Article 118 of the Contract Law gives interest from the due date to payment at the average bank short-term lending rate to prime borrowers for the currency of payment at the place for payment. The 2026 judgment awarded 9 percent a year under Article 118 on the year it treated as damages, without explaining how that figure was reached.

Can I sue now for years that have not yet fallen due? Once the contract has ended, the unpaid future years are claimed as damages, with a discount for receiving the money early and credit for costs you save. If you keep the contract alive instead, Article 41C of the Law of Damages and Remedies may allow an action for the agreed sum as instalments fall due, but the 2026 judgment did not consider it, so treat that route as untested.

Does the Small Claims Tribunal hear a claim for the whole three-year price? Only within its limits. Rule 53.2 gives it claims of up to AED 500,000, and up to AED 1,000,000 where all parties elect it in writing, in the contract or later. Rule 53.3(2) lets it treat several claims against the same defendant as one when deciding whether a limit is exceeded.

Will I recover my legal costs? In the Court of First Instance the general rule under Rule 38.7 is that the losing party pays the winner's costs, subject to the Court's discretion, and in the 2026 case the reseller was awarded court fees and costs later assessed at USD 45,000. In the Small Claims Tribunal each party generally bears its own costs, apart from fees and costs caused by unreasonable behaviour.

How long do I have to start the claim? Article 123 of the Contract Law requires an action for breach of contract to be started within six years after the cause of action accrues, and lets the original agreement shorten that to not less than one year but not extend it. The cause of action arises when the breach occurs, whether or not you know of it, so check your contract for a shorter period.

This article is for general informational purposes only and does not constitute legal advice. Consult a qualified advocate for advice on your specific situation.

Related Guides

Our DIFC commercial contracts page covers payment, suspension, termination, guarantees and shareholder disputes under DIFC-law agreements.

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