You Paid a Deposit Under a Letter of Intent to Buy Shares and the Deal Died: Can You Get It Back?

Yes, if your letter of intent made completion conditional on a share purchase agreement that was never signed, and especially if it carried its own expiry date, the DIFC Courts' Small Claims Tribunal has ordered the balance of the deposit repaid. In SCT 298/2023, decided on 12 January 2024, a company that paid AED 2 million on signing a letter of intent to buy 50 percent of another company, then withdrew when no share purchase agreement had been executed, recovered the AED 300,000 the seller had kept back, with 9 percent interest from the date of judgment, and the seller's AED 500,000 counterclaim for lost income was dismissed for lack of evidence. The seller's partial refund of AED 1.7 million counted against it: the Tribunal read it as acceptance that the letter had expired.

Three clauses decided that letter of intent deposit refund, and your own letter should be read for the same three first: completion subject to negotiating and executing the definitive agreements, a duty only to use reasonable diligence to commence good faith negotiations, and termination on the earlier of signing and 90 days from the effective date. The table sets them beside the payment and refund timeline.

Three cautions. It is one first-instance Small Claims Tribunal decision, untested above that level, with no appeal found. It cites no statute and records neither the letter's governing law nor the basis of jurisdiction, so the Contract Law articles below are the current frame for a DIFC-law letter, not the basis of the award. The parties are pseudonymised, so the case is cited by number.

Was your letter of intent conditional on a definitive agreement?

That was the Tribunal's first question, and the answer came from the letter itself. Completion was subject to negotiation and execution of a share purchase agreement and ancillary documents, and paragraph 2 committed both parties to use reasonable diligence to commence good faith negotiations to execute and deliver them. The Tribunal read paragraph 2 as a condition, execution and delivery of the Definitive Agreement, recorded that none was ever signed, and held that the seller's submission that it had become unconditional had to be supported by evidence, which it was not. The buyer's pleaded implied term that the deposit be repaid was not addressed: the refund followed from the letter's conditionality, its expiry and the seller's conduct.

If DIFC law governs your letter, the Contract Law, DIFC Law No. 6 of 2004, in the March 2024 consolidation the DIFC legal database serves, points the same way: under Article 26, where one party insists during negotiations that no contract is concluded until there is agreement on specific matters or in a specific form, none is concluded before then, and under Article 28 a party is free to negotiate and is not liable for failing to reach agreement. The judgment cites neither, so these are the frame for a DIFC-law letter, not the basis of this award.

Did the letter expire, and do months of further talks revive it?

The letter expired on 10 July 2022, 90 days from the effective date of 11 April 2022, under paragraph 4. The buyer kept negotiating past that date, and the Tribunal found the parties had extended the letter by conduct as part of further negotiations. The extension did not change the letter's nature: when the buyer wrote on 6 October 2022 that it would not proceed, there was still no Definitive Agreement, so the deposit was still refundable. Fix the exit in writing, as this buyer did, and keep the financial documentation behind the decision: the Tribunal recorded that the withdrawal followed a review of it.

Common mistake. Treating the sunset date as the end of the deal. The 90 days expired on 10 July 2022, but the letter lived on by conduct until the written withdrawal of 6 October 2022. The withdrawal letter, not the calendar, closed the negotiation.

The three findings that carried the refund, as cards.

What does the seller's partial refund tell the Court?

More than the seller intended. Six days after the withdrawal letter it returned AED 1.7 million, and in its defence said it had done so out of goodwill and under duress. The Tribunal held that the refund demonstrated the seller's agreement that the letter had expired and the buyer had no further obligation, found that the seller had not satisfied the Court why it kept AED 300,000, found no evidence of duress, and ordered the balance.

For a buyer, a partial refund is evidence: keep the transfer record and any message with it, and write at once asking why the balance is withheld. If DIFC law governs, Article 41 of the Contract Law lets a party avoid a contract it was led to conclude by an unjustified threat so imminent and serious as to leave it no reasonable alternative. The seller's duress claim concerned a payment, not a contract, and no article was argued.

Can the seller say the deal was varied by discussion or conduct?

It can say so, as this seller did, but it must prove it. The defence was that the AED 4 million was payable unconditionally, that later discussions had dispensed with the Definitive Agreement, and that the buyer's attendance at management meetings before and after the 90 days showed it remained bound. The Tribunal's answer was short: such a submission should be supported by evidence, and the seller provided none. The Tribunal treated the continued dealings as further negotiation, not proof of management.

For a DIFC-law letter the Contract Law cuts both ways. Article 9 says no contract need be in writing and any contract may be proved by any means, and Article 51 makes preliminary negotiations and later conduct relevant to interpretation. Article 31 then provides that a written contract requiring modifications to be in writing may not be otherwise modified, unless a party's conduct precludes it from relying on the clause to the extent the other side acted in reliance. Check your letter for such a clause. Its effect here was never tested.

What happens to the seller's counterclaim for lost income?

It fails unless proved, and here it was not. The seller claimed AED 500,000 for income lost between May 2022 and June 2023, saying the parties had worked as equal shareholders, the buyer had told it not to seek outside investors and had promised funding, and, kept from outside investment, it had had to close the business. The Tribunal found no evidence that the buyer was a 50 percent shareholder or in management, noted that only AED 2 million of the AED 4 million needed for the shares had been paid, and dismissed the counterclaim for lack of evidence of the loss.

Hold a seller to each link: obligation, breach and a loss shown with figures. If DIFC law governs, Article 112 of the Contract Law allows compensation only for harm established with a reasonable degree of certainty, and Article 28 makes a party free to negotiate without liability for failing to agree. Neither is cited in the judgment, and no order was made on the costs of the counterclaim.

Which law did the Tribunal apply, and where would you sue today?

The judgment applies the words of the letter and ordinary rules of proof, and names nothing else: no article of any law, no governing law clause, and no basis for the DIFC Courts' jurisdiction over a claim by an Abu Dhabi company against a Dubai company and its owner. The recorded facts do not show a DIFC connection, so the letter itself may have chosen the DIFC Courts, but that is an inference. Read your own letter for a jurisdiction clause first.

The case was decided in January 2024 under the Judicial Authority Law, Dubai Law No. 12 of 2004 as amended, which Article 43(A) of Dubai Law No. 2 of 2025 has superseded. Today Article 14(B) gives the DIFC Courts jurisdiction where the parties expressly agree in writing, before or after the dispute, by specific, clear and express provisions, and Article 14(A) gives them exclusive jurisdiction that includes claims involving DIFC Establishments and contracts performed wholly or partly in the DIFC. A buyer whose letter is silent and whose counterparty has no DIFC connection is outside both.

Within the DIFC Courts, a claim of this size goes to the Small Claims Tribunal: Rule 53.2 of the Rules of the DIFC Courts gives it claims up to AED 500,000, and up to AED 1,000,000 where all parties elect in writing, and counterclaims count under Rule 53.4. On time, Article 28 of the 2025 Law bars proceedings commenced more than six years after the events unless DIFC law provides otherwise, and Article 123 of the Contract Law gives a claim for breach six years from the breach, which the parties may shorten to not less than one year but not extend.

The limits of the decision, as cards.

What did the claim take, cost and earn in interest?

About five months: Claim Form 16 August 2023, defence and counterclaim 31 August 2023, a consultation before a Tribunal judge on 2 October 2023 that did not settle, a hearing held on 7 November and 14 December 2023 with both sides attending, judgment 12 January 2024. That is the Part 53 shape: a private, without prejudice consultation aimed at settlement, then an informal hearing before a different Tribunal judge, where the strict rules of evidence do not apply and a party presents its own case unless the Tribunal permits a lawyer.

The company and its owner were ordered, jointly or severally, to pay the AED 300,000 and the AED 15,000 court fee, and there was no order as to the costs of the counterclaim. Under Rule 53.79 each party bears its own costs, except that the Tribunal may order a party to pay the other side's court fees in part and may assess costs against a party that behaved unreasonably. Interest ran at 9 percent a year from the date of judgment, the simple rate Practice Direction No. 4 of 2017 attaches to any DIFC Courts judgment issued after 20 November 2017 unless the judge prescribes another. The buyer got nothing for the period before judgment. If DIFC law governs, Article 118 of the Contract Law gives interest from the time payment falls due, at the average bank short-term lending rate to prime borrowers, so plead the date the refund fell due, and expect the point to be untested.

Deadline warning. An appeal from the Tribunal needs permission and an appellant's notice within 14 days of the decision under Rule 53.107, and a party absent from the hearing has 7 days from service of the judgment to apply to set it aside under Rule 53.75. An appeal does not stay the order unless the Court orders otherwise.

Appeals lie to the Court of First Instance under Article 21 of the 2025 Law, with permission, and that Court's decision is final: the route is in the guide on appealing from the Small Claims Tribunal. Searches of the DIFC Courts' published lists for this claim number and each pseudonym, and of the Conflicts of Jurisdiction Tribunal's published decisions, found nothing beyond the judgment at the time of writing. Those lists are not a court-file certificate.

What should the buyer assemble before claiming?

1. The signed letter: effective date, completion condition, negotiation clause, sunset clause, any modification-in-writing clause, and any governing law and jurisdiction clause.
2. Proof of each payment, with the date it fell due and the date paid.
3. The negotiation record after the sunset date: drafts, meeting dates and attendees, and any message treating the letter as alive.
4. The written withdrawal, with its date and reason, and the demand for repayment.
5. The refund record: what came back, when, any message with it, and your request for the balance with any reply.
6. Whatever the seller may use to say you acted as a shareholder or promised funding, so you answer it before the hearing.
7. A short chronology in the Tribunal's style, and the statement of monetary value Rule 53.11 requires on the Claim Form.
8. The forum: a DIFC Courts clause or an Article 14 gateway, and whether the claim and expected counterclaim fit the Tribunal's limits.

What matters in practice is how little the Tribunal needed. It did not construe the pleaded implied term, name a governing law or cite a statute. It read three clauses, counted 90 days and asked the seller to explain the AED 300,000 it had kept, which it could not. A buyer with the same three clauses, a written withdrawal and a part refund has the facts that carried this claim. A buyer whose letter calls the deposit non-refundable, or who went beyond negotiation into running the business, is in a case this judgment does not decide. For a seller the lesson is the mirror image: a deposit you mean to keep must say so in the letter, and refunding most of it without a reason for the rest concedes the point.

Frequently Asked Questions

The letter said completion was subject to a share purchase agreement. Does that make my deposit refundable? On SCT 298/2023, where no share purchase agreement was ever signed, the letter was conditional and the deposit was repayable in full once the letter had ended. Read your letter for any clause that says the deposit is non-refundable or is forfeited on withdrawal, because the published judgment records no such clause and does not decide what happens where there is one.

We kept negotiating after the 90 days ran out. Did that extend the letter? By conduct, yes, as part of further negotiation, and that was the finding here. It did not make the payment unconditional or oblige the buyer to complete, because the Definitive Agreement was still unsigned when the buyer withdrew in writing.

The seller says I was already acting as a 50 percent shareholder. Does that defeat the claim? Only if proved. The Tribunal found no evidence that the buyer was a 50 percent shareholder or part of management, and recorded that only AED 2 million of the AED 4 million the letter required for the shares had been paid. The Tribunal treated the continued dealings as further negotiation.

The seller refunded part and says the rest covers its losses. Can it keep it? Not without explaining the retention and proving the loss. Here the seller gave the Tribunal no reason for keeping AED 300,000, its duress claim had no evidence, and its lost-income counterclaim failed for lack of evidence, so the balance was ordered.

Can the seller counterclaim for the income it lost when I walked away? It can file one, and the Tribunal will hear it with the claim. Here it failed for want of evidence of the shareholding, the management role and the loss itself. The AED 500,000 counterclaim in SCT 298/2023 was dismissed for lack of evidence, and no costs order was made on it.

Is the Small Claims Tribunal the right place for a deposit claim? For a claim within the DIFC Courts' jurisdiction, Rule 53.2 sends claims up to AED 500,000 to the Tribunal, and claims up to AED 1,000,000 where all parties elect in writing. Whether the DIFC Courts have jurisdiction at all turns on Article 14 of Dubai Law No. 2 of 2025, usually a written clause under Article 14(B), which the published judgment does not record for this letter.

Will I get interest, and from when? The order carried 9 percent a year from the date of judgment, the rate Practice Direction No. 4 of 2017 attaches to DIFC Courts judgments unless the judge prescribes another. Nothing was awarded for the months between the demand and the judgment. If DIFC law governs, plead Article 118 of the Contract Law and the date the refund fell due, and expect the point to be untested.

Can the seller appeal, and how long does it have? An appeal lies to the Court of First Instance under Article 21 of the 2025 Law on a question of law, a miscarriage of justice, procedural fairness or a matter under DIFC laws, with permission, on an appellant's notice filed within 14 days of the decision. The Court of First Instance's decision on the appeal is final. No appeal in SCT 298/2023 was found in the published lists at the time of writing.

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

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