Composite contractual arrangements between real estate developers and purchasers have become increasingly prevalent in the Egyptian real estate market. Such arrangements typically impose an obligation on the developer to provide the purchaser with a predetermined rental return or income generated from the property.

However, economic fluctuations affecting the value of the Egyptian currency, together with the resulting increase in construction and development costs, have been invoked by real estate developers as grounds for delaying the delivery of the relevant units and, in certain circumstances, suspending or modifying their contractual obligations in this respect.

The Egyptian Court of Cassation has recently addressed this issue in a number of judgments, including Cassation Judgment No. 15073 of Judicial Year 92, recognizing the purchaser’s entitlement to compensation where a delay in delivery results in actual loss, including the loss arising from the purchaser’s inability to obtain the benefits or proceeds that would otherwise have been derived from the property.

The Court further held that delivery may, under certain circumstances, take the form of constructive delivery, whereby the purchaser is deemed to have received the benefits and fruits of the property even though the property remains physically in the seller’s possession, provided that the property is in a condition enabling it to be used for the purpose for which it was intended.

The jurisprudence of the Court of Cassation, however, has not been confined to protecting the interests of purchasers. The Court has also applied the relevant legal principles from the perspective of protecting developers where the performance of a contractual obligation has become excessively onerous.

In this regard, Cassation Judgment No. 35055 of Judicial Year 95 applied the doctrine of exceptional and unforeseen circumstances in relation to the delivery of the sold unit, taking into account changes in economic conditions and their impact on the contractual equilibrium, with a view to achieving a more equitable allocation of the resulting burden between the contracting parties.

These judgments should not be regarded as contradictory. Rather, they reflect the application of the same underlying legal principles to different factual circumstances.

The mitigation or adjustment of an obligation that has become excessively onerous for the debtor is not automatic; rather, it is contingent upon the party invoking the relevant legal doctrine properly raising the issue and establishing the existence of actual and direct damage resulting from circumstances beyond the real estate developer’s control.

Accordingly, the prevailing legal approach seeks to preserve the contractual equilibrium between the parties by balancing the purchaser’s right to timely delivery and the benefits contemplated under the contract against the developer’s right to seek relief where extraordinary economic circumstances have rendered performance excessively onerous and the resulting harm is demonstrated to have arisen from circumstances beyond its control.