The Hidden Risk in “EOI”
Real estate developers in Egypt routinely place reliance on reservation forms or Expression of Intent forms “EOIs” assuming they are non-binding forms. This assumption carries legal risks. The said documents are often treated as preliminary steps, i.e. a means to secure a unit pending the finalisation of a formal agreement.
From a legal perspective, that assumption can be incorrect. Under Egyptian law, the label attached to a document does not determine its effect. What matters is whether the parties have already agreed on the essential terms of the transaction. If so, a binding contract may already exist, regardless of how the document is described or whether the parties intend to conclude a more formal agreement at a later stage. In a recent decision, dated 26 January 2026, the Egyptian Court of Cassation (hereinafter referred to as the “CoC”) in Appeal No. 2583/ 94 YJ, brought this issue into sharp focus. It addressed a question that arises frequently in practice: When is a reservation form for a real estate unit considered a binding contract?
The dispute arose out of an EOI form relating to an off-plan property executed between a buyer and a developer. The EOI identified the sold unit with precision including, its number, location, and size, and determined the total purchase price. However, the EOI also contained the following reservation under Article 6: “No binding contractual relationship with the respondent company shall arise unless the purchaser signs the preliminary sale agreement within thirty (30) days from the date of execution of the reservation form.”
The buyer issued bank cheques for the total purchase price of the disputed unit, deposited them with the Respondent Company, and the latter encashed one of those cheques. Despite this, the developer refused to execute the sale agreement as contemplated in the EOI. The buyer subsequently commenced proceedings seeking to compel performance, namely, to oblige the developer to execute the sale agreement and deliver the unit. The developer, responded with filing a counterclaim arguing that the EOI was not a binding sale agreement, rather a merely preliminary arrangement from which it could withdraw, and therefore sought to retain the amounts paid under the EOI.
The matter proved challenging before the courts. The Court of First Instance ruled in favour of the buyer and dismissed the developer’s counterclaim. However, the developer appealed this decision before The Court of Appeal, which reversed the judgment, holding that the EOI did not constitute a completed sale, but rather amounted to a sale by way of earnest money pursuant to Article 103 of the Egyptian Civil Code.
The Court of Appeal based its judgment on a single clause stipulated in the EOI stating that the “contract” would only be completed upon execution of a separate agreement between the parties within a specified period. On that basis, it treated the document as a form of earnest arrangement granting the developer the right of withdrawal. This approach reflects a common assumption in practice: namely, that the existence of a contemplated future contract precludes the current document from having binding effect.
The matter ultimately reached the cassation stage upon the buyer challenging the Court of Appeal’s decision. The CoC rejected the Court of Appeal’s reasoning, in its entirety, and adopted a substance-over-form approach grounded in established principles of Egyptian civil law. It held that a contract is formed once the parties agree on its substantial terms, and that agreement is not displaced merely because the parties intend to formalise it at a later stage. The CoC affirmed that a clause referring to a future contract does not, in itself, preclude the existence of an already binding agreement, nor does the title of the document determine its legal character. What is material is the parties’ actual agreement as reflected in the documents executed between them.
The CoC emphasised that courts should not hinder the performance of an agreement based solely on a particular clause or isolated wording. Rather, the document must be examined as a whole, with its provisions interpreted as reflecting the parties’ joint intention. The Court further observed that the inclusion of a reservation clause, or wording indicating that a further agreement would be executed, does not deprive the EOI of its binding character, provided that it already embodies the elements of a complete and binding sale agreement.
Three Legal Points That Now Matter in Practice
- Agreement on Essential Terms Is Sufficient
The Court reaffirmed a fundamental principle: a contract of sale is concluded once there is agreement on three essential elements: the parties, the subject matter, and the price. Where these elements are present, the contract is complete “بيعا باتا”. Any remaining matter is treated as ancillary and may be fulfilled and determined by law. The existence of unresolved or deferred matters does not prevent the formation of a binding contract unless the parties clearly state that no contract will exist without them. - Labels Do Not Determine Legal Effect
Labelling a document as “EOI” does not render it non-binding. The Court made clear that classification depends on substance rather than terminology. A document incorporating all the elements of a sale will be treated as such, regardless of how it is described. This has direct implications for standard developer documentation, which often combines fully defined commercial terms with language suggesting that the contract is not yet final. - A Single Clause Does Not Override the Agreement as a Whole
The Court also rejected the practice of isolating a single clause in order to determine the nature of the agreement. Contracts must be construed as a whole. A provision referring to future formalisation cannot override a clear agreement on price, property, and intention to transact. In the present case, the clause, which the developer relied upon, was interpreted as an administrative step rather than a condition preventing the contract from coming into existence.
What This Decision Means in Practice
In Conclusion, this ruling draws a clear distinction between EOI that are legally binding and those intended to be non-binding expressions of interest. For developers, reservation forms that identify the unit, fix the price, and record payment are likely to be treated as binding contracts. A reference to a future formal agreement does not preserve flexibility. If the intention is to avoid being legally bound at that stage, this must be stated expressly as a condition precedent to contract formation; anything less creates legal uncertainty and exposes the parties to unnecessary risks.
Conversely, buyers are in a stronger position. A signed EOI containing the essential terms, coupled with payment, supports a claim for specific performance. Amounts paid will not be treated as forfeitable deposits unless the parties have clearly and expressly agreed otherwise.
More broadly, in real estate transactions, timing can be just as important as substance. The point at which a binding obligation arises may determine the entire outcome of a dispute. In a market where reservation forms are widely used, that distinction is no longer merely theoretical; it is decisive.
At Habib Al Mulla and Partners, we advise clients across every stage of real estate and contractual disputes, from transactional risk assessment to litigation. If you are facing issues arising from reservation forms, off-plan transactions, or questions of contract formation, we would welcome the opportunity to discuss your matter.
Seek Legal Counsel
Should you have any questions or require assistance with any matters relating to the subject, contact our Partner, Dr. Kamel Elshendidy.
Disclaimer
The content provided in this article is intended for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy and completeness of this information, the article does not offer a guarantee or warranty regarding its content. The matters discussed in this article are subject to interpretation, and legal outcomes may vary based on specific facts and circumstances. We recommend that readers seek individual legal counsel before making any decisions based on the information provided. If you require specific legal advice, please contact us directly.