The enactment of Federal Decree-Law No. 25 of 2025 (the “New Civil Code”), which will come into effect on 1st June 2026, marks a fundamental change of the UAE’s contractual framework. Understanding UAE new civil code contracts provisions is essential for all businesses operating in the Emirates as these changes will fundamentally alter how contracts are negotiated, drafted, interpreted, and enforced.

Replacing Federal Law No. 5 of 1985 (the “Old Civil Code”), the new legislation modernises core principles governing contract formation, negotiation conduct, interpretation, and performance.

While the core tenets of UAE civil law remain rooted in established civil law conventions, the New Civil Code introduces structured reforms that will directly affect how businesses negotiate, draft, and enforce contracts. In particular, the expanded treatment of good faith and clearer rules on pre-contractual conduct, formal recognition of framework agreements, and a detailed interpretative framework signal a move toward stricter judicial consistency and commercial discipline.

For corporate actors, investors, lenders, and counterparties operating in the UAE, the message is clear: contractual risk management must now extend beyond the signed agreement to include negotiation strategy, documentation standards, and internal governance processes.

This article examines the key developments and their practical implications for UAE new civil code contracts.

Applicability and Transitional Provisions

When taking into account the changes which are to be discussed, it should be noted that the New Civil Code provisions will not apply retroactively unless expressly specified (Article 4). Prior transactions of a person who was considered to have legal capacity under the Old Civil Code but does not have legal capacity under the New Civil Code will not be affected (Article 5).

New time limit rules apply right away, but only for time periods that haven’t fully run out yet. The old rules still control how those periods began, paused, or restarted before the change (Article 6).

If a New Civil Code shortens the limitation period compared to the prior law, the shorter new period takes effect immediately, even if the old period had already begun. However, if the remaining time under the Old Civil Code is less than the new period allows, the limitation expires based on the remaining time as per the Old Civil Code (Article 7).

Hierarchy of Legal Sources Under UAE New Civil Code Contracts

The New Civil Code establishes a clear hierarchy for judicial decision-making in civil matters. Courts must first apply laws literally, according to their explicit text and underlying intent, excluding independent reasoning (Ijtihad) where laws are definitive. Where there are no applicable statutes, judges will adjudicate in accordance with Islamic Sharia principles, prioritizing solutions that serve the public interest (Article 1).

In the absence of Sharia guidance, prevailing customs will govern, provided they align with public order and morals, with emirate-specific practices limited to their jurisdiction. As a last resort, courts will rule in accordance with the principles of natural law and equity to ensure just outcomes (Article 1).

Furthermore, the New Civil Code mandates that rules of Islamic jurisprudence (Fiqh) are to inform the understanding, interpretation, and application of all legislative texts, thus embedding Sharia-compliant reasoning throughout the civil law process (Article 2). This structured approach balances statutory fidelity with flexibility, bringing an enhanced predictability to court decisions by establishing an explicit hierarchy, in contrast to the previous Civil Code, which leaned heavily on expansive Islamic jurisprudence without a defined order of sources. (The UAE’s New Civil Code Explained: Practical Changes for Businesses and Investors | Bracewell LLP – JDSupra).

General Rules for UAE New Civil Code Contracts

The reduction of the age of majority is a significant change brought by the New Civil Code. The age of majority is now considered to be 18 full Gregorian years (where it was previously 21 full Lunar years). A person having reached the age of majority and who is of sound mind shall be considered to have full legal capacity to exercise their civil rights, including the right to enter into contracts (Article 84).

Binding Nature of Contracts:

Article 113 of the New Civil Code expressly codifies that a contract is the law of the parties and may only be rescinded or amended by mutual consent or by operation of law (a principle the Old Civil Code did not explicitly state). This explicit recognition strengthens the binding nature of UAE new civil code contracts and provides greater certainty for commercial parties.

Contract Classification:

The New Civil Code formally defines bilateral, unilateral, consensual, formal, real, negotiated, and adhesion contracts as distinct legal categories, providing a systematic typology absent from the Old Civil Code (Articles 116, 117 and 118). These changes bring clarity and consistency to the legal framework behind UAE contract law.

Interpretation of UAE New Civil Code Contracts: 13 New Rules

The Old Civil Code stipulated that if the wording of a contract is clear, it may not be departed from by interpretation (Old Civil Code Article 265), and where interpretation is required, the parties’ common intention, nature of the transaction and commercially expected levels of loyalty and confidence should be taken into account. The New Civil Code retains this, but puts special emphasis on taking into account the nature of the transaction and the corresponding level of honesty and trust commonly expected in such commercial transactions, thus expanding and reinforcing good faith obligations (Article 119).

The substantially expanded interpretation framework adds thirteen sub-rules for interpreting contracts, some of which existed before and most of which have been newly added. These include (Article 120):

1. Consent is fundamental: Consent of the contracting parties and the undertakings made in the contract is the fundamental principle in a contract.
2. Protection of adhering parties: Ambiguous clauses in contracts of adhesion should not be construed to the detriment of the adhering party; more generally, where doubt remains, it may be resolved in favor of the debtor depending on the nature of the clause and the applicable interpretive rule.
3. Purpose over form: Focus during interpretation should be on the intended purposes and overall meaning of the contract, rather than strict wording or form.
4. Literal meaning preferred: A word should not be interpreted metaphorically if it can be interpreted according to its literal meaning.
5. Explicit terms prevail: Explicit terms will override any implied meanings.
6. Give effect to words: Preference should be given to interpretations that give effect to the words of the contract; words shall only be disregarded if that is impossible.
7. Indivisible items: Any reference to an indivisible item will be considered equivalent to referencing the entire item.
8. Absolute statements: Absolute statements remain absolute, unless there is some express or implied evidence to restrict it.
9. Description effectiveness: The description of an existing object will be regarded as redundant, while the description of non-existing items take effect.
10. Commercial standards: Behaviours or performances which are considered to be the commercial standard between merchants are taken to be equivalent to a contractual condition.
11. Justice and good faith: Contracts shall be interpreted to achieve justice and good faith between the parties.
12. Time of formation: Obligations shall be interpreted according to factual circumstances at the time of contract formation.
13. Favor weaker party: Unclear or conflicting terms are resolved in favor of the party with the obligation or the weaker position.

The new rules help balance contract interpretation between compliance with strict wording and a fairer approach based on intent, purpose, and good faith. Courts will now consider commercial norms, protect weaker parties, and use the 13 guidelines to avoid technical disputes. This will make outcomes more predictable and business-friendly for UAE new civil code contracts.

Elements and Validity of a Contract

The key elements surrounding the formation of a contract remain the same: consent (offer and acceptance), subject matter and lawful cause. The New Civil Code further clarifies some of these rules and aims to modernise the law with its further additions.

Offer and Acceptance – Communication

The New Civil Code explicitly recognises the use of modern (digital) forms of communication when it comes to concluding contracts. Where the Old Civil Code recognises contracting through telephones or other ‘similar means’ (Old Civil Code Article 143), the New Civil Code widens this ambit, stating that when parties are physically together or communicating directly (e.g., phone or video), the contract forms at the time and place of acceptance issuance, unless law or agreement states otherwise. For absent parties (remote dealings, including electronic communications), the contract forms when the offeror receives or learns of the acceptance, subject to legal or contractual exceptions (Article 132).

Expression of Will

The Old Civil Code has already provided a framework as to how an expression of will may be made, which largely remains the same under the New Civil Code, however it clarifies that the expression of will may only be implied if the law does not require express consent, or if the parties have not agreed that it must be expressly agreed (Article 126). This removes any ambiguity as to where will can and cannot be implied, aiding in consistent application of the law.

Both the New and Old Civil Codes specify that where an individual promises to enter into a contract but subsequently reneges, and the counterparty secures a judgment enforcing such promise, once that judgment attains res judicata status, it shall substitute for the contract itself. However, the New Civil Code expands on this further, requiring that the above be subject to fulfilment of all requisite conditions for contract formation, including any prescribed formalities (Article 136). The conditions for contract formation remain as they were in the Old Civil Code.

Defects of Will

A contracting party making a material mistake can request the contract’s annulment if the other party made the same mistake, knew about it, or should have easily detected it. For gratuitous contracts, an annulment can be obtained regardless of the other party’s knowledge or participation in the mistake (Article 162). Under the New Civil Code, material mistakes are defined as serious mistakes that would have stopped the contracting party from signing, like errors on key features of the deal (based on what the parties expected, the situation, or good faith standards) or the other party’s identity or traits that were central to the agreement (Article 163). These details are not explicitly stated in the Old Civil Code.

The changes shift the burden toward disclosure and due diligence, enabling courts to annul problematic deals, while limiting abuse through good faith requirements. Businesses may gain clarity but face heightened rescission risks without proper verification.

Agency in Contracting Under UAE New Civil Code Contracts

The New Civil Code creates further safeguards surrounding contracting through an agent, by stipulating that an agent’s authority will be defined by the law if the agency is legal and by the court where the agency is judicial, now expressly forbidding the agent from exceeding the limits of the prescribed authority (Article 139).

Lowered Age for Property Management:

Notably, this new legislation lowers the age at which courts may authorise a discerning minor to manage all or part of their property (either fully or with court-imposed conditions) from 18 Hijri to 15 Gregorian years. This may be done at the request of their guardian, trustee, or the minor themselves and following inquiry, and periodic accountings may be mandated. Such authorization can be revoked or limited if warranted. Transactions by the minor remain valid only within the scope of the granted authority (Article 149). This change serves to encourage and support youth participation and entrepreneurship in economic activity, within a clear legal framework, thus ensuring the safeguarding of discerning minors when participating in economic activity.

Trustee Authority:

Further clarification provided by the New Civil Code stipulates that trustees’ standard management contracts for a minor’s property, such as short-term leases (up to 3 years), maintenance acts, debt collection, rights enforcement, selling perishables or crops, and necessary expenditures, are valid without further approval, per legal terms (Article 152). However, higher-risk transactions like sales, mortgages, loans, settlements, property partitions, or fund investments require explicit court authorization to be binding, following prescribed conditions (Article 153).

Protection Against Exploitation:

Additionally, not only can a prior transaction with a person who is later interdicted be declared invalid if it was conducted through exploitation and collusion, a transaction may also be voided where the condition was common knowledge or the other party was aware of it (Article 155).

Subject Matter Requirements

The New Civil Code provides further details as to what may consist of valid subject matter to a contract. The subject matter must exist or be possible to exist, must not be banned by law or nature, or violate public order or morals, it must be specifically identifiable or defined by type, quantity, or both and it cannot be impossible at the time of contracting. A contract will be void if the subject matter does not comply with these requirements (Article 181).

In line with the legislative emphasis on good-faith business dealings under UAE new civil code contracts, the New Civil Code further clarifies that if parties have not specified the quality of the contract’s subject matter, and it cannot be determined from business custom or the deal’s nature, the debtor must provide it in a condition that fulfills the parties’ reasonable expectations, based on the item’s nature, trade practices, and the price paid (Article 182).

Framework Agreement: A New Concept in UAE New Civil Code Contracts

The New Civil Code also introduces the concept of a “framework agreement”, which is a contract that defines the essential terms governing future contracts between the parties. Such agreements are expressly stated to form part of each contract concluded under them, unless otherwise agreed (Article 138). No equivalent provision appears in the Old Civil Code. This is significant for commercial relationships such as supply chains, distribution arrangements, and financial facilities, where the parties conclude a master agreement followed by individual drawdown contracts.

Practical Implications:

The practical effect of this addition is that the terms of a framework agreement will automatically be incorporated into each individual order contract, without the need for re-incorporation, unless the parties expressly or impliedly exclude that effect. This provides certainty but also requires parties to ensure their framework agreements are carefully drafted, as their terms will have major future consequences.

Strategic Considerations for Businesses:

• Master Supply Agreements: Suppliers and purchasers should review existing master agreements to ensure all terms are intended to apply automatically to future orders
• Distribution Arrangements: Distributors must carefully draft framework terms as they will govern all subsequent product orders
• Financial Facilities: Lenders should structure facility agreements with clear incorporation provisions for individual drawdowns
• Construction Contracts: Main contractors using framework agreements for subcontractors must ensure pricing, liability, and performance terms are suitable for automatic application
• Service Agreements: IT, consulting, and professional service providers should draft framework terms with flexibility for project-specific variations

Practical Compliance Checklist for UAE New Civil Code Contracts

To ensure full compliance with UAE new civil code contracts effective June 1, 2026, businesses should:

Before June 1, 2026:

• Conduct comprehensive audit of all contract templates and standard forms
• Review framework agreements for automatic incorporation provisions
• Update interpretation and dispute resolution clauses to reference new 13-rule framework
• Revise age-related provisions to reflect 18 Gregorian years majority
• Add explicit good faith and fair dealing clauses
• Document negotiation processes to demonstrate good faith conduct
• Train commercial teams on enhanced pre-contractual obligations

Contract Drafting Updates:

• Include clear choice of law clauses specifying Federal Decree-Law No. 25 of 2025
• Draft framework agreements with precision, considering automatic incorporation
• Specify quality standards for subject matter or reference trade customs
• Define agent authority limits explicitly in agency provisions
• Include express provisions for electronic communications and acceptance
• Add clear termination rights exercisable proportionately

Negotiation and Performance:

• Document all pre-contractual communications and representations
• Exercise discretionary rights proportionately and in alignment with commercial purpose
• Maintain records demonstrating good faith performance
• Update internal governance processes for contract approval
• Establish procedures for framework agreement compliance monitoring

Risk Management:

• Review existing contracts for transitional application of new rules
• Assess limitation period changes for pending claims
• Evaluate rescission risks from material mistake provisions
• Consider D&O insurance coverage for enhanced contractual liability
• Prepare for heightened judicial scrutiny of negotiation conduct

Key Takeaways for Businesses

UAE new civil code contracts introduce seven critical changes:

1. Enhanced Good Faith Obligations: Courts will scrutinize negotiations and performance for honesty and trust appropriate to commercial transactions
2. 13 Interpretation Rules: Structured framework prioritizing purpose over form, protecting weaker parties, and incorporating commercial standards
3. Framework Agreement Recognition: Automatic incorporation of master agreement terms into subsequent contracts
4. Digital Communication Recognition: Explicit rules for electronic contract formation
5. Expanded Material Mistake Grounds: Clearer annulment rights with heightened disclosure obligations
6. Lowered Majority Age: 18 Gregorian years with enhanced minor participation rights
7. Binding Contract Principle: Explicit codification that contracts can only be varied by consent or law

Get Expert Contract and Civil Law Advice from the Leading Law Firm in Sharjah

The New Civil Code represents a deliberate and structured evolution of UAE contract law. It preserves the established foundations of consent, lawful subject matter and contractual freedom, while strengthening judicial oversight, expands interpretation principles, and defines rules governing negotiation conduct, agency and capacity.

For businesses operating in the UAE, the implications are practical. Negotiations must be approached with greater discipline. Contract templates should be reviewed and updated. Framework agreements must be drafted with precision. Discretionary rights and termination provisions must be exercised proportionately and in alignment with the contract’s commercial purpose. The enhanced emphasis on fairness and reliance means that contractual risk now extends beyond the written document to the conduct of the parties before and during performance.

Early alignment with the new standards will place businesses in a stronger position to manage disputes, enforce rights and mitigate exposure under the evolving civil law landscape.

For tailored advice and strategic support on navigating UAE new civil code contracts, updating your commercial agreements, and ensuring full compliance with Federal Decree-Law No. 25 of 2025 effective June 1, 2026, consulting with an experienced law firm in UAE like Economic Law Partners (ELP) ensures your contracts remain enforceable, commercially sound and fully aligned with the New Civil Code. Visit our law firm in Sharjah or contact ELP for expert legal guidance on all contractual and commercial matters in the UAE.

Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. Federal Decree-Law No. 25 of 2025 takes effect on June 1, 2026. Readers should consult qualified legal counsel specializing in UAE contract law for advice specific to their business arrangements and circumstances.