Last updated: 17 July 2026
The short answer
On 1 June 2026, Federal Decree-Law No. 25 of 2025, the UAE's new Civil Transactions Law, replaced the 1985 Civil Code that had governed onshore contracts for four decades. Negotiating in good faith is now a statutory duty with damages attached. Both sides must disclose material information, and clauses waiving that duty are void. Parties get clearer freedom to choose their governing law, and several time limits changed. Contracts signed before 1 June generally stay under the old law, but renewals and amendments after that date may not. If your templates were drafted under the old code, they are due a review.
The three facts that matter
- Federal Decree-Law No. 25 of 2025 was issued on 30 December 2025 and took effect on 1 June 2026, replacing Federal Law No. 5 of 1985. DIFC and ADGM keep their own common-law systems.
- Articles 121 and 122 make good-faith negotiation and pre-contractual disclosure statutory duties. Hiding material information can mean paying actual damages, and you cannot contract out of the disclosure duty.
- Time limits moved: professional-services claims dropped from 5 years to 3, the latent-defects warranty in sales doubled from 6 months to 1 year, and the age of majority fell from 21 to 18.
What changed, and who it touches
The new Civil Code governs every commercial contract formed on the UAE mainland from 1 June 2026. That covers mainland companies, free zone companies whose contracts point to onshore UAE law or onshore courts, and foreign companies contracting with UAE entities under UAE law.
It does not reach the DIFC or ADGM. The two financial free zones run their own independent, common-law legal systems, and nothing here changes that. A contract expressly governed by a foreign law also sits outside most of these rules, subject to UAE public policy.
Good faith is now the law, not a courtesy
Under Article 121, parties must negotiate in good faith at every stage. Bad-faith conduct, including deliberately withholding material information, creates liability for actual damages (lost profits stay excluded unless the parties agreed otherwise). Misrepresentation grounds compensation.
The practical shift: pre-signing behaviour used to be mostly a reputational matter. Now a party that walks away from advanced negotiations without a legitimate reason, or conceals a known problem while negotiating, faces a statutory claim. Your negotiation record, the emails, the drafts, the data you chose to share or not share, can become evidence.
The disclosure duty you cannot draft around
Article 122 requires both parties to disclose material and decisive information: anything directly and necessarily related to the substance of the contract or the characteristics of the parties. It cuts both ways, buyer and seller, provider and client.
The part that will catch businesses out: waivers of this duty are void. Broad "as is" language, disclaimers and entire-agreement boilerplate do not switch Article 122 off. A seller who knows about a material defect and hides behind a disclaimer can still face a claim.
Pick your governing law, properly this time
Article 19 puts the parties' express choice first: contractual obligations, in both form and substance, are governed by the law you agree on. Where a contract is silent, the default is the law of the parties' common domicile or, failing that, the place of principal performance.
The old code recognised choice of law less explicitly. The new hierarchy reduces jurisdictional argument, but it does not override UAE public policy or mandatory rules, and Article 4 confirms that specialised laws such as banking and commercial legislation take priority over the Civil Code where they apply.
Courts will read your contracts differently
Articles 119 to 122 codify how judges interpret contracts: good faith, commercial custom, the circumstances at the time of formation, and the relative positions of the parties all come into the reading. A clause that looks unambiguous on paper can be coloured by context.
For drafting, that means recitals carry more weight, definitions need to be precise, and a one-sided term extracted from a weaker counterparty is more exposed than it used to be. Article 106 adds a codified abuse-of-rights doctrine: exercising a contractual right can be unlawful where the benefit is disproportionate to the harm it causes.
The changes at a glance
| Issue | 1985 Civil Code | From 1 June 2026 |
|---|---|---|
| Pre-contractual good faith | Implied, limited case law | Statutory duty (Art. 121) |
| Disclosure obligation | Not codified | Mandatory, waivers void (Art. 122) |
| Governing-law choice | Recognised, less explicit | Expressly codified (Art. 19) |
| Framework agreements | No specific provision | Formally recognised (Art. 138) |
| Abuse of rights | General principle | Codified criteria (Art. 106) |
| Age of majority | 21 | 18 |
| Professional-services limitation | 5 years | 3 years |
| Latent-defects warranty (sales) | 6 months | 1 year |
Templates drafted under the old code?
Send us your standard contract and our team will flag the clauses the new law affects, working with legal partners where a formal opinion is needed. One document, no charge.
Get a template checkFramework agreements finally have a home
Article 138 gives formal recognition to framework agreements: master supply agreements, master service agreements and umbrella procurement arrangements that predefine the essential terms for a series of later contracts. If your business runs on repeat orders under a master agreement, that structure now has explicit statutory footing.
What happens to contracts signed before 1 June 2026
The transitional position: contracts concluded before 1 June 2026 generally remain governed by the law in force when they were signed. But the moment you amend, renew or extend one after that date, the new law's requirements come into play for what changes. Auto-renewing service agreements deserve particular attention, because a renewal can quietly move an old contract into the new regime.
Six things to review now
- Standard templates. Disclaimers, "as is" clauses and entire-agreement provisions need rereading against Articles 121 and 122.
- Governing-law and jurisdiction clauses. Confirm they say what you want under the Article 19 hierarchy.
- Negotiation practice. Decide what your team discloses and documents in deals, and train the people who negotiate.
- Master agreements. Check whether your framework arrangements match what Article 138 now recognises.
- Claims calendars. Diarise the shorter 3-year window for professional-services claims, and the longer 1-year defects warranty on both the buying and selling side.
- Auto-renewals. List contracts that renew after 1 June 2026 and review them before they roll over.
Contract hygiene sits next to the rest of the compliance stack we run for clients across the UAE: corporate compliance, accounting and tax, and the deadlines that come with them, from corporate tax to e-invoicing.
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Talk to SpadeFrequently asked questions
When did the new UAE Civil Transactions Law take effect?
1 June 2026. Federal Decree-Law No. 25 of 2025 was issued on 30 December 2025 and replaced the 1985 Civil Code from that date.
Does the new Civil Code apply in the DIFC or ADGM?
No. Both financial free zones operate their own common-law systems and are outside the new law's scope.
Do contracts signed before 1 June 2026 need to be redone?
Generally no. They remain governed by the law in force when concluded. But amendments, renewals and extensions after 1 June 2026 should be reviewed against the new law before signing.
Can we contract out of the new disclosure duty?
No. Article 122 makes the duty to disclose material and decisive information mandatory, and contractual waivers of it are void.
What are the new limitation periods to know?
Professional-services claims: 3 years, down from 5. Latent-defects warranty in sale contracts: 1 year, up from 6 months.
Is this legal advice?
No. This is general information. For specific contracts, obtain advice from qualified UAE counsel; we can involve our legal partners where a formal review is needed.
Sources
- UAE Legislation portal: Federal Decree-Law promulgating the Civil Transactions Law. uaelegislation.gov.ae
- Squire Patton Boggs: Client update on Federal Decree-Law No. 25 of 2025 (article-level analysis). squirepattonboggs.com
- Thomson Reuters Practical Law: Key highlights from the new Civil Transactions Law (UAE). practicallaw.thomsonreuters.com
- Greenberg Traurig: New UAE Civil Transactions Law updates requirements for corporate practice. gtlaw.com