The United Arab Emirates (UAE)’s new Civil Transactions Law came into force on 1 June 2026, replacing legislation that has governed civil and commercial relationships in the country since 1985. Federal Decree Law No. 25 of 2025 (the New Law) replaces Federal Law No. 5 of 1985 (the Old Law) in its entirety and introduces substantial changes to the UAE’s civil law framework.
The New Law forms part of a broader effort to modernise the UAE’s legal infrastructure and align it more closely with current commercial practice. It addresses several areas where the Old Law had become difficult to apply in practice or had not kept pace with the way business is conducted in the UAE today. One notable development is the introduction of a statutory framework governing pre-contractual conduct, which for the first time establishes clear rules around negotiation behaviour, disclosure obligations, and the consequences of bad faith at the pre-signing stage. The New Law also introduces new concepts relating to contract validity, expands the remedies available to contracting parties, and updates aspects of the framework governing corporate structures and assignments. In several areas, the New Law introduces material changes affecting commercial negotiations, contract documentation, and corporate structures.
This GT Alert addresses the changes relevant to corporate and transactional practice. The analysis focuses on those developments with implications for commercial contracting, transaction structuring, and corporate governance and highlights a number of practical considerations arising in each area.
Key Takeaways
- Pre-contractual obligations: Contractual risk now begins before signature. The New Law introduces a statutory duty to negotiate in good faith and disclose material information during negotiations. This obligation cannot be excluded or limited by contract. Separate liability arises for the unauthorised use or disclosure of confidential information obtained during negotiations.
- Challenging contracts: The New Law reforms the framework for challenging. Contracts that may previously have been treated as invalid may now remain effective unless successfully challenged within defined time limits, giving commercial parties greater certainty over the validity of historic and existing arrangements. At the same time, the New Law introduces new grounds for challenge that did not exist under the Old Law, including the exploitation doctrine, which allows a contract to be challenged within one year of its conclusion where one party has allegedly taken unfair advantage of the other. Where the alleged exploitative circumstances continue after signing, that one-year period is deferred until those circumstances cease, subject in all cases to an absolute three-year longstop running from the date the contract was concluded. The New Law also codifies misrepresentation by omission, providing that deliberate silence on a material fact constitutes misrepresentation where the other party would not have entered into the contract had they known of it.
- Age of majority: The New Law reduces the age of majority from 21 lunar years to 18 Gregorian years. This is a straightforward but practically important change that is relevant to capacity assessments in transactions, employment contracts, and shareholder agreements involving those in the 18-to-21 age bracket.
- Limitation periods: Limitation periods have changed. Professional services claims fall from five to three years. The warranty period for latent defects in sale contracts extends from six months to one year. Employment claims now carry a two-year tail. These changes applied to unexpired periods running on 1 June 2026.
- Framework agreements: Framework agreements are now expressly recognised and codified under the New Law and are deemed to automatically form part of each subsequent contract concluded under them. This may provide greater certainty around the incorporation of framework terms into individual transaction documents in arrangements that are already widely used in practice but previously lacked a specific statutory basis.
- Contract performance and judicial intervention: The court’s powers to intervene in contracts where performance becomes oppressive have been expanded. Courts may now order rescission as well as modification where exceptional unforeseen circumstances make performance onerous, and this jurisdiction cannot be excluded by agreement.
- Assignment: The assignment regime has been restructured. Assignment of rights no longer requires debtor consent, and an assignment of rights carries with it any securities attached to the right, including guarantees and pledges. In debt assignments, where a creditor is given a reasonable period to respond to a proposed assignment and does not do so, their silence is treated as refusal rather than acceptance, meaning the original debtor remains bound.
- Agency and authority: The New Law introduces a more structured framework for agency and authority to contract. A general power of attorney now authorises only management and preservation acts. A special agency is required for sales, mortgages, settlements, and similar acts, meaning that parties may wish to review the authority documents they use in transactions to confirm they are sufficient for the specific acts being authorised.
- Corporate structures: The New Law introduces several changes relevant to corporate structuring, including express recognition of single-member companies, a new dedicated framework for professional companies, non-waivable inspection rights for non-managing partners, and a revised dissolution test that is triggered only where continuation of the company serves no purpose rather than on any loss of capital.