The UAE’s New Civil Code Explained: Practical Changes for Businesses and Investors

The UAE’s New Civil Code, enacted under Federal Decree-Law No. 25 of 2025, modernizes the country’s civil and contractual framework, introducing clearer judicial methodology, stronger pre-contractual obligations, expanded liability rules, and updated property and corporate provisions.

The United Arab Emirates has enacted Federal Decree-Law No. 25 of 2025 Issuing the Civil Transactions Law (hereinafter, the “New Civil Code”), which will enter into force on 1 June 2026. The law repeals and replaces Federal Law No. 5 of 1985 on Civil Transactions, the statute that has governed civil and contractual relations in the UAE for four decades.

While the New Civil Code preserves the structural foundations and core principles of the 1985 framework, it represents a substantive modernization of the UAE’s civil transactions regime. It refines drafting, clarifies judicial methodology, aligns with specialist legislation enacted over the past decade, and introduces contemporary legal concepts that reflect the evolution of commercial practice in the UAE. For businesses and investors, the reform is not merely technical; it carries practical implications for contract formation, risk allocation, liability exposure, and corporate structuring.

This article highlights the most significant developments of relevance to commercial actors.

Judicial interpretation and legal hierarchy

The New Civil Code clarifies how courts must interpret civil law disputes. Clear legislative text takes priority. Where the law is silent, courts may apply principles of Islamic Sharia without being bound to a single theological school, selecting the solution that best serves justice and public interest.

This structured hierarchy reduces interpretive ambiguity and strengthens predictability. Judicial discretion remains, but it operates within clearer boundaries. For commercial actors, this enhances legal certainty in complex disputes.

Legal capacity and majority reform

Reduction of the age of majority

The civil age of majority is reduced from 21 lunar years to 18 Gregorian years. From June 1, 2026, individuals aged 18 and above will have full contractual capacity.

For businesses, this strengthens enforceability in transactions with young adults and reduces capacity-based disputes. Financial institutions, consumer platforms, and service providers should update onboarding and compliance frameworks accordingly.

Safeguards for minors and vulnerable persons

The law lowers the threshold for minors to seek judicial authorization to manage assets to 15. At the same time, transactions that are both beneficial and potentially harmful to a minor may be voidable, subject to defined limitation periods.

A judicial assistance framework is introduced for individuals lacking full capacity, reinforcing protection while enabling supervised participation in legal transactions.

Pre-contractual obligations and negotiation risk

Good faith in negotiations

The New Civil Code expressly requires negotiations to be conducted and terminated in good faith. Abusive withdrawal may give rise to liability.

This codification elevates negotiation standards and increases exposure before a contract is formally signed.

Mandatory disclosure of fundamental information

Parties must disclose fundamental and decisive information during negotiations. This obligation cannot be excluded by agreement. Deliberate non-disclosure may justify annulment.

Businesses should implement structured disclosure practices and carefully document negotiation processes to mitigate risk.

Contract formation in a modern economy

Recognition of electronic communications

Electronic communications, conduct, and implied acceptance are expressly recognized in contract formation. The law also clarifies when advertisements constitute binding offers versus invitations to treat.

This aligns the Civil Code with digital contracting realities and platform-based commerce.

Framework agreements for recurring transactions

The Code formally recognizes framework agreements that fix core terms for long-term or recurring commercial relationships. This provides a clearer statutory basis for supply chains, distribution structures, and service arrangements built on master terms.

Economic imbalance and defective consent

Expanded doctrines of unfairness

Traditional doctrines such as mistake, duress, and misrepresentation are clarified and expanded. The law introduces a more structured regime addressing exploitation and economic imbalance arising from vulnerability, inexperience, or dependence.

Courts may annul or rebalance obligations where manifest unfairness exists.

Clearer limitation periods

Limitation periods for challenging defective contracts are clarified and shortened, reinforcing procedural certainty while preserving judicial tools to address inequitable arrangements.

Hardship and force majeure

Judicial modification of onerous obligations

In exceptional and unforeseeable circumstances, courts may reduce excessively burdensome obligations or modify contractual terms.

Dissolution for impossibility

Where performance becomes impossible, courts may rescind or dissolve contracts.

For long-term commercial projects, these provisions underline the importance of carefully drafted hardship and force majeure clauses.

Sale of goods and post-sale risk allocation

Extended latent defect liability

The limitation period for latent defect claims is extended from six months to one year from delivery, unless a longer guarantee is agreed. Buyers may reject goods, seek price reduction, or request replacement.

This extends post-sale exposure for suppliers and manufacturers.

Clarified sale by sample or model

The law refines evidentiary standards in sales by sample or model, reducing ambiguity in product conformity disputes.

Real estate and usufruct rights

Mandatory registration requirement

Usufructuary construction rights must be registered with the competent authority. Failure to register may result in nullity.

Registration becomes constitutive rather than merely procedural. Developers and investors must ensure strict compliance and enhanced due diligence.

Tort liability and compensation

Clarified causation and joint liability

The Code clarifies indirect causation, contributory fault, and joint liability rules, strengthening doctrinal coherence in civil claims.

Expanded moral damages and additional compensation

Recognition of moral damages is broadened. In cases of death or severe injury, additional compensation may be awarded where blood money (diya) does not fully address harm.

Companies operating in higher-risk sectors should reassess liability exposure and insurance coverage.

Corporate stability and continuity

Alignment with commercial legislation

The Code distinguishes civil and commercial companies by activity and form, aligning more closely with corporate law frameworks.

Single-person companies and partner exit

Single-person companies are permitted. Mechanisms governing partner withdrawal, continuation, and liquidation are clarified, reducing the likelihood that shareholder exit triggers dissolution.

These reforms strengthen corporate resilience and investor confidence.

Judicial integrity and disputed rights

Judges, prosecutors, court clerks, and attorneys involved in a dispute are prohibited from acquiring disputed rights. This reinforces impartiality and judicial integrity.

Transitional considerations and next steps

The New Civil Code applies from June 1, 2026 and does not generally affect relationships concluded before that date unless expressly provided. Transitional issues may arise in long-term agreements and ongoing disputes.

Businesses should begin reviewing template contracts, disclosure procedures, hardship clauses, real estate compliance mechanisms, and corporate governance frameworks in advance of implementation.

Conclusion

Federal Decree-Law No. 25 of 2025 represents the most comprehensive reform of UAE civil law since 1985. By strengthening clarity, modernizing contractual doctrine, expanding liability tools, and reinforcing corporate continuity, the New Civil Code recalibrates the UAE’s private law framework for a more complex and globally integrated economy.

Early preparation will be essential for businesses seeking to mitigate risk and maintain legal certainty when the law enters into force in June 2026.

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