On 1 June 2026 (the “Effective Date”), Federal Decree-Law No. 25/2025 promulgating the Civil Transaction Law (the “New Civil Code”) comes into force. As a result, some of its mandatory provisions may override or conflict with terms and conditions of existing contract, regardless of when those contracts were entered into. There is no requirement to enter into addenda for the New Civil Code to apply to old existing contracts. Its provisions will apply automatically and immediately in some respects.
With only one month remaining until the New Civil Code comes into effect, we suggest individuals and businesses reviewing their key contracts. Undertaking this review now will help avoiding future pitfalls or unintended consequences arising from contractual clauses contradicting the New Civil Code.
Starting off with two aspects, which are particularly topical just now, this article will explore the key provisions and changes the New Civil Code introduces which persons and businesses need to be aware of:
Force Majeure
What to check:
Under Article (236) of the New Civil Code, the parties will have the right to seek the modification of a continuous contract, where performance becomes partially or temporarily impossible.
Most boilerplate force majeure clauses only allow contract suspension or termination, i.e., they do not address modification of the contractual terms. As a result of the New Civil Code, the new statutory menu of self-help remedies may overlap and/or conflict with bespoke wording in the existing force majeure clauses.
What to do:
Review all long-term continuous contracts: leases, supply, services, and offtake agreements, and consider impact of these changes.
Hardship
What to check:
Under Article (224) of the New Civil Code, Courts may reduce a contractual obligation, that has become excessively onerous, due to exceptional circumstance, or rescind the contract. Any agreement by the parties to derive from this statutory provision is void; there is no opt-out. “No-hardship”, “fixed price not subject to adjustment”, and “sole remedy” clauses are directly affected.
What to do:
Review all long-term fixed-price contracts (construction, supply, franchise, and services) and consider price-review triggers or renegotiation mechanisms that operate within Article 224.
Termination
What to check:
Under Article (235) of the New Civil Code, clauses that stipulate automatic termination of the contract still require a formal notice (i’dhar) to the defaulting party, unless the contract expressly waives that requirement. A clause that reads “terminates automatically upon breach“, without also adding “without the need for notice or a court order” will not operate as intended.
In addition to that, courts now have express power to refuse rescission where the breach is minor or has been remedied.
What to do:
Review the existing contracts for an automatic-termination provision.
Pre-Contractual Good Faith
What to check:
Articles (121) to (123) of the New Civil Code introduce an express duty of good faith in negotiations. A party may incur liability for terminating the negotiations without legitimate cause, or for misusing confidential information shared during the process. This duty does not apply retroactively to closed, executed contracts.
What to do:
Review NDA, LOI, exclusivity, and data-room access documentation for all live and upcoming negotiations before the Effective Date.
Title Warranty in Sale Contracts
What to check:
Under paragraph (2) of Article (489) of the New Civil Code, a clause that waives or limits the seller’s warranty against dispossession is deemed void. Clauses such as “As-is, where-is” and “no title warranty” in asset and property sale contracts will no longer protect sellers against third-party title claims.
What to do:
This impact of this provision may warrant a review of warranty, indemnity, insurance, and waivers clauses.
Liquidated Damages
What to check:
Under Article (340) of the New Civil Code, Courts may reduce the agreed liquidated damages, whenever they decide they are disproportionate to actual harm, or where the debtor has partly performed their obligations. Courts may, upon the creditor’s request, award a compensation that exceeds the contractually agreed sum in circumstances of the debtor’s fraud or gross fault. Additionally, the parties may not agree otherwise.
In other words, any clause contradicting this provision, may be deemed void. Liquidated damages clauses that read or include “No-challenge“, “final and conclusive“, and “sole and exclusive remedy” may become inapplicable or contradicting with the new provisions.
What to do:
Review the existing liquidated damages clauses for commercial proportionality.
Unfair Clauses in Standard-Form Contracts
What to check:
Under Articles (120) and (223) of the New Civil Code, Courts may modify or disapply unfair clauses in adhesion contracts. Any clause purporting to prevent that may be deemed void. Ambiguity in standard-form terms is now resolved against the drafter by statute under the New Civil Code. Businesses and service providers that rely on non-negotiable standard contracts (example: banks, insurers, SaaS vendors, landlords, franchisors, etc.) may be impacted by the new provisions, especially when it relates to unilateral variation rights, liability caps, automatic renewal provisions, broad exclusion clauses, and forum clauses.
What to do:
Review all standard-form terms which a court could characterise as unfair or containing ambiguous risk-allocation language.
Decennial Liability
What to check:
Under Articles (821) and (823) of the New Civil Code, any clause that limits or exempts the contractor or supervising engineer from the ten-year structural warranty could be deemed void.
For example, the following contractual provisions, common in UAE construction practice, may not survive after the Effective Date, regardless of when the contract was signed:
- monetary caps on decennial exposure, including caps tied to the contract price or to insurance proceeds;
- contractual limitation periods shorter than the three-year statutory window that runs from discovery of the defect or collapse; and
- knock-for-knock, net-contribution and several-only clauses that fragment the joint liability of contractor and engineer.
What to do:
Review all live EPC, design, and supervision contracts for project insurance and professional indemnity cover.
Limitation Periods
What to check:
Under Articles (6) and (7) of the New Civil Code, limitation periods apply immediately to any unexpired claim prior to the Effective Date. Hence, where the new limitation period is shorter under the New Civil Code, the limitation period is calculated as of the Effective Date. Additionally, other limitation periods were shortened under the new provisions. They are:
- Three (3) years for insurance claims, professional fees, and tort claims;
- Two (2) years for employment and merchant claims; and
- One (1) year for latent defects in sale contracts from the date of delivery.
What to do:
Review all on-going disputes, due receivables, and warranty claims.
Suretyship: The Six-Month Enforcement Window
What to check:
Under Article (1006) of the New Civil Code, a guarantor is automatically discharged if the creditor fails to commence judicial proceedings against both the debtor and the guarantor within six (6) months as of the debt falling due. This rule is mandatory and cannot be waived by agreement. Lenders holding parent company or personal guarantees under long-tenor facilities face a specific risk: waiting out a commercial default period before enforcing may cause the window to expire and the guarantee to lapse entirely.
What to do:
Review guarantee structures and, where appropriate, consider alternative forms of security not subject to the same constraints. Consider internal tracking of key enforcement deadlines across guarantee arrangements.
Insurance: Arbitration Clauses in Standard Policy Print
What to check:
Under Article (958) of the New Civil Code, an arbitration clause included in the pre-printed general conditions of an insurance policy could be considered void unless it is set out in a separate agreement signed by both parties.
Therefore, if your insurance policy includes an arbitration clause that appears only in the main body of a standard policy schedule or is incorporated by reference into the policy, it will become unenforceable after the New Civil Code’s Effective Date.
What to do:
Review standard policy prints for arbitration clauses.
Real Estate: Mortgage and Debt Assignment
What to check:
Under Article (424) of the New Civil Code, when a buyer acquires mortgaged property, the secured debt does not transfer to the buyer automatically, unless the parties agreed otherwise. Such transfer requires an express agreement between the parties and the mortgagee’s written consent before registration of the sale.
What to do:
Review all real estate sale contracts involving mortgaged property. Obtain the mortgagee’s written consent before any post-1 June 2026 registration.
In light of the changes introduced by the New Civil Code, it is highly recommended that businesses, and individuals, act swiftly and ensure they are adequately prepared for the fast-approaching Effective Date.
Certain aspects of existing contractual arrangements (long-term contracts, standard contracts, guarantee clauses, even pre-contractual documents) may require immediate review and prompt action to mitigate compliance risks and protect commercial interests.
If you have any questions about how the new UAE Civil Code may impact your business, or if require any assistance in reviewing your contracts or wish to discuss the new changes, please feel free to reach out to our Partner, Gerry Rogers and Associate, Danila Kriuchkov
Disclaimer:
This article is intended for general informational purposes only and does not constitute legal advice. It should not be relied upon as a substitute for specific legal advice tailored to your circumstances.