Briefing

Key takeaways of the new UAE Civil Code: Practical guidance

On 1 June 2026, the United Arab Emirates (the New UAE Civil Code), came into force, replacing Federal Law No. 5 of 1985 (the Old UAE Civil Code). We address below the key developments parties to contracts in the UAE should know.

The New UAE Civil Code does not apply retroactively. Therefore, parties of contracts which were entered into prior to 1 June 2026, will need to be aware of whether the Old UAE Civil Code applies taking into consideration any future amendments and disputes.

The New UAE Civil Code broadly contains provisions that are similar to the Old UAE Civil Code, however, there are notable changes of relevance to any person or business wishing to enter contracts and work in the UAE which we explain below.

This article does not seek to address all the amendments introduced by the New UAE Civil Code. Instead, we have focused on those changes which we consider to be the most significant in practice, given their potential impact on contractual relationships and dispute resolution in the UAE.

Pre-contractual good faith

Under the Old UAE Civil Code, pre-contractual good faith principles were inferred and not expressly stated.

One of the more significant outcomes of the New UAE Civil Code is the codification of good faith obligations between parties, during pre-contractual negotiations.

Pre-contractual negotiations under the Old UAE Civil Code were considered a relatively low legal risk however, the practical impact of the new UAE Civil Code provides that this phase now carries significant legal risk.

Under Articles 121 – 123 of the New UAE Civil Code, the conduct, termination, disclosure of material and decisive information of pre-contractual negotiations must be in accordance with the requirements of good faith.

In cases where negotiations conclude due to bad faith, or parties deliberately fail to disclose material information, this may give rise to liability for damages.

Key takeaway

The codification of good faith principles in the New UAE Civil Code is a material shift and of particular significance to persons of business in the UAE since the changes suggest: UAE Courts may be permitted to consider information, statements or representations made during pre-contractual negotiations to determine liability for bad faith pre-contractual conduct.

This change may give rise to an increased number of disputes between parties because of the bad faith conduct of the parties during the pre-contractual negotiation stage.

Hardship

Historically, the Old UAE Civil Code considered the application of the provision of hardship to contractual obligations in narrow terms. Put simply, in the instance that hardship has arisen through the duration of the contractual arrangement, the UAE Courts could reduce a contractual obligation deemed burdensome to a reasonable limit.

Under Article 224 of the New UAE Civil Code, in instances where exceptional unforeseen circumstances have arisen and their occurrence results in a contractual obligation becoming onerous, the Courts have been given further discretion to reduce the contractual obligation to a reasonable limit or alternatively, terminate the contract.

The Court’s discretion arises where exceptional and unforeseen events render performance of a contract onerous on a party, such that it would threaten heavy loss on that party.

Key takeaway

This development indicates the Courts will exercise wider discretion to revise or terminate contracts where unforeseen events render performance of contractual obligations onerous which justifies the termination of a contract.

The New Civil Code does not define what constitutes an “onerous contractual obligation“, to a party which is threatened “with a heavy loss“, however, based on our experience of the UAE Courts, the threshold of an onerous obligation is likely to be high.

In light of the recent regional conflict and considering the UAE Courts has been granted more power to exercise wider discretion to revise and terminate contracts where unforeseen circumstances have arisen, parties entering into new contracts should carefully consider the allocation of risk under their contracts.

Force majeure

The New UAE Civil Code does not materially change the provision of force majeure under the Old UAE Civil Code. The provisions governing circumstances of force majeure which render performance of a contract wholly or partially impossible are maintained in the New UAE Civil Code, under Article 236. In this context, Article 236(2) specifically addresses situations of partial impossibility, providing that the affected party may reduce its corresponding obligations to reflect the part that can no longer be performed or seek termination of the contract before the courts.

Key takeaway

In the context of the recent regional conflict, we are currently seeing a significant number of claims of force majeure. Based on our experience with the UAE Courts and recent case law[1], the threshold for force majeure is high as parties will need to demonstrate the “unforeseeable event” rendered the contractual performance impossible and is the sole and direct reason for failure to perform under the contract.

We understand parties invoking force majeure because of the conflict have been placed in circumstances of significant financial strain and difficulty. As explained, the threshold to establish force majeure is high and we consider that the UAE Courts will grant a claim of force majeure in strict circumstances where the party has proved completion of its obligations under the contract were impossible.

Limitation period for latent defects

Under Article 555 of the Old UAE Civil Code, claims relating to latent defects were subject to a six-month limitation period, unless a longer period was agreed or the defect was fraudulently concealed.

Article 510 of the New UAE Civil Code extends this default period to one year from the day following delivery of the works or product. This provision does not apply where the parties have agreed a longer liability period or in cases of fraudulent concealment.

Key takeaway

The extended limitation period for latent defects is a positive development for employers and consumers, providing more time after handover to identify and pursue latent defects.

Governing law

Article 19 of the New UAE Civil Code establishes that “contractual obligations shall be governed, in form and substance, by the law expressly agreed upon by the parties.” This provision expressly states that contractual obligations shall be governed by the law of the country, as agreed upon by the parties. This wording indicates parties’ ability to select the governing law to apply.

Whilst the Old UAE Civil Code does recognise parties’ choice of law, in practice, the UAE Courts rarely apply foreign law.

Key takeaway

The changes in the New UAE Civil Code may indicate a shift in this approach, such that we may see the onshore courts applying foreign law and possibly also hearing expert evidence on foreign law.

Civil liability and damages

The New UAE Civil Code revises and clarifies a number of principles relating to civil liability.

Article 246 of the New UAE Civil Code provides that “every causing of harm to another shall render the actor, even if lacking discretion, liable to make reparation for the harm“. Further, Article 253 of the New UAE Civil Code grants the courts the discretion to apportion liability among multiple parties, or to reduce, or even deny compensation where the victim has contributed to the occurrence or aggravation of the damage.

The New UAE Civil Code also expressly confirms that compensation extends to moral damages. Under Article 254 of the New UAE Civil Code, moral damage includes harm to personal freedom, honour, reputation, social standing, or financial position.

In addition, Article 255 of the New UAE Civil Code clarifies that compensation is to be assessed on the basis of the actual loss suffered and the loss of profit, provided that such damage is a natural consequence of the harmful act.

Key takeaway

The New UAE Civil Code provides greater clarity and structure in relation to civil liability and damages, in particular by codifying the recoverability of moral damages.

Conclusion

The New UAE Civil Code presents a modernised approach to contractual frameworks in the UAE. These amendments provide for expansive judicial discretion, enhancing clarity and predictability in the resolution of contractual disputes.

In light of the amendments introduced by the New UAE Civil Code, we recommend that UAE businesses and persons completing business in the UAE take a proactive approach and review their existing contractual arrangements, particularly contracts entered into after 1 June 2026.

Footnote

Dubai Court of Cassation Judgment No. 33 of 2026 – the Courts determined the adverse weather event of 16 April 2024 which resulted in flooding across the UAE did not constitute force majeure. The party with contractual obligation under the contract was found liable for the damages and the Dubai Court ordered the defaulting party to compensate.