Federal Decree Law No. 25 of 2025 (the “New Civil Code”) will come into effect on 1 June 2026, repealing and replacing Federal Law No. 5 of 1985 (as amended) (the “Old Civil Code”), which has formed the backbone of civil and contractual relations in the UAE for the past four decades.
The New Civil Code represents a substantive modernisation of the UAE’s civil transactions legislative framework. Whilst the New Civil Code preserves the core structure and principles of the Old Civil Code, it introduces clearer drafting, modern legal concepts and enhanced protections, reflecting the evolution of commercial dealings in the UAE.
This update highlights some of the most significant changes of practical relevance to businesses, investors and individuals alike.
Key Changes and Developments
Clear Hierarchy of Legal Sources and Interpretation
The New Civil Code refines the methodology that courts must follow when interpreting civil law matters. An important clarification under the New Civil Code is that priority is given to explicit legislative text, with no scope for judicial discretion where provisions are clear. Where legislation is silent, the UAE courts are expressly directed to apply Islamic Sharia and local custom, provided that it does not conflict with public order or morals. In addition, the UAE courts may, as a fallback, rely upon principles of justice and natural law. Consequently, it is anticipated that the New Civil Code will not be subject to the previous level of judicial interpretation and, where it is, the manner in which such judicial interpretation will be attended to is clear.
This introduces greater predictability in judicial reasoning compared to the Old Civil Code, which relied more heavily on broad Islamic jurisprudence without an explicit hierarchy.
Recognition of Good Faith and Pre-Contractual Liability
One of the most significant innovations is the codification of good faith obligations during negotiations. This includes:
- a requirement that negotiations be conducted and terminated in good faith;
- potential liability for damages where negotiations are broken off abusively or in bad faith; and
- an express obligation to disclose material and decisive information, extending to both parties.
Notably, parties may not contract out of disclosure obligations, and deliberate non-disclosure may give grounds to annul a contract. This represents a material shift from the Old Civil Code, where such principles were inferred rather than expressly stated.
Updated Contract Formation Rules
The New Civil Code modernises contract formation by:
- recognising electronic communications, conduct and implied acceptance;
- clarifying when advertisements constitute binding offers versus invitations to treat; and
- establishing rules on framework agreements, acknowledging long term commercial arrangements common in modern transactions.
These changes align the New Civil Code more closely with modern commercial realities, particularly in digital contracting environments.
Age of Adulthood Reduced
The New Civil Code lowers the age of legal maturity to 18 Gregorian years, replacing the previous threshold of 21 Lunar years. This change has substantial implications for:
- contractual capacity;
- financial transactions involving young adults; and
- guardianship and asset management arrangements.
Enhanced Regulation of Defective Consent and Economic Imbalance
While legal doctrines such as mistake, duress and misrepresentation existed under the Old Civil Code, the New Civil Code expands and clarifies them by:
- introducing a more detailed regime for exploitation, including economic imbalance arising from vulnerability, inexperience or dependence;
- allowing courts to annul or rebalance obligations where a contract involves manifest unfairness; and
- imposing shorter and clearer limitation periods for challenging defective contracts.
These reforms strengthen judicial tools to address unfair transactions while providing clearer boundaries for contractual certainty.
Modernised Force Majeure and Hardship Provisions
The New Civil Code reframes hardship and force majeure principles, allowing courts to:
- reduce onerous obligations;
- modify or rescind contracts in exceptional and unforeseeable circumstances; or
- dissolve contracts where performance becomes impossible.
These provisions codify judicial discretion more clearly than under the Old Civil Code.
Expanded Tort and Civil Liability Framework
Key updates introduced in respect of civil liability include:
- clearer rules on indirect causation, joint liability, and contributory fault;
- explicit recognition of moral damages beyond existing narrow categories; and
- strengthened liability rules for custodians of things, buildings, machinery and animals.
These changes enhance claimant protection whilst providing distinct risk allocation for businesses and property owners.
Streamlined Structure and Terminology
The New Civil Code reorganises the Old Civil Code into a more coherent structure, with:
- clearer separation between obligations, contracts, real rights and securities;
- updated terminology; and
- improved internal consistency.
Whilst many provisions will be familiar, the drafting of the New Civil Code is more precise which we anticipate will reduce interpretive uncertainty at a judicial level, as noted above.
Effectiveness
The New Civil Code applies from 1 June 2026 and does not generally affect legal relationships or transactions concluded before that date, unless the New Civil Code expressly provides otherwise. Transitional issues are therefore expected to arise in long term contracts and ongoing disputes.
What Parties Should Do Now
We recommend that all parties should consider reviewing template contracts that are subject to the New Civil Code, paying particular regard to:
- disclosure obligations;
- termination rights; and
- hardship and force majeure clauses.
It is also important to assess the impact of the changes to the age of maturity and monitor how the UAE courts interpret these new provisions in practice.
The New Civil Code marks the most significant overhaul of UAE civil law since 1985. By modernising contractual mechanics, strengthening good faith obligations and improving legal clarity, the New Civil Code reinforces the UAE’s position as a mature and investor friendly legal environment in which to conduct business and commercial undertakings, whilst maintaining its foundational legal principles.
If you have any questions about how the New Civil Code may affect your business we would be very happy to discuss.
