The United Arab Emirates has taken a major step in strengthening its legal framework with the issuance of Federal Decree-Law No. 25 of 2025, which promulgates the new Civil Transactions Law. Signed on 30 December 2025, the law will come into full effect on 1 June 2026. Completely replacing the four decade old Federal Law No. 5 of 1985.
This comprehensive recodification reflects the UAE’s ongoing commitment to creating a modern, investor-friendly and business-oriented legal environment. By streamlining rules, removing overlaps with specialised laws (such as commercial and procedural legislation) and introducing clearer, more practical provisions, the new law aims to reduce disputes, enhance legal certainty, and support the country’s ambitious economic diversification goals.
Key Highlights of the New Law
Lower Age of Majority
The age of full legal capacity has been reduced from 21 lunar years (roughly 20.4 Gregorian years) to 18 Gregorian years. This change aligns civil capacity with labour, juvenile justice, and other national laws, empowering young entrepreneurs and simplifying financial and contractual dealings for the younger generation.
Pre-Contractual Good Faith and Disclosure Obligations
One of the most significant innovations is the explicit regulation of pre-contract negotiations. Parties must now negotiate and terminate discussions in good faith and disclose all material information that could influence the other party’s decision. Failure to do so may result in liability for damages (a concept known as culpa in contrahendo). Exclusion clauses attempting to waive these duties are void. This brings UAE law closer to international best practices and is expected to reduce pre-contract disputes.
Stronger Protections and Updated Remedies
- Rules on latent defects in sales have been strengthened, with the limitation period extended from six months to one year.
- Courts have greater flexibility to address economic imbalance, hardship, or force majeure by adjusting or terminating contracts.
- Tort and civil liability provisions have been clarified, with clearer rules on causation, joint liability, and moral damages.
- Usufructuary (construction) rights now require mandatory registration; unregistered rights are void.
Corporate and Property Modernisation
The new law distinguishes more clearly between civil and commercial companies, permits single-person companies in certain contexts, and introduces dedicated rules for non-profit and professional companies. It also modernises rules on assignment of rights, possession protection, and sale of disputed assets.
For businesses and investors, the New Civil Transactions Law offers greater predictability and efficiency. By reducing legal grey areas and aligning with global standards, it strengthens the UAE’s position as a leading regional hub for commerce and dispute resolution. Law firms and companies are already advising clients to review template contracts, negotiation protocols, and disclosure practices ahead of the June 2026 implementation date.
The reform also gives judges more practical tools while preserving the foundational role of Islamic Sharia principles (applied flexibly according to justice and public interest when no statutory rule exists). This balanced approach maintains cultural authenticity while meeting the demands of a dynamic, modern economy.
In summary, the UAE’s new Civil Transactions Law is more than just an update. It is a forward-looking blueprint designed to foster trust, efficiency, and growth in civil and commercial life across the Emirates. Its successful implementation will undoubtedly reinforce the country’s reputation as one of the most progressive legal jurisdictions in the region.
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