Abu Dhabi businesses that contract under onshore UAE law should prepare for Federal Decree-Law No. 25 of 2025 on Civil Transactions, which takes effect on 1 June 2026 and replaces Federal Law No. 5 of 1985. The reforms are described as a substantive modernisation that preserves the core structure and principles of the old regime, while introducing clearer drafting and more structured rules. In practice, that means less reliance on open-ended judicial approaches where the legislative text is clear, and more predictable pathways for how courts reason through civil and contractual disputes.
The most immediate commercial implication is the codification of good faith at the negotiation stage, not just during performance. Negotiations must be conducted and terminated in good faith, and liability can arise if talks are carried out or broken off abusively or in bad faith. The framework also introduces an express duty to disclose material and decisive information relevant to the other party’s consent, and sources note that parties cannot contract out of that disclosure duty. Compensation is framed around actual damage, with loss of profit excluded unless otherwise agreed, and deliberate non-disclosure may also create a basis to challenge validity or seek annulment.
Contract Formation, Interpretation, and Drafting Discipline
The new framework updates how contracts can be formed in ways that track modern commercial practice. Consent can be expressed through electronic communications, conduct, and implied acceptance, bringing day-to-day digital workflows and operational behaviours directly into formation analysis. It also clarifies when advertisements are binding offers versus invitations to treat. For Abu Dhabi counterparties working through repeat purchase orders, master terms, or ongoing service arrangements, formal recognition of framework agreements is especially practical, because it allows parties to fix core terms that govern a series of future transactions while maintaining a clear legal structure for long-term cooperation.
Interpretation and drafting standards also tighten. Clear wording must be respected, and interpretive tools are triggered where ambiguity genuinely exists. When ambiguity remains, courts may look to the parties’ common intention, informed by the nature of the transaction, good faith, and commercial custom. Sources also highlight that ambiguous terms may be construed against the party bearing the obligation or the drafting party, particularly in adhesion-style contracting. For Abu Dhabi businesses, this raises the bar on template governance, version control, and ensuring that risk allocation, remedies, and operational responsibilities are stated in plain, auditable language.
Operationally, businesses should map these changes onto their contracting footprint in Abu Dhabi. The UAE civil transactions law governs mainland civil transactions but does not displace the DIFC or Abu Dhabi Global Market (ADGM) regimes, which continue to apply within their free zones and for contracts that validly opt into their laws and courts. That distinction matters because negotiation and disclosure practices that might feel familiar in a common-law style setting can create different risks onshore, where disclosure is treated as a public-order level obligation. As a final layer, sector-specific prohibitions and Shari’a-driven constraints—such as issues flagged around impermissible structures in particular contexts—should be screened early because invalid provisions can jeopardise enforceability.
When does the new civil transactions regime take effect, and what does it replace?
How does the UAE Civil Transactions Law change pre-contract negotiations for businesses?
Can a business limit its liability for non-disclosure with a clause in the contract?
Do the reforms apply inside ADGM and DIFC?
