What You Should Know About Civil Transactions Law in the UAE

Key Changes in the New 2025 Law 

Here’s a quick look at the main areas where the new law makes a difference:

Taken together, these changes are intended to provide greater clarity, encourage fair dealing, and help reduce disputes before they arise.

Why This Law Matters

Most disputes do not begin in court. They start with a misunderstanding, an unclear agreement, a delayed payment, or a disagreement about what each party was supposed to do.

People sign contracts, make financial commitments, buy property, or hire service providers without giving much thought to what could happen if something goes wrong. And when things do go wrong, each side often has a different view of the situation. One party may believe they have met their obligations, while the other believes there has been a breach.

This is where the Civil Transactions Law becomes important. It helps determine the rights and responsibilities of each party and outlines the legal remedies that may be available when disputes arise.

Pre-Contractual Obligations Under the New Law

Most people assume that legal obligations only begin once a contract is signed. Under the new law, however, that’s not always the case.

The way parties behave during negotiations — before anything is finalised — can also carry legal significance in certain situations. If one party provides misleading information, deliberately withholds important information that could affect the other party’s decision, or acts in bad faith during negotiations, that conduct may have legal consequences depending on the circumstances.

The idea behind this change is straightforward. Transparency and fair dealing should not begin only when a contract is signed. They should be present from the very beginning of a transaction.

Contracts and Good Faith Under the New Law

Contracts are central to many personal and commercial relationships. Under the UAE Civil Transactions Law, entering into a contract comes with an expectation that both parties will carry out their obligations honestly and in line with what was agreed.

Why Is Good Faith Important in Contracts?

A signed contract is more than just a piece of paper. It creates legal obligations, and when one party fails to meet those obligations, the other party may have legal remedies available depending on the circumstances.

Take a simple example. A company hires a contractor to renovate its office by a fixed deadline. The contractor repeatedly delays the work without a valid reason. As a result, the company is forced to postpone its opening and suffers financial losses.

In a situation like this, the legal issue is not just the delay itself. It is whether the contractor fulfilled its obligations in a manner that was consistent with the agreement and its intended purpose.

That is essentially what good faith is about. It is not just about signing an agreement, but about carrying out obligations honestly, fairly, and in line with what was agreed.

Possible Legal Consequences of a Contract Breach

When a contract isn’t honoured, the consequences will depend on what happened and how serious the breach is. Here are some common legal outcomes that may arise:

Note: These are general examples only. The actual outcome in any situation will depend on the specific facts, the terms of the agreement, and the circumstances involved.

Civil Liability Under the New Law

Contracts are not the only area covered by the Civil Transactions Law. It also deals with civil liability, which can arise when one party causes financial loss, property damage, or other harm to another through negligence, a breach of duty, or unlawful conduct.

What Can Civil Liability Include?

Civil liability can arise in a range of situations, including negligent acts that cause financial loss, breaches of legal or contractual obligations, property damage, and wrongful interference with another party’s rights.

Here’s a practical example. A supplier agrees to deliver essential equipment before a major product launch but fails to do so on time. As a result, the business misses an important commercial opportunity. Depending on the circumstances and the losses suffered, the affected party may have grounds to seek compensation.

As with most legal claims, the outcome will depend on the facts of the case. Evidence, documentation, and the ability to establish a clear link between the conduct and the loss suffered can all play an important role.

What the UAE Civil Transactions Law Means for Businesses

For businesses operating in the UAE, the Civil Transactions Law influences many day-to-day commercial relationships. It affects how agreements are formed and enforced, how legal obligations are interpreted, and how rights and responsibilities are assessed when disputes arise.

The new law also places greater emphasis on good faith, transparency, and clarity in commercial dealings. As a result, businesses need to be even more mindful of how they negotiate agreements, communicate obligations, and manage contractual relationships.

Why Do Businesses Need Strong Contract Protection?

Many business relationships involve significant payments, ongoing responsibilities, and multiple parties. When agreements are unclear, disputes can arise over payment terms, deadlines, responsibilities, or the quality of work delivered.

A well-drafted contract helps everyone understand what is expected of them. It sets out key terms, defines responsibilities, establishes timelines, and provides a framework for dealing with issues if they arise.

Simply put, clear agreements help businesses reduce uncertainty, manage risk, and avoid unnecessary disputes.

What the UAE Civil Transactions Law Means for Individuals

While the Civil Transactions Law is often discussed in a business context, it also affects many aspects of everyday life. People encounter it more often than they might realise.

It can apply when signing personal agreements, buying or selling property, dealing with financial obligations, seeking compensation for losses, or resolving disputes.

One of the notable changes introduced by the new law is the reduction of the age of majority from 21 lunar years to 18 Gregorian years. In practical terms, this means individuals generally acquire full legal capacity at an earlier age, allowing them to enter into transactions and exercise certain legal rights sooner than before.

Understanding the basic principles of the law can help people make more informed decisions, better understand their rights and obligations, and avoid unnecessary legal complications.

Real-Life Scenarios Under the Civil Transactions Law 

Sometimes the best way to understand how a law works is to see it in action. Here are a few everyday situations where the Civil Transactions Law could come into play.

Scenario 1: Delayed business performance