UAE New Civil Transactions Law 2025: What Changed From the 1985 Civil Code?

Key Changes Under the New UAE Civil Transactions Law

The exact effect of each provision depends on the type of transaction, contract and claim involved.

Why Did the UAE Replace the 1985 Civil Code?

The 1985 Civil Code served as the foundation of UAE civil law for decades. Since then, the UAE's economy, property market, investment environment and commercial activity have changed significantly.

The new Civil Transactions Law is a full replacement rather than a small amendment. It re-organises and updates the civil-law framework and provides more detailed rules in several areas.

The UAE Government has described the reform as part of the country's wider effort to modernise the legislative framework and make legal rules clearer and more practical.

For businesses and individuals, this means older contract templates and assumptions about UAE civil law should not automatically be carried forward without review.

The Legal Age of Majority

One of the clearest changes is the reduction of the age of majority.

Under the new law, the age of majority is 18 Gregorian years, rather than 21 lunar years under the previous framework. This can affect legal capacity and a person's ability to enter into certain civil transactions.

The new law also contains provisions concerning minors and the management of their property, including circumstances in which a minor may seek court permission to manage their own money.

What should you check?

If your business uses contracts, employment-related documents, tenancy agreements or other documents that refer to the previous age of majority, review those references to ensure they remain appropriate under the new law.

New Duties During Contract Negotiations

The new law gives greater attention to what happens before a contract is signed.

Parties negotiating a contract are expected to act in good faith. The law also introduces specific rules concerning information that should be disclosed during negotiations.

This means a legal dispute may arise not only from what the parties eventually agreed to, but also from how the negotiations were conducted.

For example, issues may arise where:

• Important information was deliberately withheld.
• One party acted in bad faith during negotiations.
• A party created reliance and then ended negotiations improperly.
• Confidential information obtained during negotiations was misused.

However, not every failed negotiation creates liability. The circumstances, conduct of the parties and actual loss will need to be considered.

Why does this matter for businesses?

Companies should review how they handle:

• Letters of intent
• Term sheets
• Preliminary agreements
• Confidentiality arrangements
• Due diligence
• Contract negotiations

The safest approach is to make sure important disclosures and negotiation records are properly documented.

Hardship Rules Have Changed

The new law also changes the treatment of hardship affecting contractual obligations.

A contract may become extremely difficult to perform because of circumstances that were not reasonably expected when the agreement was made.

The new framework gives courts broader powers in qualifying circumstances. Depending on the facts, the court may intervene in the contractual relationship rather than simply leaving the affected party to bear the entire burden.

This does not mean that every difficult or expensive contract can be cancelled.

The circumstances, contractual terms and legal requirements must be examined before relying on hardship.

What businesses should review

Businesses should pay particular attention to:

• Force majeure clauses
• Hardship clauses
• Price adjustment provisions
• Long-term supply contracts
• Construction contracts
• Commercial leases
• Agreements affected by major changes in circumstances

A contract clause that attempts to completely exclude a mandatory legal rule may not be effective.

Agreed Compensation and Liquidated Damages

Contracts often specify an amount that must be paid if one party breaches the agreement. The new law provides a more detailed framework for judicial intervention in agreed compensation.

A court may reduce agreed compensation in circumstances such as where:

• The agreed amount is excessive.
• The contract has been partly performed.
• The creditor contributed to the loss.

There are also rules concerning circumstances in which a creditor seeks compensation above the amount agreed in the contract.

Practical effect

Businesses should not assume that a contractual penalty will automatically be enforced exactly as written.

When preparing or reviewing contracts, it is worth checking whether the agreed compensation provisions are consistent with the new legal framework.

Changes Affecting Sales and Defective Goods

The new Civil Transactions Law also updates several rules relating to sales.

One important development concerns the scope of what may be sold. The rules are not limited to traditional physical goods and can apply to certain rights and intangible interests.

The law also provides more detailed rules concerning:

• Price determination
• Delivery
• Transfer of ownership
• Risk
• Defects
• Remedies available to buyers

Defective goods

The new framework changes the position of buyers dealing with certain defects.

Under the previous rules, the buyer's available remedies could be more limited. The new law provides circumstances in which a buyer may retain the item while also seeking a reduction in price. The applicable limitation period for certain latent defect claims has also changed.

If you are involved in a commercial sale, distribution agreement or purchase of significant assets, the warranty and defect provisions should be reviewed carefully.

Civil Companies Can Be Established by One Person

Another notable change concerns civil companies.

The new law allows a civil company to be established by a single person in circumstances permitted by the law, whereas the previous framework generally contemplated more than one founder.

The new rules also provide greater flexibility where a partner leaves a civil company, allowing the remaining business structure to continue in circumstances provided by law.

This may be relevant to professionals and businesses operating through civil company structures in the UAE.

Limitation Periods: A Change Businesses Should Not Ignore

One of the areas that deserves particular attention is limitation periods.

A limitation period determines how long a person may have to bring a particular legal claim.

There is no single limitation period that applies to every civil dispute in the UAE. The applicable period depends on the nature of the claim and may also be affected by specialised legislation.

Because the new Civil Transactions Law contains transitional provisions, businesses with existing disputes should not assume that the deadline applicable under the old law automatically remains unchanged.

If you already have a dispute

Check:

• When the cause of action arose.
• Which law previously applied.
• Whether the new law affects the applicable limitation period.
• Whether another federal or local law provides a different deadline.
• Whether any event interrupted or affected the limitation period.

Do not wait until the deadline is close before checking this.

What the New Civil Law Changes Mean in Practice

The replacement of the 1985 Civil Code is significant, but businesses and individuals should focus less on the headline and more on how the new rules affect their particular contracts and legal claims.

The most practical areas to review are:

• Contract negotiations - good-faith and disclosure obligations now have greater statutory importance.
• Existing agreements - transitional rules should be checked rather than making assumptions.
• Hardship provisions - long-term contracts may need closer review.
• Agreed compensation - penalty and liquidated-damages clauses should be checked against the new framework.
• Sale contracts - warranty and defect provisions may need attention.
• Civil companies - the new framework provides greater flexibility in certain structures.
• Limitation periods - pending claims should be checked carefully.
• Cross-border contracts - governing law and jurisdiction remain important.

The new UAE Civil Transactions Law is therefore not simply a new version of the old Civil Code. It introduces a reorganised framework that businesses, investors, property owners and individuals should understand when entering into new transactions or dealing with existing disputes.

Legal Consultation on the New UAE Civil Transactions Law

If you have a contract, civil dispute or pending claim that may be affected by the UAE New Civil Transactions Law a case-specific legal review can help clarify which provisions apply and whether any action is required.

Alaa ElHoushy Legal Consultancy provides legal consultation on civil disputes, contracts and related UAE legal matters. The applicable law can depend on the nature of the transaction, the contract terms, the date of the agreement and the relevant transitional provisions.

For a specific matter, seek legal advice before relying on a general summary of the new law.