The New UAE Civil Code
By Shahed Ahmed, Senior Associate
The UAE continues to develop its legal framework with the recent enactment of Federal Decree Law No. 25 of 2025 (the “New Civil Code”), which replaces and significantly reforms major components of the well-known and long-serving Federal Law No. 5 of 1985 (the “Old Civil Code”). The New Civil Code, which is expected to come into effect on 1 June 2026, is designed to modernise the UAE’s civil legal framework, streamline statutory overlap, strengthen contractual certainty and enhance protections across commercial activities. This article analyses how the latest amendments affect construction stakeholders.
Key Reforms
Judicial interpretation and hierarchy
Article 1 of the New Civil Code reconfirms that the courts are to apply the New Civil Code to all matters with no scope for interpretation where provisions are clear and unambiguous.1 However, the New Civil Code does grant courts the broader discretion to apply Islamic Shari’ah principles where no explicit or implicit statutory rule exists. Whilst the Old Civil Code directed the courts to consider the schools of Imam Malik and Imam Ahmad bin Hanbal in the absence of statutory rule in the first instance, Article 1 of the New Civil Code no longer refers to a specific school of jurisprudence or single Shari’ah principle:
“(2) Where no applicable legislative provision exists, the court shall adjudicate according to Islamic Sharia, selecting the most appropriate solution in accordance with public interest.”
So, in the absence of statutory provision, the courts shall look to Islamic Shari’ah for an appropriate solution that aligns with public interest. Where no rule of Shari’ah is found, Article 1 further guides the court to apply ordinary custom or alternatively find a solution that is fair and delivers justice.2 This may influence how a court approaches issues like unjust enrichment and contractual risk allocation, which are common issues that arise between parties on construction projects.
Further, Article 4 of the New Civil Code reinforces that special laws shall take precedence over general laws, directing the courts to specialised laws that may be relevant:
“(3) A special legal provision shall not be repealed or amended by a subsequent general provision unless expressly stated; the special provision shall prevail over the general provision within the matters it governs.”
This principle is further reinforced under Article 33 which provides that a specific provision prevails over a general provision. This is important in the context of construction disputes where overlapping laws may be applicable. As a result, reliance by parties on a general provision to support their position in a dispute may not be persuasive before the courts where a specific provision of law applies.
Autonomy to agree governing law
The Old Civil Code was prescriptive in terms of the governing law of the contract, which was based on either the state in which the parties were resident or, if the parties were resident in different states, the state in which the contract was concluded. Under Article 19(1) of the New Civil Code, however, the parties have the prerogative in the first instance to decide upon the governing law, and only in the absence of agreement between the parties will the default position apply.
Contract interpretation
The overarching principle under the Old Civil Code that clear terms agreed between contracting parties are to be given primacy is maintained under the New Civil Code. However, additional interpretation guidelines have now been incorporated, including amongst other things, that a contract will be interpreted “in a manner that achieves justice and good faith” and “according to the actual circumstances surrounding the contract at the time of its conclusion”;3 allowing courts the discretion to add context to contract terms rather than being strictly bound by the plain meaning of words.
Pre-contractual negotiations and disclosure obligations
A significant introduction is the express duties imposed in respect of pre-contractual obligations. Whilst pre-contractual negotiations shall not obligate a party to conclude the contract,4 Article 121 requires that pre-contractual negotiations, their conduct, and their termination “must be in accordance with the requirements of good faith”;5 any failure of which may result in a defaulting party being liable to compensate the actual damage suffered (although such damages shall not include expected benefits or loss of profit, unless otherwise agreed).6
Further, Article 121(4) provides that the deliberate failure to disclose material information affecting the validity of the contract shall be considered bad faith. Article 122 further expands on this, as follows:
“(1) A party to negotiations or contracts who knows information of decisive importance to the consent of the other party must inform them of it, unless the latter is presumed to know the information and has placed trust in the contracting party. Information of direct and necessary connection to the content of the contract and the status of the parties shall be considered material and decisive to the parties’ consent.
(2) Disclosure of material and decisive information is an obligation on both parties to negotiations and contracting, whereby each party must exercise due diligence in providing the other party with information and data relating to the negotiations, the contract to be concluded, and the circumstances of the contractual process.”
Article 122 is a mandatory provision as parties cannot limit, exempt or exclude the duty to disclose key information. As a result, care must be taken in supplying and exchanging information. This is particularly important within the construction industry where procurement is highly dependent on accurate pre-contractual information such as, for example, design intent, site conditions, geotechnical data, stakeholder requirements and time constraints.
The New Civil Code clearly increases the need for rigorous tender documentation and pre‑award diligence. Employers will therefore need to consider disclosure (and possibly draw attention to specific information) to contractors during the tender phase. Similarly, contractors must ensure accuracy of technical proposals, price breakdowns and necessary qualification and technical statements, because omissions or underpriced bids (with a view to negotiating the price after the project is won) could trigger liability. Furthermore, because liability can now arise during negotiations, parties using interim arrangements such as letters of intent or initial notices to proceed will need to consider robust controls to define the binding nature of such documents and clearly identify what information has been disclosed.
Framework agreements
Unlike the Old Civil Code, Article 138 of the New Civil Code defines framework agreements as “a contract by which the contracting parties determine the basic terms to which contracts concluded between them according to the provisions of this agreement shall be subject”. The ability for parties to agree core terms in advance, which then form the basis of subsequent call-offs is now recognised.
For construction parties with projects in the pipeline, this enhances business continuity and contractual efficiency providing some certainty around key risks and responsibilities, which in turn will reduce ambiguity and the need to renegotiate terms. This is particularly helpful for parties who work together regularly and / or those who intend to build long-term relationships.
Assignment of rights
Under the Old Civil Code, assignment was specific to the transfer of a debt and claim, however the New Civil Code now refers to assignment of rights more generally. Article 405 states:
“The creditor may assign his right to a third party unless the assignment is prohibited by law, by agreement, or by virtue of the nature of the obligation. The assignment shall be valid without requiring the debtor’s consent.”
Significantly, the debtor’s consent is no longer required in order for the assignment to be valid, however the New Civil Code provides that the debtor must nevertheless be notified of the assignment.
Furthermore, the New Civil Code provides clear statutory protections for assignees. First, where assignment is made for consideration, Article 411 imposes on the assignor a warranty that the right to assign exists. If no such right existed, Article 413 stipulates that the assignor must return the consideration and reimburse the assignee’s expenses. Additionally, if it was known that no such right existed, the assignor will be liable to pay damages.
Greater clarity in respect of assignments is a welcome change, with assignment between parties on construction projects being clearer, with stronger protections for assignees.
Latent defects
The New Civil Code provides that a defect will be considered “latent” (or “hidden”), if it is:
“pre‑existing, having existed prior to the sale, or arose thereafter while the item remained in the seller’s possession and before delivery, and if such defect is not ordinarily discernible through normal inspection, or would not be detected by a person of average attention, or cannot be discovered except through an expert examination or practical testing”.7
Parties typically rely on decennial liability for structural defects, but this amendment enhances remedies for non‑structural issues (e.g. finishes, fixtures). Also, the available remedies are now expanded. Whereas in the Old Civil Code the buyer could either return the defective goods or accept them at the agreed price, Article 495 now gives the buyer the option to retain the goods and claim a proportional reduction in price relative to the defect.
Notably, the New Civil Code also clarifies that the seller could avoid consequences if replacement goods are provided without defect. This may encourage parties to reach an amicable solution, as opposed to raising a formal dispute immediately.
In addition, the New Civil Code extends the limitation period for latent defects claims from six months to one year from the date of delivery, unless the seller has expressly guaranteed the goods for a longer period. The lengthier prescription period strengthens buyer protection as they benefit from more time to discover, and subsequently pursue, claims against contractors and suppliers for latent defects.
Disclaimer: The author has relied upon an unofficial translation of the New Civil Code when drafting this article; and, therefore, the contents herein should be considered in that context.
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