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The new law sets out that pre-contractual negotiations must be conducted in good faith from start to finish, the Federal Decree-Law No. 25 of 2025 states. Negotiations themselves do not bind parties to conclude a deal, yet breaking them off in bad faith triggers liability for the counterparty’s actual damages. The statute imposes a duty to disclose information that is fundamental to the other party’s decision to contract, with nondisclosure qualifying as bad faith. This framework builds on but significantly expands the good faith concept that existed under the prior legislation.
The legislation further defines framework agreements that allow parties to fix essential terms for a series of future contracts, according to the law’s text. Once established, the framework becomes part of those later agreements unless the parties expressly or implicitly decide otherwise. The innovation seeks to lower transaction costs and deliver predictability in long-term commercial arrangements prevalent in the UAE market. Legal observers note that this will facilitate more efficient business operations in sectors reliant on repeated transactions.
Federal Decree-Law No. 25 of 2025 replaces the entire 1985 Civil Transactions Law with a new set of 1,422 articles organised into four books, the official promulgation shows. The recodification eliminates overlaps with more recent specialist statutes while unifying legal principles across civil matters. It forms part of a wider trend of civil law modernisation across the Gulf Cooperation Council states, a Squire Patton Boggs client update reported. The reform provides clearer language and structures better suited to contemporary commercial realities in the region.
Updates to provisions governing muqawala or contract for work agreements will particularly affect the construction industry, which represents a key pillar of the UAE economy, according to a K&L Gates thought leadership piece.
The relevant articles have been renumbered and revised to incorporate the new pre-contractual obligations and other modern considerations such as limitation periods. Industry participants have updated their contract templates in response to the changes that took effect on 1 June 2026.
Businesses across the UAE have begun adjusting their negotiation protocols and disclosure practices to align with the mandatory requirements, multiple law firm briefings issued in the first half of 2026 indicated. The inability to exclude the disclosure obligation by contract means parties must proactively share decisive information or risk contract annulment or damages claims. This development is expected to foster greater transparency in dealings ranging from corporate mergers to everyday trade agreements.
The code also refines rules on contractual interpretation, placing emphasis on the shared intent of the parties and the contract’s purpose when literal terms are unclear, a Mayer Brown publication examining the new civil code explained. It provides distinctions between offers and invitations to treat in the context of advertisements and other communications. Further adjustments address defects in products, effects on third parties and various other civil transaction elements to create a more cohesive legal environment.
