Federal Decree-Law No. (25) of 2025 issued a new UAE Civil Transactions Law, expressly repealing the prior Federal Law No. (5) of 1985 (the “Old Civil Law”). Under the Decree-Law, the New Civil Law is scheduled to enter into force on 1 June 2026 (Decree-Law Article (2) on repeal; Decree-Law Article (3) on effective date).

Below is an overview of the key substantive changes introduced by the 2025 Civil Transactions Law (the “New Civil law”).

1) Contract lifecycle: negotiations, disclosure, confidentiality, and fairness

These are among the most commercially important changes—especially for M&A, JV negotiations, long-term supply arrangements, franchising, agency, and major procurement.

A. Pre-contract negotiations: explicit good-faith duties and liability for bad faith

Under Article (121), the New Civil Law codifies that pre-contract negotiations must be conducted, continued, and broken off in good faith, and that bad-faith negotiation/termination creates liability for actual damages (excluding expected profits from the unfinalized deal, unless agreed otherwise). The Old Civil Law had no express “pre-contract negotiation” regime in this form.

B. Duty to disclose “decisive” information, and invalidity consequences

Article (122) introduces an express duty of disclosure: if one party knows information that is decisive to the other party’s consent, it must be disclosed in defined circumstances; parties cannot contract out of this duty, and breach can support rescission/avoidance.

C. Confidentiality of negotiation information

Using or disclosing confidential information obtained during negotiations without permission triggers liability under general rules (Article (123)).

D. Contract interpretation: a broader fairness/good-faith framing

While the Old Civil Law contained key interpretation rules, the new Article (120) consolidates and expands interpretive principles in a way that expressly emphasizes justice and good faith between the parties.

E. Contracts formed through modern communication methods

The New Civil Law clarifies timing and place of formation where parties are “present” via communications despite being in different locations (Article (132)).

2) Transfer of rights: introducing a modern “assignment of rights” regime

A. “Assignment of rights” (حوالة الحق) is expressly regulated

The New Civil Law (Articles (405) – (413)) creates a clear framework allowing a creditor to assign its right without requiring the debtor’s consent (subject to legal/contractual/nature limits), alongside notice/acceptance mechanics and related protections. The Old Civil Law’s “Assignment” “حوالة” chapter was framed primarily around transfer of debt (e.g., definition in Article (1106): “نقل الدين والمطالبة…”), not a standalone modern “assignment of rights” track.

B. Assignment includes securities and matured instalments (high relevance to finance)

Under Article (409), the New Civil Law states expressly that assignment includes guarantees (surety, privilege/lien, pledge/mortgage) and includes instalments that have fallen due.

3) Companies (Civil Company) and the introduction of the “Professional Company” regime

This is a major reform area.

A. One-person company and reinvestment of profits (expressly recognized)

Article (603) introduces express exceptions allowing:

1. establishing/owning a company by one person, and
2. reinvesting net profits to achieve the company’s purposes (subject to applicable legislation).

B. Civil vs commercial company classification; deference to the Commercial Companies Law

The New Civil Law states that a company is civil if its activity is non-commercial, and commercial if its activity is commercial or it adopts a commercial company form—then it is governed by the Commercial Companies Law (Article (606)). The Old Civil Law did not contain an express equivalent article framing this classification.

C. Fiscal year rules are introduced

Article (609) introduces detailed rules on a company’s financial year, including limits for the first financial year and standardized subsequent periods.

D. “Professional Company” is codified (new section)

Articles (645)–(654) create a dedicated framework for professional companies (licensing-based professional practice vehicles), covering naming, partner restrictions, transfer restrictions, liability for professional faults, and dissolution triggers tied to licensing.

4) Employment contract rules: expanded duties, modern tipping systems, non-compete safeguards, and more termination grounds

Even with the UAE Labour Law governing most employment relationships, these civil-code provisions matter in interpretation, gap-filling, and certain categories of work.

A. Tips (“إكرامية”) and electronic pooling systems

Article (846) modernizes the tipping concept by recognizing pooling through a shared electronic system.

B. Expanded employee duties (confidential info, documents—paper and electronic, emergency assistance, medical checks)

The enumerated duties of the worker (including modern confidentiality and document-retention issues) are significantly expanded under Article (848).

C. Non-compete: explicit “full capacity at signing” condition

Article (851) adds an express condition that the employee must be of full age/capacity at the time of agreement for the non-compete to be valid (in addition to scope/time/place limits).

D. Employment termination: broader list of grounds (including insolvency/closure/regulatory conditions)

The termination grounds are expanded substantially (e.g., final imprisonment sentence threshold, closure, bankruptcy/insolvency, exceptional economic reasons, work permit renewal issues) (Article (864)).

5) Construction/contracting: decennial liability plus subcontractor rules

A. Decennial liability is clarified/expanded (including safety-threatening defects) and subcontractor recourse

The New Civil Law clarifies that the decennial warranty does not prejudice the contractor’s recourse against subcontractors (Article (821)).

B. Subcontracting is expressly regulated (new)

(Articles (832)–(833)) introduce an express subcontractor framework: the main contractor may subcontract unless prohibited, remains responsible to the employer, and the subcontractor’s claims against the employer are restricted absent assignment.

6) Insurance: “Takaful” is expressly recognized

The concept of mutual takaful insurance is expressly introduced and is tied to applicable legislation (Article (967)).

7) Sources of law, interpretation, and time calculation

A. Expanded “fallback” sources where no statutory text exists

The New Civil Law refines the hierarchy of legal sources and expressly adds “natural law and rules of justice” as a fallback when no text, no applicable Sharia rule, and no custom are available (Article (1)).

B. “Special overrides general” is stated explicitly as a legal rule

In Article (33), the New Civil Law states plainly that the special rule restricts the general rule—a principle that is often critical in disputes where parties rely on general provisions to avoid a specific one.

C. Gregorian calendar replaces “solar/lunar” counting in core rules

 Article (9) clarifies that time is calculated by the Gregorian calendar, which directly impacts deadlines and age-related rules.

8) Unjust enrichment and restitution: broader recovery (including benefits)

The New Civil Law strengthens restitution by explicitly requiring the return not only of the principal but also benefits and increases in unjust enrichment scenarios (Article (274)).

9) Private international law: choice of law and nationality rules

A. Party autonomy is placed first; and “place of performance” replaces “place of contract”

For cross-border contracts new Article (19) prioritizes the parties’ express choice of law and changes the default connecting factor (when no choice exists) to the state of the principal performance (instead of the place where the contract was concluded).

B. Multiple nationalities: a new practical tie-breaker

Where a person holds multiple nationalities, Article 25 introduces a specific rule: apply the law of the nationality under which the person entered the UAE. The old approach was bundled into Article (24) without this “entered the state” tie-breaker.

10) Capacity and personal status (high-impact change)

A. Age of majority is now 18 Gregorian years (instead of 21 lunar years)

This is one of the most consequential reforms for day-to-day transactions: full civil capacity now attaches at 18 years (Gregorian) (Article (84)).

B. Age of discernment is tied to Gregorian years

The New Civil Law also ties discernment thresholds to Gregorian time (Article (85)).

C. Names/surnames: new baseline rule and delegation to special legislation

Article (91) adds an express rule that every person has a name and surname, and that the surname attaches to children—while referring regulation of naming to a special law. Article (91) of the Old Civil Law focused mainly on protection from unlawful use/impersonation, without the same foundational rule.

11) Gifts: revocation grounds expanded to cover engagement gifts

A practical change for individuals (and dispute risk): if a gift is made between fiancés and the engagement ends due to the donee’s withdrawal, it becomes an express ground for revocation (Article (583)).

12) Real estate and property rights: possession/prescription and Musataha reforms

A. Possession/prescription shifts toward “acquisition” language and shorter good-faith period

The New Civil Law recasts long possession into a route to acquiring ownership/right, not merely barring claims from being heard, and it reduces the good-faith/valid-cause period.

• New law:
  • Article (1218): acquisition after 15 years (for unregistered property/rights, with conditions)
  • Article (1219): acquisition after 5 years with good faith + valid cause
• Old Civil Law :
  • Article (1317): “non-hearing” of ownership/real-right claims after 15 years
  • Article (1318): the reduced period was 7 years (not 5)

 B. Waqf/inheritance “non-hearing” rule retained but expanded with clearer protections

Article (1220) retains the 33-year framework but broadens the protective perimeter (including explicit administrative removal powers for encroachments).

C. Musataha is modernized: registration, validity, and a more detailed operational regime

The New Civil Law introduces a more regulatory, registration-based approach (including invalidity for unregistered dispositions) and more detailed obligations and termination triggers.

Key examples:

• Definition and scope: New Article (1254) vs Old Article (1353)
• Formation/registration + invalidity: New Article (1255) (not expressed in the same way in the old musataha provisions)
• Termination grounds and shorter default non-payment trigger: New Article (1260) vs Old Article (1358)
• Default termination notice rule if duration not set: New Article (1258) vs Old Article (1356)

13) Co-ownership management: shorter objection window

Where common property is managed by a qualified majority of co‑owners, the period available to a dissenting co‑owner to challenge the decision has been shortened, as Article (1056) now requires any objection to be filed within 30 days, whereas under the Old Civil Law, Article (1157) allowed a longer period of two months for raising such a challenge.

14) Lease (Ijarah): assignment and sublease rules are substantially expanded

The Old Civil Law regulated subleasing through a single, general provision under Article (787). By contrast, Article (729) of the 2025 Civil Transactions Law introduces a more comprehensive and structured framework governing the assignment of the lease and subleasing, including the requirement of written consent, the alignment of the sublease term with the original lease, and the legal consequences arising from the termination of the principal lease on any subsequent assignment or sublease arrangements.

Practical implications before 1 June 2026

Because the New Civil Law becomes effective on 1 June 2026 (Article (3)), businesses and individuals should consider:

1. Contract templates & negotiation playbooks
   • Update negotiation protocols, NDAs, and term sheets to address good faith negotiation, disclosure duties, and confidential negotiation information.
2. Finance documentation
   • Review assignment clauses and security packages to align with “Assignment of Rights” “حوالة الحق  rules.
3. Company structuring and professional practices
   • Re-check whether a structure falls under civil vs commercial classification and consider implications of the professional company regime.
4. Real estate holdings and long possession situations
   • Evaluate any “long possession” files and musataha arrangements.
5. Construction risk management
   • Update contracting, supervision, and subcontracting clauses to reflect the new express rules.

For further information on how the new Civil Law may affect your business, including restructuring, governance, and investment considerations, please contact

Ahmed Hadeed
a.hadeed@hadeedpartners.ae

This article is current as of 10 January 2026 and is intended for general information purposes only. It does not constitute legal advice. For specific guidance on your transaction, please contact our team.

© Hadeed & Partners 2026