New UAE Civil Transactions Law (Federal Decree-Law No. 25 of 2025)

16 March 2026

The United Arab Emirates has undertaken one of the most significant legislative reforms in its modern legal history through the enactment of Federal Decree-Law No. 25 of 2025, issuing the new Civil Transactions Law, which repeals and replaces Federal Law No. 5 of 1985.
Set to take effect on 1 June 2026, this reform represents a full recodification of the UAE’s civil law framework rather than a simple amendment of existing provisions.
It reflects a strategic legislative effort to modernise, harmonise, and strengthen private law in line with the country’s evolving economic, commercial, and social landscape.
For businesses, investors, legal practitioners, and individuals, the new law introduces structural changes that reshape foundational principles governing contracts, property rights, liability, civil capacity, and judicial interpretation.
Its adoption signals the UAE’s commitment to reinforcing legal certainty while aligning domestic civil law with contemporary international standards.

From Incremental Amendments to Comprehensive Recodification

For nearly four decades, the Civil Transactions Law of 1985 served as the backbone of private law in the UAE. However, rapid economic development and digital transformation exposed limitations in the previous framework. Federal Decree-Law No. 25 of 2025 restructures the legal architecture by:

• Consolidating prior amendments to create a more cohesive legal system.
• Removing outdated concepts and introducing clearer statutory language to reduce ambiguity.
• Enhancing predictability in legal interpretation and application across the Emirates.

Modernising Legal Capacity and Age of Majority

One of the most notable changes concerns legal capacity, aligning civil status with international standards. The new law significantly adjusts age requirements to reflect modern societal and economic realities:

• Age of Majority: Reduced from 21 lunar years to 18 Gregorian years.
• Full Civil Capacity: Individuals reaching 18 years generally enjoy the full right to enter contracts and manage assets without guardianship.
• Minor Management: The age at which a minor may seek judicial permission to manage personal assets is lowered from 18 to 15 Gregorian years, subject to court oversight.

Strengthening Contractual Principles and Good Faith

The new Civil Transactions Law significantly refines contractual doctrine. It elevates the principle of good faith to a central governing standard applicable not only to performance but also to pre-contractual negotiations.
Parties are explicitly required to act transparently and honestly during negotiations. Failure to disclose material information or engaging in bad-faith conduct may generate liability even if negotiations do not culminate in a binding contract. This codification enhances accountability and reduces uncertainty surrounding disputes arising from failed transactions.
Contract formation rules have also been modernised to formally recognise electronic communications, digital signatures, and conduct-based acceptance as valid methods for concluding agreements. In an era dominated by digital contracting platforms and remote business operations, this clarification ensures that modern commercial practices are firmly supported by statutory authority.
Furthermore, doctrines relating to mistake, misrepresentation, duress, and exploitation have been clarified and expanded. Courts are granted clearer authority to intervene where contractual imbalance or defective consent results in manifest unfairness. This strengthens judicial capacity to uphold fairness while respecting party autonomy.

Force Majeure, Hardship, and Risk Allocation

The reform provides a detailed codification of how to handle unforeseen disruptions, distinguishing between different levels of impossibility:

• Force Majeure: Addressed as an absolute impossibility of performance.
• Hardship: Situations where performance remains possible but becomes "excessively burdensome" due to unforeseen circumstances.
• Judicial Modification: In hardship cases, courts may modify obligations to restore balance rather than immediately terminating the agreement.

Civil Liability and Enhanced Remedies

Federal Decree-Law No. 25 of 2025 refines the legal framework governing civil liability and damages. It provides clearer guidance on causation, contributory negligence, and joint liability, thereby improving consistency in tort adjudication.
Importantly, the law strengthens recognition of moral damages alongside material compensation. It clarifies the scope of recoverable harm and provides courts with structured principles for assessing damages. This development aligns UAE civil liability standards with broader international practices and ensures comprehensive remedies for wrongful acts.

Property Rights and Corporate Civil Provisions

Modernisation extends to property-related provisions, clarifying ownership rights, possession protections, and assignment mechanisms. The law strengthens legal remedies available to property owners against unlawful interference while refining procedural safeguards related to proprietary disputes. Additionally, corporate civil provisions have been updated to better support entrepreneurial activity:

• Regulation Updates: Clearer rules for single-person companies and partnership continuity.
• Liquidation Processes: Refined procedures for partner withdrawal and liquidation.
• Legislative Harmony: Civil law rules are now more closely aligned with contemporary corporate legislation.

Judicial Interpretation and Legal Hierarchy

The reform clarifies interpretative methodology by establishing a structured hierarchy of legal sources. Courts must first rely on explicit statutory language. If provisions are ambiguous or silent, reference may be made to principles derived from Islamic jurisprudence, local custom, and general principles of justice, provided they do not conflict with public order.

Transitional Application and Practical Implications

As the 1 June 2026 implementation date approaches, businesses and legal practitioners must prepare for the transition. While contracts concluded before the effective date may continue under prior rules in certain respects, transactions and disputes arising after implementation will generally fall under the new framework.
Businesses should proactively review contractual templates, risk allocation clauses, and governance policies to ensure compliance with the updated regime.

Conclusion

Federal Decree-Law No. 25 of 2025 represents a transformative milestone in the development of UAE civil law. By replacing the 1985 Civil Transactions Law with a modern and comprehensive code, the legislature has undertaken a structural reform designed to reflect economic progress and contemporary legal practice.
As implementation approaches in June 2026, stakeholders should prepare for practical adjustments and strategic legal review to align with the new framework.

MIS Legal supports clients in navigating the transition to the new Civil Transactions Law, offering strategic advisory services, contract review, compliance guidance, and dispute resolution support to ensure seamless adaptation to the updated legal regime.