TRW & Co · Corporate & Commercial
Commercial Contracts in the UAE
Commercial contracts in the UAE now sit under a new civil code. Since 1 June 2026, the Civil Transactions Law has imposed good-faith negotiation and disclosure duties, changed the default rules on assignment and tightened signing authority. This guide explains the framework onshore and in the DIFC and ADGM, and what to change in your templates and practices.
Key pointUnder the 2026 civil code a general power of attorney no longer covers agreeing to arbitrate, settle or sell, so an arbitration clause signed by an under-authorised manager can be attacked and the dispute pushed back into the onshore courts.
At a glance
New civil code in force
Federal Decree-Law No. 25 of 2025 replaced the 1985 Civil Transactions Law on 1 June 2026 and applies to contracts concluded from that date.
Disclosure cannot be excluded
Parties must disclose information of decisive importance to the other side’s decision to contract; the duty cannot be contracted out, and breach may support annulment.
Assignment without consent
A creditor can generally assign contractual rights without the debtor’s consent unless the law, contract or nature of the right prevents it, so restrictions must be drafted.
Special authority needed
Sales, settlements, mortgages, acknowledgements and arbitration agreements require a special power of attorney identifying the act; a general power is not enough.
Three legal systems
Onshore federal civil law, DIFC contract law and English common law in ADGM each apply different rules, courts and languages to the same deal.
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What commercial contracts in the UAE cover
Commercial contracts in the UAE are the agreements that run a business: supply and purchase terms, services and outsourcing agreements, distribution and licensing deals, technology and SaaS contracts, framework agreements with key customers, guarantees, and the confidentiality and settlement agreements that sit around them. Getting them right decides whether you are paid, whether you can exit, and where any dispute will be heard.
2026 is a turning point. The new Civil Transactions Law, Federal Decree-Law No. 25 of 2025, replaced the 1985 civil code on 1 June 2026. It changes the rules on negotiations, disclosure, assignment, transfers of debt and signing authority, and it applies to contracts concluded from that date. Templates that worked for years now need review.
Contracts become a legal question earlier than most managers expect: when negotiations start, because good-faith duties now apply before signature; when a counterparty asks to assign or change the deal; when performance goes wrong; and when the business needs to enforce a payment or end a relationship. This page explains the framework and the practical decisions at each stage.
The legal framework for commercial contracts in the UAE
Federal civil and commercial law
Onshore, the Civil Transactions Law (Federal Decree-Law No. 25 of 2025) supplies the general law of contract: formation, validity, interpretation, performance, termination and compensation. The Commercial Transactions Law (Federal Decree-Law No. 50 of 2022) governs commercial acts, commercial sales, commercial agency and representation, banking operations and cheques, and takes priority on those topics. The Ministry of Economy and Tourism publishes the commercial legislation on its commercial transactions page.
Specialist statutes then apply by subject: the commercial agencies law for registered agencies, the consumer protection law for consumer-facing terms, the competition law for restrictive clauses, the Personal Data Protection Law for data processing, and the Electronic Transactions and Trust Services Law (Federal Decree-Law No. 46 of 2021) for electronic contracting and signatures.
The DIFC, ADGM and free zones
The two financial free zones have their own civil and commercial law. The DIFC has a codified common-law contract law, and the ADGM applies English common law directly under its application regulations. Contracts between parties in those centres, or that choose their law, are interpreted with familiar common-law tools, and disputes can be heard by the DIFC Courts or ADGM Courts. Other free zones generally apply federal civil and commercial law to contracts, with their own company and licensing rules.
| Issue | Onshore (federal) | DIFC | ADGM |
|---|---|---|---|
| Core contract law | Civil Transactions Law 2025 and Commercial Transactions Law 2022 | DIFC contract legislation on common-law lines | English common law as applied in ADGM |
| Good faith | Express duty in negotiation and performance | Recognised in the DIFC statute | Limited, as in English law, unless the contract provides |
| Agreed damages | Courts have traditionally been able to adjust agreed compensation to the actual loss | Common-law penalty principles | English penalty doctrine |
| Language of courts | Arabic; certified translations needed | English | English |
| Default forum | Onshore courts of the relevant emirate | DIFC Courts | ADGM Courts |
What the new Civil Transactions Law changes
For commercial contracts in the UAE concluded from 1 June 2026, the most important practical changes are in pre-contract conduct, assignment and authority. The law applies prospectively, with transitional rules for limitation periods that were still running when it came into force. Our article on the new UAE Civil Transactions Law covers the wider changes.
Good-faith negotiation
Parties must start, conduct and end negotiations in good faith. A party that walks away in bad faith may be liable for the other side’s actual losses, although not, unless agreed, for the lost benefit of the contract.
Mandatory disclosure
Each party must disclose information of decisive importance to the other’s decision to contract where the other side does not know it or relies on the discloser. The duty cannot be excluded, and breach may support annulment.
Confidential negotiations
Unauthorised use or disclosure of confidential information received during negotiations may create liability, even without a signed NDA. A written NDA still adds clarity on scope and remedies.
Framework agreements
Framework agreements are recognised and, unless the parties agree otherwise, form part of the contracts made under them. Master supply and services agreements should say how they interact with purchase orders.
Assignment and debt transfer
A creditor can generally assign a right without the debtor’s consent unless restricted by law, contract or the nature of the right. A transfer of debt needs creditor consent, and silence after a reasonable period counts as refusal.
Signing authority
A general power of attorney covers management and preservation acts only. Sales, settlements, mortgages, acknowledgements and agreements to arbitrate need a special power identifying the specific act.
Check who is signing. Under the new civil code, a manager or employee relying on a general power of attorney may not have authority to agree an arbitration clause, a settlement or a sale. For important contracts, ask for the counterparty’s trade licence, constitutional documents and a specific board resolution or special power of attorney, and keep copies on file.
Key drafting decisions for commercial contracts in the UAE
Most disputes over commercial contracts in the UAE trace back to a small number of clauses. Treat these as decisions, not boilerplate.
Governing law and forum
Parties may choose foreign law for most commercial contracts, but onshore courts will apply UAE mandatory rules and public order, and foreign law must be proved as a fact. Choosing arbitration seated in the DIFC, the ADGM or a recognised foreign seat, or opting into DIFC Courts jurisdiction, often gives more predictable procedure in English. Read our guide on governing law and jurisdiction clauses and our page on UAE-seated arbitration.
Liability, indemnities and agreed damages
Exclusion and limitation clauses are generally respected between businesses, but UAE law does not allow a party to exclude liability for its own fraud or gross error, and courts read limitation clauses against the party relying on them. Onshore courts have traditionally had power to adjust pre-agreed compensation so that it reflects the actual loss, so liquidated damages should be a genuine estimate supported by a recorded rationale. See our guide to limitation of liability, indemnities and warranties.
Price, payment and security
Define the price, currency, invoicing trigger, payment period and the consequence of late payment. Where credit exposure is significant, take security: a parent guarantee, a bank guarantee, retention of title or a registered security interest over movables. Because published commentary on the new civil code identifies a short window for suing a guarantor of a commercial debt after it falls due, guarantee wording and diary dates deserve particular care.
Change, termination and hardship
Spell out the grounds for termination, notice and cure periods, and what happens to work in progress, stock and data on exit. UAE law allows a court to rebalance obligations where exceptional, unforeseeable events make performance excessively onerous, and it recognises force majeure. Rather than relying on general law, set out a practical change mechanism. Our article on force majeure and hardship explains the options.
Language and execution
English-only contracts are common and valid between businesses, but onshore litigation runs in Arabic and requires certified translation. Bilingual contracts should state which version prevails. Electronic signatures are recognised, with qualified electronic signatures from TDRA-listed providers carrying the same effect as a handwritten signature, but documents that need notarisation or registration still require those formalities. See Arabic and English contracts.
Specific rules by contract type
General contract law is only the starting point. Different categories of commercial contracts in the UAE attract their own statutory overlays, and the overlay often matters more than the general rules.
- Supply and sale of goods. The Commercial Transactions Law governs commercial sales, including delivery, inspection and the buyer’s remedies. Retention of title and security over stock are best supported by registration under the movables security regime. See our page on procurement and supply contracts.
- Services and outsourcing. Service levels, service credits and step-in rights need precise drafting. Regulated businesses such as banks and insurers face their own outsourcing rules from the Central Bank and the financial free zone regulators.
- Technology and data. Where personal data is processed, the Personal Data Protection Law onshore, or the DIFC and ADGM data protection regimes, require controller and processor terms and transfer safeguards.
- Distribution and agency. A notarised and registered commercial agency attracts statutory protection that ordinary distribution does not, so labels and paperwork matter.
- Construction and projects. Decennial liability and other mandatory civil code rules apply to building works, whatever the contract says.
- Consumer-facing terms. Terms with consumers must comply with the consumer protection law, including Arabic information, warranties and pricing transparency.
Payment enforcement also depends on the instrument. Under the Commercial Transactions Law, a dishonoured cheque can be taken directly to the execution judge without a prior judgment, and the Civil Procedure Law offers a summary order-for-payment route for liquidated, documented debts. Contracts and invoices that are clear on the amount and due date make those fast routes easier to use, which is a strong commercial reason to draft them carefully.
From negotiation to signature: a practical process
- Qualify the counterparty. Check the trade licence, licensing authority, legal form, beneficial ownership and sanctions exposure, and confirm whether the counterparty is onshore, in a free zone, or in the DIFC or ADGM.
- Set the negotiation rules. Record that discussions are subject to contract and confidential, identify who may negotiate, and keep a record of material information disclosed, given the new disclosure duty.
- Choose the framework. Decide governing law, forum, language and whether a master agreement with call-off orders suits the relationship better than a single contract.
- Draft the risk clauses. Agree scope and specifications, price and payment, security, liability caps, indemnities, intellectual property, data protection, compliance and termination.
- Verify authority. Obtain board resolutions or special powers of attorney for signatories, especially where the contract includes arbitration, settlement, sale or security.
- Execute properly. Sign by wet ink or an appropriate electronic signature, complete any notarisation, attestation or registration, and circulate a signed final copy to all parties.
- Manage the contract. Load key dates, renewal windows, notice addresses and obligations into a contract register, and assign an owner for each significant contract.
Documents and evidence to keep
When commercial contracts in the UAE are disputed, the court or tribunal will rely heavily on documents. Onshore courts expect written evidence and translations; arbitral tribunals expect organised bundles. Keep the following from day one.
- The signed contract, schedules, amendments, side letters and the purchase orders or statements of work issued under it.
- Pre-contract correspondence, term sheets and records of what was disclosed during negotiations.
- Corporate authority documents for both sides: trade licences, constitutional documents, resolutions and powers of attorney.
- Delivery notes, acceptance certificates, timesheets and service reports proving performance.
- Invoices, statements of account and any acknowledgement of debt, which are valuable in payment proceedings.
- Notices of breach, cure, suspension and termination, with proof of delivery to the contractual address.
- Guarantees, security documents and registration certificates.
The best evidence in a UAE contract dispute is usually a short, dated document written before anyone was thinking about a dispute.
Risks and common mistakes
Using pre-2026 templates without review
Templates written for the 1985 civil code may contain assignment clauses that no longer achieve their purpose, disclosure exclusions that are now ineffective, and signing blocks that assume a general manager can bind the company to arbitration. Review standard terms, master agreements and NDAs for contracts concluded from 1 June 2026, and record which template version applies to which contract. Our page on contract remediation explains how to run a portfolio review efficiently.
Relying on a foreign governing law without a forum plan
Choosing English or Singapore law but leaving disputes to onshore courts means foreign law must be proved by experts, in Arabic translation, and may be displaced by UAE public order. If you choose foreign law, pair it with arbitration or a forum that can apply it efficiently, and check where the counterparty’s assets are so that the award or judgment can be enforced.
Letting authority go unchecked
An arbitration clause signed by someone without authority may be challenged, which can push the dispute into the onshore courts against your wishes. The same applies to settlements and acknowledgements of debt. Ask for evidence of authority when signing, especially with family-owned groups where the licence manager may not be the decision-maker.
Missing notice formalities
Many disputes turn on whether a termination or claim notice was validly served. Contracts should give physical and email addresses, say when notices are deemed received, and require changes of address to be notified. Serve notices exactly as the contract requires and keep proof of delivery.
Overreaching restrictive clauses
Exclusivity, non-compete and pricing restrictions in supply and distribution contracts are subject to the competition law, whose Executive Regulations took effect on 30 July 2026. Consumer contracts must also comply with the consumer protection law. Overreaching clauses risk being unenforceable and can attract regulatory attention, so keep restrictions proportionate and documented.
Cross-border contracting from and into the UAE
Many commercial contracts in the UAE involve a foreign counterparty. For enforcement, the UAE is a party to the New York Convention, and onshore courts now routinely recognise foreign arbitral awards. Foreign court judgments are enforced under the Civil Procedure Law and any applicable treaty, and the position differs by country, so check it at the drafting stage. Our page on cross-border contracting covers the detail.
Counterparties in Saudi Arabia and the wider GCC operate under civil-law systems with their own rules on contract language, penalty clauses and agency. Indian and Bangladeshi suppliers often prefer their home law, but enforcement against their UAE assets is easier with arbitration. Chinese counterparties increasingly accept Hong Kong, Singapore or DIFC-seated arbitration. UK and Singapore parties usually want English or Singapore law; that can work, but onshore public-order rules still apply to performance in the UAE.
TRW & Co coordinates across its Dhaka, Singapore, London and Dubai teams so that the governing law, the forum and the enforcement plan are aligned with where each party actually holds assets.
How TRW & Co helps with commercial contracts in the UAE
We draft, review and negotiate commercial contracts in the UAE for suppliers, customers, investors and service providers, and we help businesses update their templates for the 2026 civil code. Where representation before UAE onshore courts or the DIFC/ADGM Courts is required, we work alongside locally licensed advocates and registered practitioners.
Template refresh
We update standard terms, master agreements, NDAs and purchase order terms for the new Civil Transactions Law, including disclosure, assignment and authority provisions.
Deal drafting and negotiation
We draft and negotiate supply, services, outsourcing, licensing and framework agreements, with governing law and forum chosen around enforcement.
Portfolio review
We audit contract portfolios for renewal dates, change-of-control clauses, liability exposure and restrictive covenants, often ahead of a transaction or restructuring.
Disputes and exits
We advise on breach, termination, settlement and recovery strategy, and coordinate litigation and arbitration counsel when proceedings are needed.
Related pages: commercial terms and conditions, distribution and agency agreements, digital signatures and e-transactions and commercial litigation. Explore our practices or contact us at info@trw.co.
Checklist for decision-makers
- Have our standard commercial contracts in the UAE been reviewed for the Civil Transactions Law in force since 1 June 2026?
- Do we know which contracts were concluded before and after that date, and which rules apply to each?
- Do our negotiation practices record what material information was disclosed to counterparties?
- Are governing law, forum and language chosen with enforcement against the counterparty’s assets in mind?
- Do signatories hold special authority for arbitration, settlement, sale and security?
- Are liability caps, indemnities and agreed damages supported by a documented rationale?
- Are assignment, change-of-control and transfer clauses drafted for the new default rules?
- Is there a contract register with renewal dates, notice addresses and an owner for each key contract?
Businesses that treat commercial contracts in the UAE as a managed portfolio, rather than a pile of signed documents, are better placed to collect, renegotiate and exit on their own terms. For a foundation guide, read our article on contract law in the UAE.
Frequently asked questions
01Does the new Civil Transactions Law apply to contracts signed before 1 June 2026?
Generally no. Federal Decree-Law No. 25 of 2025 applies to contracts and transactions concluded from 1 June 2026, so earlier contracts continue to be governed by the rules in force when they were made. There are transitional rules for limitation periods that had not expired on that date. Amendments and renewals agreed after 1 June 2026 may bring the new rules into play, so record the date and nature of every variation.
02Can we choose English law for a contract performed in the UAE?
Yes, for most commercial contracts between businesses. Onshore courts will apply UAE mandatory and public-order rules regardless, and foreign law must be proved as a fact through experts and translations. English law works best when paired with arbitration or a DIFC or ADGM forum. Some contracts, such as registered agencies, real estate and employment, are subject to mandatory UAE rules whatever law is chosen.
03Must a commercial contract in the UAE be in Arabic?
No general rule requires a business-to-business contract to be in Arabic, and English contracts are widely used. Onshore courts, however, work in Arabic and will require a certified translation of the contract and evidence. Consumer-facing documents and some filings must be in Arabic. A bilingual contract with a clause stating which version prevails reduces the risk of translation disputes in onshore proceedings.
04Are electronic signatures valid for commercial contracts?
Yes. Federal Decree-Law No. 46 of 2021 recognises electronic, reliable and qualified electronic signatures, and a qualified electronic signature from a TDRA-listed provider has the same effect as a handwritten one. Where another law requires notarisation, registration or an official form, a platform signature alone will usually not satisfy it. For high-value contracts, use a reliable or qualified signature and keep the audit trail.
05Will a UAE court enforce our limitation of liability clause?
Generally yes between businesses, provided the clause is clear and does not try to exclude liability for fraud or gross error. Courts read exclusion clauses narrowly and against the party relying on them. Agreed damages clauses have traditionally been open to adjustment by onshore courts to match actual loss, so document how any liquidated damages figure was calculated. DIFC and ADGM courts apply common-law principles instead.
06What happens if a counterparty walks away from negotiations?
Under the new civil code, negotiations must be conducted and ended in good faith. A party that breaks off negotiations in bad faith may be liable for the other side’s actual losses, such as wasted costs, but, unless otherwise agreed, not for the profit expected from the contract. Recording that discussions are subject to contract and keeping a clear negotiation file helps both sides manage this risk.
Sources and official materials
- Federal Decree-Law No. 25 of 2025 promulgating the Civil Transactions Law — General contract law from 1 June 2026
- Federal Decree-Law No. 50 of 2022 on the Commercial Transactions Law — Commercial acts, sales, agency and cheques
- Federal Decree-Law No. 46 of 2021 on Electronic Transactions and Trust Services — Electronic contracts and signatures
- Federal Law No. 6 of 2018 on Arbitration — Onshore arbitration framework
- Commercial Transactions Legislations, Ministry of Economy and Tourism — Official list of commercial laws
- DIFC Courts — Common-law court for DIFC and opt-in disputes
- ADGM legal framework — Application of English common law in ADGM
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
