TRW & Co · Corporate & Commercial
Contract Remediation in the UAE
Contract remediation means fixing contract disputes in the UAE before they harden into litigation: diagnosing the problem, protecting rights, renegotiating and documenting a durable outcome. Since 1 June 2026, the new Civil Transactions Law has changed the rules on hardship, agreed damages, standard terms and signing authority that shape every negotiation.
Key pointSince 1 June 2026, a settlement signed under a general power of attorney may not bind the company, and courts can reduce exaggerated agreed damages or rebalance hardship-hit contracts, so leverage must be tested against the new code before talks start.
At a glance
Hardship cannot be excluded
Under the new civil code a court may reduce an excessively onerous obligation or rescind the contract in exceptional, unforeseeable general circumstances; contrary agreements are void.
Agreed damages can move
Courts may reduce agreed compensation that is exaggerated or where the obligation was partly performed, and award more where there was fraud or gross fault.
Settlements need specific authority
A general power of attorney covers management acts only; settlements, sales and arbitration agreements require a special agency identifying the act.
Five years between traders
Commercial claims between traders are generally time-barred five years after falling due under the Commercial Transactions Law, Federal Decree-Law No. 50 of 2022.
Automatic rescission allowed
Parties may agree that specified breaches rescind the contract without a court judgment, provided the clause is clearly drafted.
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What contract remediation covers
Contract remediation is the work of repairing a commercial relationship that has gone wrong, or is about to, before it becomes a full-blown claim. It covers contract disputes in the UAE at their earliest stage: late or defective performance, unpaid invoices, scope creep, price shocks, a counterparty threatening termination, or a contract that turns out not to say what either side thought it said.
It also covers a quieter kind of problem: contracts that are not in dispute yet but will not work as intended under current law. The new Civil Transactions Law, in force from 1 June 2026, changed the rules on negotiation, standard terms, hardship, agreed damages and authority. Portfolios drafted for the 1985 code need review before they are amended, renewed or relied on.
Remediation has three possible outcomes: the contract is fixed and performance continues; the relationship ends on negotiated terms; or the dispute is prepared properly for a court or tribunal. The work done in the first weeks decides which of those is available.
The legal tools for resolving contract disputes in the UAE
Onshore, the Civil Transactions Law, Federal Decree-Law No. 25 of 2025 sets the general rules on performance, breach and remedies, and the Commercial Transactions Law, Federal Decree-Law No. 50 of 2022, governs obligations between traders. The DIFC applies its own Contract Law and Law of Obligations, and ADGM applies English common law. Which toolkit applies depends on the governing law clause, not on where the parties sit.
Performance, rescission and damages
Under the new civil code, a party may generally insist on performance where it is still possible, and a court may authorise the innocent party to have work done at the defaulting party's expense. Where one side fails to perform, the other may, after notice, ask the court to order performance or rescission, with damages where appropriate.
Parties can also agree that the contract will be treated as rescinded automatically, without a court judgment, on specified breaches. Such clauses are enforceable if drafted clearly; vague wording leaves the matter to the court. Where performance becomes impossible through a cause beyond the parties' control, corresponding obligations end and the contract is rescinded by operation of law.
Hardship and agreed damages
Two provisions matter in almost every remediation. First, where exceptional, general and unforeseeable circumstances make performance excessively onerous, a court may reduce the onerous obligation to a reasonable level or rescind the contract, and any agreement to the contrary is void. Second, parties may agree compensation in advance, but a court may reduce the agreed amount where the debtor shows it is exaggerated or that the obligation was partly performed. Where the debtor acted fraudulently or with gross fault, the creditor may recover more than the agreed amount.
Standard-form and unbalanced contracts
The new code defines a contract of adhesion as one whose general terms are set by one party and not open to negotiation. A court may modify unfair conditions in such a contract, ambiguity is not interpreted to the detriment of the adhering party, and terms added to a standard form prevail over the printed conditions. A separate ground allows a contract to be challenged where one party exploited the other, subject to short time limits.
| Route | What it achieves | Speed and cost | Best used when |
|---|---|---|---|
| Negotiated amendment | Re-prices, re-scopes or re-times the contract | Fastest and cheapest | Both sides want the relationship to continue |
| Standstill or tolling agreement | Pauses limitation and escalation while talks proceed | Quick to document | Settlement is realistic but time is running |
| Mediation | Facilitated, confidential settlement | Weeks, modest cost | Positions are entrenched but commercial value remains |
| Payment order (onshore) | Summary order for a clear, documented debt | Short timescale, low cost | The debt is fixed, due and evidenced in writing |
| Court action or arbitration | Binding judgment or award with damages or rescission | Months to years | Settlement has failed or urgent protection is needed |
| Interim relief | Freezes assets or preserves evidence | Days to weeks | There is a real risk of dissipation or loss of evidence |
Triage: the first decisions
The first conversation about contract disputes in the UAE should answer five questions. What does the contract actually say, in its governing-language version? Which law governs and which forum decides? What has each side already said in writing? What is the commercial value of keeping the relationship? And how much time is left before limitation, notice or termination deadlines expire?
Read the whole contract set
Framework agreements, orders, statements of work, side letters and emails can all form part of the bargain. Under the new code, framework terms flow into later contracts unless the parties agreed otherwise, so the hierarchy matters.
Fix the timeline
Reconstruct what happened, when and who knew. Breach notices, extension requests and acceptance certificates often decide liability more than the main contract does.
Assess leverage
Identify retentions, guarantees, set-off rights, unpaid invoices and termination rights on both sides. Leverage, not legal merit alone, usually drives settlement.
Protect the position
Stop informal admissions, preserve documents, and send correspondence that reserves rights. Send notices exactly as the contract requires, in the right form and to the right address.
Do not terminate in anger. A termination that is not supported by the contract or the law can itself be a repudiatory breach, turning a strong claim into a counterclaim. Check the termination route, cure periods and notice formalities before sending anything.
A remediation process that works
- Diagnose. Collect the full contract set, correspondence and performance records. Identify the governing law, forum clause, notice provisions, limitation dates and any automatic-rescission or agreed-damages clauses.
- Set objectives. Decide whether the aim is to continue, restructure or exit the relationship, and what a good outcome is worth. Agree internal authority to settle within a range.
- Preserve rights. Issue a reservation of rights and, where needed, a formal notice of breach that complies with the contract. Consider a standstill agreement if limitation is close.
- Open structured talks. Use without-prejudice correspondence or a meeting with an agreed agenda. Under the new civil code, good faith governs performance, and conduct in talks will be scrutinised if the matter later goes to court.
- Document the outcome. Record any deal in a variation, settlement or termination agreement with clear releases, payment terms, confidentiality and a dispute clause. Confirm signatories hold specific authority to settle.
- Escalate if needed. If talks fail, move to mediation, a payment order, arbitration or court action, with interim relief where assets or evidence are at risk.
- Learn and redraft. Feed lessons back into templates: notice mechanics, change control, price-review clauses and the liability package.
Where contract disputes in the UAE are decided
Escalation planning starts with the dispute clause. The forum controls language, cost, speed, confidentiality and, above all, how easily the result can be enforced against the counterparty's assets.
Onshore courts
Onshore contract disputes in the UAE are heard by the federal courts or by the local courts of Dubai, Abu Dhabi or Ras Al Khaimah. Proceedings run in Arabic and every foreign-language document needs a certified translation. Onshore courts apply the Commercial Transactions Law to obligations between traders, including a five-year limitation period and a 9% cap on interest where no rate was agreed. Their main advantage is direct access to enforcement against onshore assets and summary procedures for clear debts.
DIFC and ADGM Courts
The DIFC Courts and the ADGM Courts are English-language common-law courts. Parties can opt in by written agreement even if neither is based in the financial centre. They offer summary judgment, robust case management and published reasoning, which encourages settlement once the merits are visible. Where a DIFC contract uses standard terms, the DIFC Implied Terms in Contracts and Unfair Terms Law subjects exclusions to a reasonableness test.
Arbitration
Arbitration suits higher-value or international contract disputes in the UAE, particularly where enforcement abroad may be needed. The Dubai International Arbitration Centre administers most Dubai-seated cases under its 2022 Rules, which also provide for expedited procedures and emergency arbitrators. Arbitration is confidential and the parties choose their tribunal, but it is rarely the cheapest option for small claims. Before filing, check that the clause is valid and was signed with proper authority.
Getting settlement agreements right
Many contract disputes in the UAE are settled on paper that later fails. A settlement agreement is a contract in its own right and must be signed by someone with authority. Under the new civil code, a general power of attorney does not extend to settlements, so a special power or resolution is needed.
A good settlement defines exactly which claims are released, whether unknown claims are included, how and when payment is made, what happens on default, and which forum decides disputes about the settlement itself. Where the settlement will be enforced onshore, consider recording it in a form that can be executed quickly, for example as a court-ratified settlement or an arbitral consent award.
Our pages on mediation and settlement in the UAE and debt recovery in the UAE explain the procedural routes in more detail.
Documents and evidence to assemble
- the signed contract in all language versions, plus framework agreements, orders, statements of work and amendments;
- all notices given and received, with proof of delivery;
- invoices, statements of account, delivery notes, acceptance certificates and payment records;
- meeting minutes, emails and messaging records that show agreed changes or admissions;
- evidence of loss: cost records, replacement contracts, lost-margin calculations and mitigation steps;
- corporate documents showing who had authority to sign, vary and settle;
- for onshore proceedings, certified Arabic translations of the key documents.
Electronic records are admissible, and the Commercial Transactions Law allows traders to keep records digitally. What matters is that the records are complete, unaltered and can be tied to the people who made them.
Risks and common mistakes
Waiting until limitation is close
Claims between traders are generally time-barred five years after they fall due under the Commercial Transactions Law, and the new civil code shortens some specific periods, including for professional fees. Contractual time bars can be far shorter. New limitation provisions apply from 1 June 2026 with transitional rules for periods already running. If settlement talks are dragging, agree a written standstill or take a protective step. Our guide to limitation periods explains how each period runs.
Relying on a clause the new code overrides
Several protections cannot be excluded: the duty to disclose decisive information during negotiation, the court's hardship power, and the rule voiding exemptions from liability for harmful acts. In standard-form contracts, the court may modify unfair conditions. A remediation strategy built on an exclusion or a waiver that the law will not enforce is a weak strategy. Test each clause you plan to rely on against the version of the code that applies to the contract.
Overstating agreed damages
Liquidated damages are useful leverage, but a court may reduce them where they are exaggerated or the obligation was partly performed. Demanding the full contractual sum for a minor, partly cured delay invites a counterclaim and weakens credibility. Calculate actual loss alongside the agreed figure, so you can show the sum is a genuine pre-estimate and negotiate from evidence.
Informal variations without authority
Contracts are often changed by email, site instruction or a manager's promise. If the contract requires written variations, or the person agreeing lacked authority, the variation may not bind. Equally, a pattern of accepting late performance without protest can be argued as a waiver. Record every agreed change in a signed variation and reserve rights when you accept late or defective performance.
Escalating in the wrong forum
Filing in an onshore court when the contract contains a valid arbitration clause can lead to dismissal if the defendant raises it, wasting time and fees. Equally, starting an arbitration on a defective clause can produce an unenforceable award. Check the dispute clause, any opt-in to the DIFC or ADGM Courts and the signatories' authority before choosing a route.
Remediating contract portfolios after the 2026 civil code
Remediation is not only reactive. Since the new Civil Transactions Law took effect on 1 June 2026, businesses with large onshore contract portfolios are reviewing templates and key agreements to reduce the risk of future contract disputes in the UAE.
- Standard terms. Identify which contracts are standard-form and test terms that a court could treat as unfair under the adhesion rules. See our page on commercial terms and conditions in the UAE.
- Hardship and price review. Replace silent or exclusionary hardship wording with a renegotiation and adjustment mechanism the parties control.
- Agreed damages. Recalibrate liquidated damages to a defensible pre-estimate and record the basis of calculation.
- Authority and execution. Update signing policies to reflect that settlements, sales and arbitration agreements need specific authority.
- Framework agreements. Clarify precedence between master agreements, orders and statements of work.
- Amendments. Before varying a pre-June 2026 contract, decide whether the amendment could bring new-code rules into play.
Most of the value in a contract dispute is won or lost before anyone files a claim.
Cross-border angle
Many contract disputes in the UAE involve a foreign counterparty, which changes the leverage calculation. A settlement is worth more if it is backed by security in the UAE, and a claim is worth less if the only judgment available will be hard to enforce where the counterparty's assets are.
With Bangladeshi, Chinese, Indian and Singaporean suppliers, arbitration awards generally offer the most dependable enforcement under the New York Convention. With GCC counterparties, regional conventions support judgment enforcement. With English counterparties, the UAE Ministry of Justice indicated in 2022 that reciprocity exists for English judgments, but outcomes still depend on the onshore court. Our pages on foreign judgment enforcement in the UAE and arbitral award enforcement in the UAE explain the routes, and our interim relief page covers asset protection.
How TRW & Co helps with contract disputes in the UAE
We focus on early, commercial resolution and on preparing the ground properly if a dispute cannot be avoided. Where representation before UAE onshore courts or the DIFC/ADGM Courts is required, we work alongside locally licensed advocates and registered practitioners.
Rapid contract health check
We review the contract set, correspondence and deadlines and give a clear view of rights, risks and leverage.
Notice and reservation strategy
We draft breach notices, reservations of rights, cure notices and termination letters that comply with the contract and the governing law.
Negotiation and settlement
We prepare negotiation strategy, run without-prejudice talks and document variations, settlements and exits with enforceable terms.
Escalation planning
We assess the best forum, from payment orders to arbitration, and coordinate counsel for proceedings and interim relief.
Portfolio remediation
We review templates and key contracts against the 2026 Civil Transactions Law and prepare targeted amendments.
Cross-border coordination
We coordinate with counsel in Bangladesh, the UK, Singapore, China, the GCC and India where the counterparty or its assets are abroad.
See also our commercial litigation practice and commercial contracts practice, our article on terminating a commercial contract in the UAE, all our practices, or contact us to discuss a contract under strain.
Checklist for decision-makers
- Do we have the complete contract set, including orders, amendments and side letters?
- Which version of the civil code governs: pre- or post-1 June 2026?
- What are the limitation, notice and cure deadlines, and are they diarised?
- Have we reserved our rights in writing?
- Is any clause we rely on overridden by mandatory rules?
- Are agreed damages defensible against a reduction argument?
- Does the person negotiating and signing have specific authority to settle?
- What leverage do we have: retentions, guarantees, set-off, unpaid sums?
- Is there a risk of asset flight that justifies interim relief?
- Have lessons from this dispute been fed back into our templates?
Frequently asked questions
01Can we terminate a contract in the UAE without going to court?
Yes, if the contract clearly provides for it. The new Civil Transactions Law recognises clauses under which a contract is treated as rescinded automatically, without a court judgment, on specified breaches. Without such a clause, the innocent party generally gives notice and asks the court to order performance or rescission. Termination rights must be exercised exactly as drafted, including notice and cure periods. A wrongful termination can expose you to a counterclaim, so check the clause and the governing law before acting.
02Our supplier says costs have doubled and wants a price increase. Must we agree?
Not automatically. Under the new civil code, a court may intervene only where exceptional, general and unforeseeable circumstances make performance excessively onerous, not merely less profitable. If those conditions are met, the court may reduce the burden to a reasonable level or rescind the contract, and the parties cannot exclude that power. In practice, a negotiated adjustment with a defined review period is usually better for both sides than leaving the question to a judge.
03Will a UAE court enforce our liquidated damages clause in full?
Not necessarily. Parties may agree compensation in advance, but under the new civil code the court may reduce the agreed amount where the debtor proves it is exaggerated or that the obligation was partly performed. Where the debtor acted fraudulently or with gross fault, the creditor may claim more. Keep evidence of how the figure was calculated and of your actual loss, so you can defend the sum or justify a negotiated reduction.
04Who can sign a settlement agreement for our UAE company?
Someone with specific authority to settle. Under the new civil code, a general power of attorney authorises acts of management and preservation, while settlements require a special agency identifying the transaction. Check the company's constitutional documents and commercial register entry, and obtain a board or shareholder resolution for material settlements. The same applies to the counterparty: ask for evidence of its signatory's authority before signing.
05How quickly can we recover an undisputed invoice onshore?
For a fixed, due and documented debt, the onshore payment-order procedure is often the fastest route, because it is decided on the papers without a full trial. The debtor can challenge the order, which then moves into ordinary proceedings. Where the contract contains an arbitration clause, the position is more complex. Our debt recovery and payment order guidance explains the procedure and when it fits.
06Do the new civil code rules apply to our existing contracts?
The new law applies from 1 June 2026 and is not retroactive, so existing contracts are generally governed by the 1985 code as to their formation and effects. New limitation provisions apply from commencement, subject to transitional rules for periods already running. Significant amendments made after 1 June 2026 may engage new-code rules for the amended terms, so treat amendments of legacy contracts as a legal decision, not just a commercial one.
07Is mediation worth trying in a UAE contract dispute?
Often, yes. Mediation is confidential, quick to arrange and preserves relationships, and a mediated settlement can be documented in an enforceable form. It works best when both sides still see commercial value in a deal and when each has a realistic view of its legal position. Agree a standstill on limitation first, so the time spent mediating does not prejudice a later claim.
Sources and official materials
- Federal Decree-Law No. 25 of 2025 promulgating the Civil Transactions Law — Remedies, hardship, adhesion contracts; in force 1 June 2026
- UAE Government issues Federal Decree-Law promulgating the Civil Transactions Law — Official summary of key changes
- Federal Decree-Law No. 50 of 2022 on the Commercial Transactions Law — Commercial obligations and limitation
- DIFC Courts — Common-law court for opt-in disputes
- ADGM Courts — Common-law court for ADGM disputes
- Dubai International Arbitration Centre — Arbitration and mediation services
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.
