For four decades, civil relationships in the UAE were governed by Federal Law No. 5 of 1985, the Civil Transactions Law. On 1 June 2026 that law was replaced by Federal Decree-Law No. 25 of 2025. The new law keeps the structure and core principles of its predecessor, but it modernises important rules on how contracts are formed and performed, how compensation is assessed and how long claims can be brought.
Does the new law apply to my contract?
As a general rule, the new law applies from its effective date and does not operate retroactively. A contract concluded before 1 June 2026 may therefore continue to be assessed under the 1985 law, particularly as to its validity. Ongoing obligations, events occurring after 1 June 2026 and unexpired limitation periods can, however, be affected by the new law's transitional rules. For long-term contracts, the answer may differ from one obligation to the next.
Age of majority is now eighteen
The new law sets the age of majority at eighteen Gregorian years, replacing the previous twenty-one lunar years. This affects who can contract independently, when guardianship over a young person's property ends, and how businesses deal with young adult customers.
Negotiation, disclosure and good faith
The new law gives clearer effect to good faith before a contract is signed. Parties must negotiate in good faith and disclose information that is material to the other side's decision, and abruptly breaking off negotiations in bad faith can give rise to liability. In practice, this makes the record of negotiations (emails, drafts and messages) more important than before.
Compensation and agreed damages
Where neither the law nor the contract fixes the amount, compensation is assessed on the damage actually suffered. Agreed compensation remains enforceable, but the court may reduce it if it is excessive or if the main obligation was partly performed, while a creditor may claim more where the debtor acted fraudulently or with gross negligence. The law also expressly recognises compensation for moral damage.
The question is no longer only what the contract says, but also how the parties behaved before and after signing it.
Hardship and impossibility
Where exceptional and unforeseeable general events make performance excessively onerous, the court may reduce the obligation to a reasonable level or end the contract, and a clause excluding this power is void. Where performance becomes impossible, the obligation ends and the contract is cancelled; partial or temporary impossibility can justify partial cancellation or modification.
What to do now
Businesses should review standard terms, limitation of liability and penalty clauses, and the way negotiations are documented. Anyone with a dispute that began around the change of law should establish early which law governs each issue, because the answer affects deadlines as well as substance.
Frequently asked questions
Has the 1985 Civil Code been completely repealed?
Yes, it was repealed and replaced from 1 June 2026. It may still be relevant to contracts and events that pre-date that date.
Does the new law apply in the DIFC and ADGM?
Those financial free zones have their own civil and commercial laws, so the position there must be checked separately.
Legal sources
Federal Decree-Law No. 25 of 2025 issuing the Civil Transactions Law (in force 1 June 2026), UAE Legislation portal, uaelegislation.gov.ae
Federal Law No. 5 of 1985 issuing the Civil Transactions Law (repealed)