In the current age, commercial contracts are most useful when there is a breach of the contract or a party or both parties are unable to fulfill the requirements of the contract. For example, when payment is not made on time or performance is not up to scratch or confidential information is revealed, the choice of words in the contract becomes important to avoid losses. This involves more than simply copying a standard form from another jurisdiction for businesses in the United Arab Emirates (UAE). There is a specific legal system for mainland contracts, and two other legal systems for the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM). On 1st June 2026, Federal Decree-Law No. 25 of 2025 came into force replacing the former 1985 Civil Code. It is thus necessary to review the commercial contracts with reference to the current framework.
The legal and regulatory framework.
The Civil Transactions Law primarily governs the commercial contracts in mainland UAE and wherever applicable the Commercial Transactions Law also help in governing. The Civil Transactions Law, 1985 was replaced by Federal Decree-Law No. 25 of 2025 and took effect on 1st June 2026.[1] Commercial transactions in the scope of Federal Decree-Law No. 50 of 2022 concerning the Commercial Transactions are still governed by the previous law[2]. According to the new Civil Transactions Law, a contract is created by the agreement of the parties and, from the moment it is validly concluded, it will be the law that governs their relationship, subject to the grounds of amendment or rescission recognised by law. It also mandates that contracts be carried out as per their terms and in good faith. The new law also explicitly provides for good faith in the pre-contract stage of negotiations, and the disclosure of essential and decisive information under certain conditions.
DIFC and ADGM are different legal jurisdictions to the mainland UAE. The parties should thus clarify the governing law and forum, not only because of the UAE or Dubai being mentioned, but because it may not necessarily be the forum they intend.
A commercial contract clause should not simply document the discussions that took place in the negotiations. It should assign responsibility, set boundaries on expectations, set out how the risk is to be shared, and define a process for the resolution of conflict or changes in circumstances. The best clauses will be specific enough to help the parties to understand what is expected of them when the contract is performed but also be broad enough to allow them to rely on the terms in the event of a dispute.
Þ Purpose and Authority
The contract should name each party as their proper legal name and provide enough information to determine each party’s legal identity. It should also establish that the signatory to the agreement is authorised to sign on behalf of the relevant company. In the UAE especially, the precise nature of a representative’s power will have a significant impact on whether the company is adequately bound by the transaction. The power of the authority should be verified from the company’s constitutional documents and any board resolutions or other supporting evidence and not presumed by the position held. Contractual representation is expressly recognised in the current Civil Transactions Law, which states that the scope of powers of the representative is determined by the instrument of authority.
The clause should also include representations on matters material to the transaction, for e.g., representations of legal capacity and that the necessary licences and authorities have been obtained to enter into the agreement (where applicable). This provides the other party with a contractual foundation to look for a remedy in the event of a significant representation being false.
Þ SCOPE
The contract must clearly specify what the parties agree to do. This includes the services or goods to be provided, deliverables, technical or quality standards, milestones, delivery dates, acceptance procedures and responsibilities of each party. Any detailed specifications should be inserted in the agreement and provided in clearly identified schedules if detailed specifications are required.
Even if the parties had a mutual understanding of a vague scope at the time of signing, it can still lead to disputes. A well-drafted contract should also state how changes to the scope will be approved, priced and documented. When a master agreement is used, with a statement of work/purchase order structure, there should be an obvious order of precedence to prevent uncertainty in the event that terms of the contract conflict.
Þ Price, Payment and Taxes
Payment terms should include the contract price, currency, when the invoice is due, payment due dates and any conditions that must be met for payment to be due. It should also be outlined in the agreement who will be liable for bank charges, reimbursable expenses and applicable taxes.
Value Added Tax should not be left to be considered as an implication. The contract should indicate if the agreed price includes or excludes VAT and which party is to be responsible for providing any necessary tax documentation. Late payment clauses should also be tailored to the applicable UAE regulations and to the type of transaction and not based on a foreign counterpart. This is particularly relevant as the UAE Commercial Transactions Law provides for specific provisions on the delay interest of commercial debts.
Þ Termination and renewal
A contract should list a start date, an end date and an auto-renewal date or date that is dependent upon agreement. If it is necessary, termination rights should be split up depending on the state of affairs. These can include material breach, failure to cure a breach, insolvency, fraud, regulatory non-compliance and termination for convenience which the parties have expressly agreed to.
Also, the termination mechanism needs to address what is to be done post termination. This can involve the payment of accrued amounts, the return or deletion of confidential information, transfer of work in progress and treatment of intellectual property and survival of provisions. The UAE Civil Transactions Law in force allows for automatic rescission in case of non-performance, which may be agreed upon by the parties between the parties, but the drafting should be clear as to when the automatic rescission is to be effected. The existing legislation treats rescission in the event of non-performance as a separate issue and allows for the parties to agree to automatic rescission without a court judgment.
Þ Liability, Indemnities and Agreed Compensation
A liability clause is a section that distributes the financial risk among the parties. It should identify the type of loss that may be recoverable, the dollar limit, and any different types of loss. Indemnities should be customized to cover a particular risk, such as a claim by a third party, a claim for infringing on intellectual property or losses arising as a result of a party’s regulatory violation, and should not be drafted to cover any and all losses. Iin particular it is important to identify the risk covered, the party covered, the losses covered and finally the procedure to be followed in making an indemnity claim.
Agreed compensation, commonly known as a ‘liquidated damages’ or ‘contractual penalty’, necessitates special attention under UAE law.[3] Under the current Civil Transactions Law, the parties can agree on the compensation beforehand, but if the agreed compensation is excessive, or the obligation has been executed for part of the time, the court has the power to reduce the compensation. A creditor can assert a claim for an amount greater than the agreed amount if fraud or gross fault exists. So without a proper, well drafted contract in place, it becomes harder to retrieve the amount lost due to the breach.
Þ Force Majeure
A force majeure clause should specify events which are beyond the control of the parties and outline the contractual consequences. Depending on the transaction, these could be natural disasters, war, government restrictions, regulatory action, pandemics or serious disturbance of transport and supply chains.
In reference to Article 273 of the former Civil Code has been replaced by the 2025 Civil Transactions Law, which is now in force. The current framework applies to force majeure situations in which it is impossible to perform. The clause should then include provisions for notice requirements, steps to be taken to mitigate, suspension of obligations and the effect if the disruption persists for a predetermined period of time. It should also include a description of what happens to payment responsibilities during the disruption. The existing legislation addresses the effects of force majeure in case of impossibility of performances and makes a distinction between permanent and temporary impossibility of performances.
Þ Confidentiality and Data Protection
A confidentiality clause should outline the information that is to be protected and when it can be shared. It should also outline which disclosures are allowed, for example when required by law or to professional advisers, and also the duration of obligations after the end of the contract.
If the contract contains personal data, confidentiality should be distinguished from the commitments in data protection. The parties should specify their respective obligations in regards to the processing of personal data and ensure that data protection requirements are observed. This is especially true when customer information, employee records or other private information is passed along with a transaction[4].
Þ Intellectual Property
It should distinguish between what is the IP of a party at outset of the contract and IP that comes out of the relationship. It should include the following: If new work is being created, who has the ownership, the rights to it and if it is licensed or jointly owned, the rights that they will have after termination.
With technology, creative and service contracts, background IP, treatment of third party materials, permitted use, infringement warranties and disposition of the work product after the contract period should also be addressed in the clause. If a work is delivered, payment should not be regarded as a substitute for any express agreement regarding the ownership or the right of use or license. The parties need to clearly specify what rights are being transferred and when. For example, documents that contain details of intellectual property or newly created rights, licensing, assignment and post termination use, as issues should be addressed explicitly in the contract.
Þ Governing Law, Dispute Resolution and Language
The contract should specify the law that is applicable to the contract and where any disputes will be heard. The options in the UAE are between the Mainland courts, the DIFC courts, the ADGM courts and arbitration. An arbitration clause should include the institution, if applicable, and rules, and also the seat and the language of the arbitration.[5]
It is important to note that a reference to “Dubai courts” might not be sufficient as there are two court systems in Dubai: the mainland courts and the DIFC court system. Language needs to be covered in the contract as well. Proceeding in the UAE onshore Courts will typically involve Arabic documentation or Arabic certified translations, with English being the language of the proceedings in DIFC and ADGM. The scope of the dispute clause should thus be prepared with the envisaged enforcement path in mind, especially if the parties and/or assets are located in different jurisdictions.
Þ Notices, Assignment, Variation and Entire Agreement
The last section of the provisions should concern administration of the contract. A notices clause should define how notice may be given, the addresses, the content of emails and when notice is deemed to have been received. It is also important for the agreement to indicate if either party has the right to assign their rights or obligations, or the right to subcontract the work and if it requires consent.
An entire agreement clause and a variation clause can prevent any controversy over any alleged oral promises or informal changes to the agreement, since it will dictate what documents constitute the agreement, and how any changes must be approved. Additionally, waiver, severability, survival and electronic execution (as applicable) should be included in the contract. For a practical commercial contract, these provisions were already dealt with in the original article as “extra” clauses for more valuable contracts, but their importance is of such a nature that they cannot be ignored as part of the main ten.
Electronic execution also needs greater careful drafting than that provided in the original article. UAE Electronic Transactions and Trust Services Law[6] allows electronic documents and electronic signature to have legal effect. But, if the statutory requirements are met, a qualified electronic signature has the same authenticity as a manual one. Thus, the general rule that each e-signature is automatically treated as a signature signed with “ink” cannot be made.
Drafting Contracts that Hold up
Commercial contracts do not always need to be lengthy. It is the one that effectively documents the commercial deal, assigns the critical risks and can still be worked with when the relationship breaks down. This also involves deletion of obsolete references to the old 1985 Civil Code and clauses relating to termination, agreed compensation, force majeure, liability and electronic execution for contracts in the UAE. The current Civil Transactions Law has been in effect since 1 June 2026, and the Commercial Transactions Law of 2022 remains in effect for commercial transactions to the extent that it applies to them.
Where prices, specifications, service, or delivery dates are included in a schedule, it is especially important that it be drafted clearly. Those timetables should be identified and attached to the contract and terms used in the contract should be consistent, if there is an inconsistency, the contract should specify what takes precedence. In general, a very well drafted contract is more useful, but a long contract from abroad, with no care taken as to the applicable law, is less useful.
