The UAE has enacted a new Civil Code. Federal Decree-Law No. 25 of 2025 issuing the Civil Transactions Law takes effect on 1 June 2026 and repeals Federal Law No. 5 of 1985 — the code that has governed contracts, obligations, torts and property for four decades. The new law keeps the architecture of the old code but modernises its drafting and introduces reforms that reach into everyday contracting, legal capacity and dispute resolution.
Who should read this
Anyone who contracts under UAE law — businesses, investors, contractors, lenders and individuals — should understand how the new Civil Code changes obligations, capacity and liability from 1 June 2026.
Directly affected
Key facts
- Enacted as Federal Decree-Law No. 25 of 2025 issuing the Civil Transactions Law
- Published in the Official Gazette on 14 October 2025
- Takes effect on 1 June 2026
- Repeals Federal Law No. 5 of 1985 (the previous Civil Code) and its amendments
- Reduces the age of legal majority from 21 to 18
- Codifies a duty of good faith in pre-contractual negotiations
- Restates the abuse-of-rights doctrine on a clearer statutory footing
Executive summary
The Civil Transactions Law is the backbone of private law in the UAE: it governs how contracts are formed and performed, how obligations arise, how civil liability is assessed, and how property and security rights work. Replacing the 1985 Code, the 2025 law is an evolution rather than a rupture — the familiar structure and Sharia-derived principles remain — but the drafting has been modernised and several doctrines have been sharpened in ways that matter for anyone doing business in, or with, the UAE.
Background
Federal Law No. 5 of 1985 served as the UAE's civil code for four decades. Federal Decree-Law No. 25 of 2025 replaces it in full from 1 June 2026. Because the new Code preserves the numbering logic and core principles of its predecessor, most established case law and commercial practice remain relevant; the significance lies in the targeted reforms and clearer articulation of concepts that courts previously derived from general principles.
Key reforms
- Good faith in pre-contractual negotiations. The Code expressly requires the initiation, conduct and termination of negotiations to conform to good faith — a duty that was not spelt out in the 1985 law. Breaking off negotiations abusively, or negotiating without genuine intent, can now found liability before any contract is signed.
- Abuse of rights. The Code sets out a clearer, structured test for when exercising a legal or contractual right becomes unlawful — not only where harm is intended, but where the benefit sought is disproportionate to the harm caused, or where the exercise conflicts with law, public order or morals, or exceeds customary practice.
- Age of legal majority reduced from 21 to 18. This aligns capacity to contract with international norms and has direct consequences for consumer-facing businesses, banks and any party relying on a counterparty's capacity.
- Modernised drafting and enhanced protections. Concepts are expressed in clearer, more contemporary language, reflecting how commercial dealings actually work today.
Specific article references cited in professional commentary (for example, good faith in negotiations and the abuse-of-rights framework) should be confirmed against the enacted Arabic text before being relied on in a particular matter.
Practical implications
- Contracting and deal-making. Heads of terms, letters of intent and negotiation conduct carry more weight. Parties should document the basis on which they negotiate and be deliberate about how, and when, they walk away.
- Construction and long-term contracts. The Code's treatment of obligations and liability continues to shape construction and infrastructure contracts; existing templates should be reviewed against the new drafting.
- Capacity-sensitive dealings. The lower age of majority affects onboarding, KYC, guarantees and any transaction where a party's capacity to bind themselves matters.
- Lending and security. Because the Code underpins guarantees, set-off and civil liability, lenders should confirm that facility and security documentation reflects the updated position.
Transitional position
The Code applies from 1 June 2026 and does not generally affect legal relationships or transactions concluded before that date, unless it expressly provides otherwise. Contracts entered into now, but performed after commencement, should be reviewed so the parties know which regime governs which obligations.
Action points
- Review standard-form contracts, NDAs and heads of terms against the new good-faith and abuse-of-rights provisions before 1 June 2026.
- Update onboarding, KYC and guarantee processes to reflect the age of majority moving from 21 to 18.
- Check live negotiations and long-term contracts that will straddle the commencement date for transitional exposure.
- Confirm any specific article relied on against the enacted Arabic text of Federal Decree-Law No. 25 of 2025.
Dispute and litigation relevance
The Civil Code is the instrument UAE courts apply to most contract and civil-liability claims. The clearer good-faith and abuse-of-rights provisions give claimants and defendants new arguments on pre-contractual conduct and on the limits of exercising contractual rights, while the transitional rules will determine which version of the Code applies to a disputed transaction. Early advice on which regime governs is often decisive.
Directly affected: businesses, contracting parties, investors, lenders and individuals.
Sources and authorities
Federal Decree-Law No. 25 of 2025 issuing the Civil Transactions Law — UAE Legislation Portal
uaelegislation.gov.ae — legislation 4011
Repeals Federal Law No. 5 of 1985 (Civil Transactions Law) and its amendments. Effective 1 June 2026.
Instrument details
Instrument: Federal Decree-Law No. 25 of 2025 issuing the Civil Transactions Law (the UAE Civil Code).
Official Gazette: 14 October 2025. Commencement: 1 June 2026.
Repeals: Federal Law No. 5 of 1985 and its amendments. This summary is general guidance; the enacted Arabic text prevails.
Based on Federal Decree-Law No. 25 of 2025 and cross-checked against leading practitioner analyses of the new Civil Code. General information only — it does not constitute legal advice, and the enacted Arabic text prevails. For advice on a specific matter, please contact us. Last updated: 2 July 2026.