The UAE’s new Civil Transactions Law (Federal Decree Law No. 25 of 2025), which came into force on 1 June 2026, introduces important changes that affect the rights and obligations of businesses operating in the UAE, and introduces significant changes for commercial contracts, corporate transactions, and broader commercial law matters affecting UAE businesses.
For companies facing contractual difficulties arising from regional instability, supply chain disruption, rising costs, labour shortages or other unforeseen events, the new legislation provides additional routes to relief that were not previously available under the former Civil Code.
Force Majeure: Impossibility & Exceptional Circumstances
One of the key developments concerns force majeure. Under the new law, where performance becomes wholly impossible due to a force majeure event, the corresponding obligations are extinguished and the contract is automatically rescinded. Importantly, the new Civil Code also introduces greater flexibility where impossibility is only partial or temporary. In these circumstances, parties may be able to seek modification of the contract or ask the court to rescind it, rather than relying solely on termination.
The new Civil Code also revises the doctrine of exceptional circumstances (sometimes referred to as hardship). Where exceptional and unforeseen events make contractual performance excessively onerous and threaten a party with serious financial loss or expose it to commercial contract disputes, the courts now have express authority not only to reduce the burdensome obligation to a reasonable level but, where appropriate, to order rescission of the contract. Significantly, parties cannot contract out of these statutory protections.
Force Majeure Rules for Muqawala (Construction) Contracts
For construction and engineering projects, the changes are even more significant. The new Civil Code allows courts to step in and adjust the contract terms to make them fair again when unexpected events have made the original financial deal unworkable. Depending on the circumstances, this could include extending completion dates, increasing or reducing remuneration, or rescinding the contract altogether. These provisions may prove particularly relevant for projects affected by substantial increases in material costs, delays or disruption.
The February 2026 regional conflict has brought these provisions into sharp focus for the UAE construction and engineering sectors. Many contractors, developers, suppliers, and other businesses operating under commercial contracts are grappling with significant cost increases for imported materials, disrupted shipping routes, labour availability challenges, and project delays that could not have been anticipated when their contracts were signed. The new Civil Code offers a potential lifeline: businesses that find themselves locked into contracts that have become financially unviable due to conflict-related disruption may now have grounds to seek court intervention.
The new Civil Code also retains the fundamental principles of good faith and the prohibition against the abuse of rights. These long-standing doctrines continue to require parties to exercise their contractual rights fairly and proportionately and may provide additional grounds for relief in appropriate cases.
Protecting Your Commercial Position Under UAE Law
Businesses should not assume that their contractual position remains unchanged simply because their agreements were entered into before the new Civil Code came into force. The introduction of new statutory rights, together with evolving commercial conditions, may affect both existing contracts and those currently being negotiated. It is also important to consider whether contractual notice requirements have been satisfied, as the availability of certain remedies may depend on compliance with those provisions.
How We Can Help
If your business has experienced significant contractual difficulties as a result of unforeseen events, it may be worth reviewing your agreements in light of the new Civil Code. Our corporate & commercial lawyers can assess how the new legislation applies to your circumstances and advise. businesses on commercial contract reviews, force majeure claims, contract drafting, contract negotiations, dispute avoidance, and broader corporate legal matters arising under UAE law.
Disclaimer: This blog provides general information as of July 2026 and does not constitute legal advice. For bespoke legal advice and assistance, please consult with a qualified legal professional.
