A major milestone in the UAE legal landscape is on the horizon. On 1 June 2026, the new UAE Civil Code (Federal Law Decree No. 25 of 2025) will come into effect, replacing the current framework that has served the nation for 40 years.

While the existing Code has undergone various amendments over the decades, this represents its first complete overhaul. This is a pivotal development for the UAE construction industry, and while we will explore specific technical implications in future articles, this is a brief introduction to one critical aspect we should all be aware of.

The new Civil Code modernises and streamlines commercial law in order to enhance clarity and provides the legal predictability essential for modern commerce. This update effectively reduces ambiguity, helping to minimise the risk of disputes and ensuring more consistent outcomes for businesses. In practical terms, the new Civil Code tackles both the conflict inherent in commercial situations being governed by overlapping laws, and the potential for unpredictability in courts’ freedom to apply legal principles from different sources. So, the new Civil Code provides a stepped pathway, both in hierarchy of laws and in judicial decision-making. Specifically:

• The new Civil Code states an order of priority between laws: those enacted to govern a specific commercial area take precedence over general commercial laws;

• Where legislative text is clear and unambiguous, courts have no discretion other than to apply it; 

• Where legislation is silent, courts are directed to apply Sharia principles “selecting the most appropriate solution in the public interest”; and

• If no Sharia principles apply, courts shall apply local custom, subject to there being no breach of public policy, with natural justice as a fallback reference.

Alongside this systemic development, the new Civil Code updates the governance of specific contractual points. For the construction sector, one of the most critical updates involves the negotiation phase – specifically, the legal requirements surrounding the disclosure of material information.

New Civil Code Article 121 requires parties to conduct contract negotiations in good faith. That includes their initiation, conduct and termination. Discontinuing negotiations abusively or in bad faith may result in liability to the other negotiating party for damages. Those damages will not include the revenue or profit expected by the other party in the contract that was never concluded – unless, of course, that was agreed. So, damages could include wasted resources in negotiating and/or making technical and commercial assessments to support the negotiation, such as site surveys.

Article 121.4 specifies the deliberate withholding of material information “that would affect contract validity” as an act of bad faith. Linked to this, Article 122(i) states:

“A party to negotiations or contracts who knows information of decisive importance to the consent of the other party must inform them of it, unless the latter is presumed to know the information and has placed trust in the contracting party. Information of direct and necessary connection to the content of the contract and the status of the parties shall be considered material and decisive to the parties’ consent.” 

How do we judge what information is material and decisive? The words “of decisive importance to the consent of the other party” indicates that the obligation only extends to information, the disclosure of which would be decisive as to whether the deal is done or not. But the inclusion of “Information of direct and necessary connection to the content of the contract and the status of the parties” is a wider and less clear category.       

Although this is the first UAE codification of law governing contract negotiation, the principles are not new in the Gulf and in Civil Law jurisdictions elsewhere. One close example is the 2023 Saudi Civil Transactions Law, in which broadly similar provisions are set out, both in relation to contract negotiation and the disclosure of material information. 

These are mandatory laws; parties cannot contract out of them and they appear to challenge the ways of our industry in two main ways:

1. Construction negotiations proceed on the basis of “nothing is agreed until everything is agreed.” Requests for Proposals, Memoranda of Understanding and Letters of Intent might commit the parties to certain negotiation steps for a certain period, but with no other obligation save (sometimes) a commitment to hold to a commercial price, secured by a bid bond. Owners negotiate with several contractors at once and might eventually contract with none of them; and 

2. Construction contracts generally acknowledge the risks of the unknown, that is, incomplete or incorrect information. “No Warranty save for Rely Upon Information” and “All-inclusive Tender” provisions are just two ways in which those risks are allocated to a party who is expressly not relying on disclosure. 

Is this a problem for our industry? I see no inherent conflict with the new law. The new Civil Code expressly does not seek to commit negotiating parties to enter into a contract: it deals only with bad faith. Certainly, parties in the UAE should consider their tender documents or other instruments of negotiation to help avoid breach. Think: transparency of decision-making, timing and method of negotiation, disclosure, governing law and dispute resolution. 

* Dubai-based Stuart Jordan is the Global Head of Construction for Baker Botts, a leading international law firm.  He has extensive experience in the Middle East, Russia and the UK.