UAE Civil Transactions Law 2026: Key Changes Effective June 1 – What You Must Do Now
As of today, June 1, 2026, Federal Decree‑Law No. 25 of 2025 – the new Civil Transactions Law – has officially come into force across the UAE. This landmark legislation completely repeals and replaces the 1985 Civil Code, reshaping legal capacity, contracts, family estate defaults, and court litigation nationwide. Every resident, investor, and business must understand the changes that take effect immediately.
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1. Full Legal Capacity at 18 – Immediate Probate Impact
Full Legal Capacity: Individuals who have reached 18 Gregorian years are now legally recognised as full adults. They can independently execute contracts, manage finances, and form companies without parental or guardian approval.
Immediate Probate Changes: According to analysis by Al Tamimi & Company, assets that were previously locked under court‑mandated minority supervision until age 21 are now eligible for immediate release to 18‑year‑old beneficiaries. If you have a registered will that still refers to “under 21” as a minor, you should reassess your succession planning.
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2. Pre‑Contractual Liability & Bad‑Faith Terminations
Under Articles 121 to 123 of the new law, parties are legally bound by a strict duty of good faith during negotiations. Failing to disclose material facts or abruptly pulling out of a deal in bad faith can result in tort liability and direct damage claims – even if a final contract was never signed.
Exclusion of Lost Profits: Unless explicitly agreed beforehand, compensation for breaking off pre‑contractual negotiations is limited to actual reliance costs and excludes speculative lost profits. This changes how termination fees and break‑up costs should be drafted in NDAs and term sheets.
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3. Strict Changes for Construction & Commercial Disputes
Direct Self‑Help Remedies (Article 818): Employers in construction works (muqawala) can now legally rescind contracts or pass incomplete work to a new contractor at the original contractor’s expense – without applying for a court order first. This is a powerful tool for developers facing delays.
Overhauling Liquidated Damages: While parties can still pre‑agree on late fees or cancellation penalties, UAE courts now possess clear, standardised statutory guidelines to adjust or lower penalty clauses if they significantly exceed the actual harm suffered. Drafting realistic LD clauses is essential.
Employee Penalty Adjustments (Article 852): Courts are explicitly empowered to modify or scale back excessive non‑compete penalty clauses rather than declaring them entirely null and void. Employers should review restrictive covenants to ensure they are reasonable and enforceable.
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4. Heirless Expat Estates Reallocated to Waqf
If a foreign national dies without an enforceable, registered civil will and has no legally recognised heirs, their UAE‑based assets (including bank accounts, properties, and end‑of‑service benefits) will automatically transfer to a state‑administered charitable waqf (endowment).
This underscores the urgent need for every expatriate to have a properly registered will. Without one, the state – not your family – will inherit your assets. The new law does not change the ability to make a civil will (DIFC, ADJD, etc.), but it reinforces the default distribution rules for those who fail to plan.
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5. Priority Actions for Residents & Businesses
Because these rules are actively applied to new filings and transactions starting today, individuals and corporations should implement the following steps immediately:
- Amend Corporate NDA & Negotiation Workflows: Update deal‑making and disclosure protocols to safeguard against claims of "bad faith negotiation" under the new code.
- Reassess Registered Wills: If you have a registered UAE will that restricts asset distribution or appoints guardians based on the old assumption of minors being under 21, consult a legal professional to align terms with the new age threshold of 18.
- Update Contract Templates: Review boilerplates for standard terms, limitation periods, and liquidated damages to reflect the code's mandatory updates.
- Construction Contracts: Ensure your contracts clearly define breach, termination rights, and penalties in line with Article 818 and the new LD guidelines.
- Non‑Compete Clauses: Adjust employee restrictive covenants to avoid being struck down or reduced by courts under Article 852.
Key Takeaways
- Age of majority lowered to 18 – affects contracts, inheritance, and guardianship
- New duty of good faith in negotiations – pre‑contractual liability now enforceable
- Construction employers gain direct self‑help remedies – no court order needed to rescind or replace contractor
- Courts can adjust excessive liquidated damages – draft realistic penalty clauses
- Without a registered will, expat assets may go to the state waqf – urgent action required
6. Frequently Asked Questions
Does the new Civil Transactions Law apply retroactively to existing contracts?
Generally, the new law applies to legal relationships and contracts from its effective date (1 June 2026). However, ongoing litigation or disputes may be affected if procedural rules change. We recommend a case‑by‑case review.
Can an 18‑year‑old now sign a company formation contract without a guardian?
Yes. Under the new law, any person who has reached 18 Gregorian years has full legal capacity to execute contracts, including company formation documents, leases, and financial agreements.
What happens to an existing will that names a guardian for a child under 21?
The will remains valid, but the guardian clause should be reviewed. Because a child becomes an adult at 18, the guardianship may end earlier than intended. You may wish to update the will to reflect the new legal age.
How can I protect my assets if I don’t have a will?
Without a valid civil will, your UAE assets may be distributed according to default inheritance rules – and if no heirs are found, they will go to the waqf. The only way to ensure your assets go to your chosen beneficiaries is to register a will (DIFC, ADJD, or another recognised registry).
Are construction contracts automatically affected?
Yes. Article 818 applies to all muqawala (construction/works) contracts from 1 June 2026. Employers can now take direct self‑help remedies without a court order if the contractor is in breach. Existing contracts should be reviewed for compatibility.
Need to update your contracts, will, or compliance framework?
ALHEKMA Legal Consultancy – led by former judges – can help you review your commercial agreements, draft enforceable non‑compete clauses, and ensure your will reflects the new Civil Transactions Law.
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