Federal Law No. 5 of 1985 to the Federal Decree-Law No. 25 of 2025 (effective June 1, 2026) marks a significant modernization of the UAE’s Legal Landscape.

The transition from the Federal Law No. 5 of 1985 to the Federal Decree-Law No. 25 of 2025 (effective June 1, 2026) marks a significant modernization of the UAE’s legal landscape.

1. Legal Hierarchy and Interpretation

• Old: Relied heavily on broad Islamic jurisprudence with less defined priority.

• New: Establishes a strict hierarchy: Legislative Text > Islamic Sharia > Custom > Principles of Justice. Judicial discretion is limited where legislative provisions are clear.

2. Age of Majority

• Old: 21 lunar years.

• New: 18 Gregorian years. This significantly lowers the threshold for contractual capacity and financial independence.

3. Pre-contractual Obligations (Good Faith)

• Old: General principles of good faith applied primarily during contract performance.

• New: Codifies the duty of good faith during negotiations. Parties can now be held liable for "abusive withdrawal" from negotiations or failure to disclose fundamental information.

4. Modernized Contract Formation

• Old: Traditional offer and acceptance models.

• New: Explicitly recognizes electronic communications, conduct, and implied acceptance. It distinguishes between binding offers and "invitations to treat" (advertisements) and formalizes framework agreements for long-term business.

5. Force Majeure and Hardship

• Old: Stricter application of impossibility.

• New: Grants courts broader flexibility to modify, reduce, or rescind obligations in exceptional, unforeseeable circumstances (hardship) to prevent manifest unfairness.

6. Defective Consent and Exploitation

• Old: Basic doctrines of mistake and duress.

• New: Expands definitions of economic imbalance and exploitation. Courts can annul or rebalance contracts if one party takes advantage of another’s vulnerability or inexperience.

7. Party Autonomy (Governing Law)

• Old: Limited flexibility in choosing foreign law for domestic contracts.

• New: Strengthens party autonomy, expressly prioritizing the parties' choice of governing law.

8. Specific Contractual Changes

• Construction (Muqawala): The new code codifies the employer's right to terminate for convenience, provided the contractor is compensated for work done and lost profits.

• Deposit Contracts: Refines the definition and strengthens the proprietary position of the depositor.