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.