UAE Construction Contracts: Do Existing Agreements Need to Be Amended Under the New Civil Code?

Construction contracts in the UAE are typically signed once but remain in force for years, through variations, disputes, defect liability periods and final account settlements. On June 1, 2026, the legal framework underpinning these contracts changed significantly. Federal Decree-Law No. 25 of 2025, which promulgates the new Civil Transactions Law, came into force on that date, repealing Federal Law No. 5 of 1985, which had governed muqawala (construction) contracts for more than four decades.

A common assumption among employers and contractors is that, because the new law generally applies only to contracts executed on or after 1 June 2026, existing agreements can simply remain unchanged. In reality, the transition is more nuanced. Treating an existing contract as entirely unaffected by the reform may expose parties to unexpected legal risks, particularly when disputes arise and the governing law becomes critical.

What Has the New Law Changed?

Under the former Civil Code, muqawala contracts were governed by Articles 872 to 896 of Federal Law No. 5 of 1985. Under the new Civil Transactions Law, the corresponding provisions appear in Articles 812 to 839 of Federal Decree-Law No. 25 of 2025.

Contracts concluded before June 1, 2026 continue to be governed by the former Civil Code, while contracts executed on or after that date fall under the new legislation.

However, the distinction is not absolute.

Article 6 of the new Civil Code appears to create an important exception for limitation periods. Where a limitation period had not expired as of June 1, 2026, the new limitation regime may apply irrespective of when the underlying contract was signed. Consequently, claims relating to defects or warranties under existing contracts may already be subject to the new statutory limitation periods, even though the substantive contractual rights and obligations remain governed by the former Civil Code.

Many provisions governing muqawala contracts operate as default rules, applying only where the contract is silent and capable of being displaced through express drafting. Others — most notably decennial liability — remain mandatory and cannot be excluded by agreement. As a result, the quality of contractual drafting, rather than merely the contract's execution date, plays a decisive role in determining legal exposure.

The Risk of Assuming Nothing Has Changed

Many construction contracts, including those based on standard forms such as FIDIC, were drafted on the assumption that any gaps would be filled by the former Civil Code or established UAE case law. Some of that jurisprudence may now be uncertain or displaced.

For example, UAE courts have, in certain cases, held that liquidated damages cease to apply once a contract is terminated unless the contract expressly provides otherwise, requiring the employer to prove actual loss. Although this approach has not been entirely consistent, the new Civil Code does not expressly codify either position.

The practical risk is therefore not that the new law is inherently more onerous, but that contracts drafted for one legal environment are now operating within another. These gaps often become apparent only after a dispute has arisen.

Clauses That Deserve Immediate Review

Several contractual provisions warrant careful reconsideration, particularly where the contract relies on statutory defaults or previous judicial interpretation.

Payment

The new Civil Code continues to allow parties to agree on their own payment mechanisms. However, contracts that are silent or ambiguous regarding certification procedures, payment timelines or interest for late payment may now be governed by the new statutory provisions. Parties should not assume that previous judicial approaches will continue unchanged.

Termination

The new Civil Code expressly recognises termination for convenience, allowing an employer to terminate a contract before completion, provided the contractor is compensated for:

• expenses reasonably incurred;
• the value of completed works; and
• loss of anticipated profit, subject to the contractor's duty to mitigate its losses.
  
  

Contracts dealing only with termination for breach, or failing to address compensation for termination without cause, should be reviewed against this statutory framework.

Delay and Hardship

Article 829 introduces a construction-specific hardship mechanism alongside the general hardship provision contained in Article 224, which succeeds the former Article 249.

Where exceptional, unforeseeable and general circumstances fundamentally disturb the economic balance of a lump-sum contract, a court or tribunal may:

• extend the completion period;
• adjust the contract price; or
• terminate the contract.
  
  

Contracts relying solely on extension-of-time provisions and liquidated damages clauses, without addressing these statutory principles, may face judicial intervention.

Defects

Article 816(3) requires contractors to notify employers immediately of:

• defects in employer-supplied materials; or
• any circumstance likely to hinder proper execution of the works.
  
  

Failure to provide timely notice may result in the contractor bearing the consequences, including the possible loss of entitlement to additional time or compensation.

Meanwhile, Article 821 preserves the joint ten-year decennial liability of contractors and engineers for structural collapse or defects threatening the stability or safety of a building.

Article 824 establishes a three-year limitation period from the date of collapse or discovery of the defect. Importantly, this statutory liability does not extend to claims by contractors against subcontractors, which continue to depend on ordinary contractual or tortious liability.

Contracts and subcontracts that do not expressly address these matters should be reviewed.

Notices

The former Civil Code contained no general statutory notice requirement for construction contracts.

The new Article 816(3) now imposes an express notice obligation but leaves important practical issues unresolved, including what constitutes "immediate" notice and the acceptable form of such notice.

Contracts relying on informal or poorly defined notice procedures may therefore present increased legal uncertainty.

Limitation of Liability

Because Article 6 alters the limitation regime for claims that were not already time-barred on June 1, 2026, parties should carefully review limitation-of-liability clauses and liability caps linked to defects or warranty periods.

Decennial liability remains a separate mandatory regime. Under Article 823, any contractual provision seeking to exclude or limit decennial liability is void, although the parties may agree to extend the ten-year liability period.

Should Existing Contracts Be Amended?

Re-executing every ongoing construction contract in the UAE is neither necessary nor commercially practical. Likewise, reopening negotiations on a live EPC contract may create unnecessary commercial uncertainty.

A more proportionate solution is to execute a concise and carefully drafted addendum that:

• confirms which Civil Code governs the original contract and the addendum;
• updates payment, notice and liability provisions where the contract relied on previous statutory defaults or case law;
• expressly addresses decennial liability, defect notification obligations and subcontractor recourse; and
• establishes a clear notice procedure under Article 816(3), including the required form of notice and how receipt will be evidenced.
  
  

An addendum agreed while the parties maintain a cooperative relationship is generally far more effective—both commercially and evidentially—than amendments proposed after a dispute has already arisen. Agreements reached proactively are more readily viewed as reflecting the parties' genuine intentions, whereas amendments proposed during litigation are often perceived as self-serving.

International Standard Forms are Not Enough

Some parties assume that adopting an international standard form, such as FIDIC, fully addresses the legislative transition. It does not.

While standard forms regulate many of the same issues addressed by the new Civil Code, they were not drafted with reference to Articles 224, 267, 816, 821, 824 or 829.

Where a contractual provision conflicts with a mandatory statutory rule, the legislation prevails. Where the contract is silent on an issue governed by a default statutory provision, the new Civil Code will apply unless the parties have expressly agreed otherwise.

Conclusion

The introduction of the new Civil Transactions Law does not require every construction contract in the UAE to be re-signed. It does, however, require existing contracts to be reviewed carefully against a legal framework that has materially changed.

For some existing contracts, limitation periods have already shifted without any contractual amendment. Provisions relating to termination, notices, defects and hardship now operate against a different statutory backdrop than the one under which many contracts were originally drafted.

Parties that proactively review their payment, termination, delay, defects, notice and limitation-of-liability provisions — and address any gaps through a well-drafted addendum — will be in a significantly stronger legal and commercial position than those who wait until a dispute reveals the consequences of the new Civil Code.

 

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