UAE Courts Prioritise Intention Over Wording in Construction Contract Disputes, Emphasising Purpose, Fairness in Interpretation

In the UAE’s fast-evolving construction sector, disputes often hinge not on the existence of a contract, but on how it is to be interpreted. Unlike common law jurisdictions that emphasise the literal meaning of the written word, Federal Law No. 5 of 1985 on Civil Transactions (“Civil Code”) adopts a more purposive and equitable approach, focusing on the intentions and meanings behind contractual language. Understanding how UAE courts interpret contracts is therefore essential for contractors and employers alike.

 

1. Statutory Maxims – The Foundation of Interpretation

 

The principles governing contract interpretation in the UAE derive primarily from the Civil Code (Articles 257–273). The fundamental rule under Article 257 is that “the contracting parties are bound by what they have freely agreed.” However, this is supplemented by a distinctive interpretative maxim under Article 258, which provides that “the criterion in the construction of contracts is intentions and meanings, and not words and form.”

 

This provision, unique to the UAE among Gulf jurisdictions, highlights that contracts are not to be read mechanically. Courts are empowered to go beyond the literal text to ascertain what the parties meant rather than what they merely wrote. Yet this freedom is not unlimited. Article 259 tempers the principle by requiring that “words shall have their true meaning, and a word may not be construed figuratively unless it is impossible to give it its direct meaning.” Thus, the law strikes a delicate balance between textual certainty and interpretative flexibility -- crucial in construction contracts where standard forms (such as FIDIC) are often heavily amended.

 

2. Intentions – The Central Principle

 

The principle of intention occupies a unique place in UAE law. While other Gulf civil codes (such as those of Bahrain, Kuwait, Oman, and Qatar) also recognise its relevance, the UAE Civil Code gives it special prominence in its interpretative hierarchy.

 

According to Article 265, if the expression of the contract is clear, there is no scope for interpretation; however, if there is ambiguity, courts must seek the common intention of the parties, considering the nature of the transaction, the trust between them, and commercial custom. This is reinforced by UAE jurisprudence.

 

In Federal Supreme Court Case No. 322/1999 (26 January 1999), the Court affirmed that the Court of First Instance has absolute discretion to interpret contractual terms to determine the intention of the parties, considering the surrounding circumstances and commercial relationship. Similarly, the Dubai Court of Cassation in Case No. 18/2000 (21 May 2000) clarified that “[i]f the wording of a contract is clear, it may not be departed from by way of interpretation to achieve the intention of the parties. However, if there is scope for interpretation, the mutual intention must be ascertained without being restricted to the literal meaning of the words.”

 

In the construction context, this principle has significant implications. For example:

 

• Where a payment clause is unclear (e.g., “payment upon completion of works” vs. “payment upon certification”), the courts may look at the surrounding correspondence, invoicing patterns, and conduct to determine the intended trigger.

 

Importantly, UAE courts interpret “intentions” as referring to “the meanings intended by the words,” not the subjective will of a party. The Ministry of Justice commentary clarifies that intentions are to be inferred objectively from the wording and surrounding circumstances and not from what one party later claims it “meant.” Thus, intention under UAE law functions as an interpretative tool, not an independent contractual element. The courts seek the mutual intention, not the unilateral purpose of one party.

 

3. Resolution of Ambiguity – Interpreting in Favour of the Obliged Party

 

Even after considering wording and intentions, contracts may still contain uncertainty. For such cases, Article 266(1) of the Civil Code provides a guiding principle: “[a] doubt shall be interpreted in favour of the obligor.” This mirrors the common law doctrine of contra proferentem, which construes ambiguous language against the party that drafted or seeks to rely upon it. In practice, this principle safeguards against one-sided interpretations and ensures that contractual risk allocation remains equitable, preventing parties with stronger bargaining power from exploiting vague or ambiguous drafting to their advantage.

 

4. Absence of Express Terms – Filling the Gaps

 

A reality well known in construction projects is that not every contractual relationship anticipates every scenario. Where the contract is silent on a particular matter, UAE courts follow the hierarchy of legal sources prescribed under Article 2 of Federal Decree Law No. 50 of 2022 Issuing the Commercial Transactions Law (“Commercial Code”).

 

This hierarchy operates as follows:

 

1. i) Federal laws of specific application, such as those governing professional practice or public procurement;
   ii) Commercial laws, including the Commercial Code;
   iii) Emirate-level laws and regulations;
   iv) Construction industry custom, as recognised locally;
   v) General commercial custom; and
   vi) Finally, civil laws, primarily the Civil Code.

 

In practice, courts often rely on the Civil Code, which provides detailed guidance on construction-related matters, including the contractor’s liability for defects (Articles 872–883) and obligations relating to delay, variation, and performance. The Dubai Court of Appeal in Case No. 1477/1999 (20 January 2001) explained that in the absence of an express contractual provision, courts may apply commercial custom -- and where no relevant custom exists, civil law rules apply, provided they do not conflict with the nature of commercial dealings. This hierarchy gives the judiciary a structured framework for resolving disputes even in the absence of clear contractual language, a common occurrence in construction projects where standard forms are supplemented by oral agreements or informal instructions.

 

5. Custom and Commercial Practice – The Silent Interpreter

 

Custom (‘urf’) plays an important but subordinate role in UAE contract interpretation. Courts may refer to standard industry practice to interpret unclear provisions, but custom cannot override express terms of the contract. For instance, in Dubai Cassation No. 138/1994 (13 November 1994), the Court declined to imply a 10% cap on delay damages because the contract itself was silent on such a limitation. This demonstrates that while custom is influential, it is not determinative. For construction contracts, this means that widely accepted industry norms (e.g., back-to-back risk allocation or standard retention rates) may guide interpretation but cannot replace express drafting.

 

Conclusion

 

The interpretation of construction contracts under UAE law demands more than linguistic precision; it requires a deep appreciation of intent, context, and custom. For practitioners and industry participants alike, this means:

 

• Drafting contracts that clearly express mutual intentions;
  • Maintaining contemporaneous correspondence that evidences shared understanding; and
  • Recognising that courts will prioritise equitable and good-faith interpretations over strict literal readings.

 

In a market where disputes can hinge on a single clause, understanding the UAE’s interpretative framework is not just a matter of legal knowledge, but a matter of commercial survival.

 

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