New UAE civil law takes effect June 1: How it will reshape daily life and business

Dubai: A landmark restructure of the UAE’s civil legal framework will come into effect on June 1, introducing far-reaching changes that will impact how residents, families, businesses and young adults enter contracts, manage assets, resolve disputes and seek compensation.

Federal Law No. 25 of 2025 on the Civil Transactions Law will replace the UAE’s Civil Code that has been in force since 1985, ushering in a new era of legal clarity, accountability and predictability in civil dealings.

Among the most significant changes is the reduction of the legal age of adulthood from 21 to 18. Under the new law, 18-year-olds will, in many civil matters, be recognised as adults, allowing them to sign agreements, manage finances, participate in civil proceedings, establish businesses and deal with certain assets without requiring parental or guardian approval.

However, legal experts say the reform extends well beyond the age change, introducing comprehensive updates to rules governing contracts, negotiations, liability, compensation and dispute resolution.

Wider impact on daily life

The changes are expected to affect a broad range of everyday transactions, from renting homes and signing service agreements to resolving failed business deals and pursuing compensation claims.

A central feature of the new legislation is the strengthening of obligations that apply before and after a contract is signed. Individuals and companies will be required to act in good faith during negotiations and disclose important information that may influence the other party’s decision.

Failure to reveal material facts could carry legal consequences.

The provisions are particularly relevant in transactions involving property purchases, business partnerships, long-term service agreements, investment projects and settlement negotiations.

The objective is to reduce disputes arising from hidden information, misleading representations or sudden withdrawals from negotiations after one party has already incurred costs or acted in reliance on an expected agreement.

Clearer compensation framework

The law also introduces greater clarity regarding compensation claims.

Courts will assess the actual damage suffered, the connection between the wrongful act and the resulting loss, and whether the injured party contributed to the harm.

As a result, compensation awards may be reduced where the claimant’s own actions worsened the loss. Courts will also have authority to review pre-agreed contractual penalties if they are deemed excessive or fail to reflect actual damages.

For consumers and businesses, this could affect provisions relating to late-payment charges, cancellation fees, delay penalties, service penalties and compensation clauses.

Time limits and record-keeping

Another notable reform concerns limitation periods for civil claims.

The new law provides clearer guidance on deadlines for filing cases, making it increasingly important for residents and businesses to identify the type of claim involved and act within the prescribed timeframe.

Legal experts say this places greater emphasis on maintaining proper documentation. Emails, text messages, invoices, contracts, payment records and written notices may become crucial evidence if disputes later reach the courts.

Enforcement of judgments

The legislation also strengthens the framework for enforcing civil judgments.

Once a judgment becomes final, enforcement measures may extend to bank accounts, movable assets, receivables and property, depending on the nature of the case and procedures outlined in the Civil Procedure Law.

Cross-border and free-zone contracts

The reform also addresses contracts involving multiple legal jurisdictions.

While the UAE mainland follows a civil law system, separate legal frameworks operate within financial free zones such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM).

Under the new law, parties entering contracts will be encouraged to clearly specify which legal system governs their agreement and where disputes will be heard.

This is expected to be particularly important for investors, property owners, businesses and residents involved in cross-border transactions or free-zone-related activities.

Greater awareness of legal obligations

Legal experts view the reforms as part of a broader effort to modernise civil transactions and encourage responsible conduct.

Dr Hasan Elhais, Legal Consultant at Amal Al Rashedi Lawyers and Legal Consultants, said the changes reinforce the principle that contracts are legally binding commitments rather than routine paperwork.

“The practical effect of this law is that people will need to be more careful before they sign, not after a problem happens,” Dr Elhais said.

“Many residents sign tenancy agreements, service contracts, loan documents, partnership agreements or property-related papers without reading every clause. The new law makes clarity, disclosure and responsibility more important, so both sides should know exactly what they are agreeing to.”

New responsibilities for young adults

According to Dr Elhais, lowering the age of adulthood to 18 grants greater independence but also introduces greater responsibility.

“For young adults, this is a major step towards independence,” he said. “But independence also means accountability. If an 18-year-old signs a binding contract, opens a business or takes on a financial obligation, the decision may no longer be treated as something that can easily be reversed because of age.”

Good-faith negotiations gain importance

Dr Elhais said the enhanced good-faith provisions could help prevent disputes before contracts are finalised.

“In many cases, the disagreement is not only about what is written in the contract but about what was said before signing, what was not disclosed, and whether one party was led to believe something that was not true. The new law gives more weight to this early stage,” he said.

He added that the reforms should encourage landlords, banks, employers, service providers and business owners to simplify contractual documents and improve transparency.

“When contracts are written clearly, and important information is shared from the start, many disputes can be avoided,” he said.

Importance of written records

Dr Elhais also urged residents not to rely solely on verbal assurances.

“People should keep written records, ask questions before signing and make sure any important promise is included in the contract,” he said.

“A simple message, email or written clarification can make a big difference later.”

A new phase for civil transactions

Legal experts believe the reforms signal a shift towards a more clearly defined civil legal environment in the UAE, where individuals and businesses enjoy broader rights but also face clearer obligations.

The law will govern most civil transactions across the country, although specialised areas such as employment, family matters, banking, insurance and certain free-zone activities will continue to be regulated by their respective laws.