Federal Decree-Law No. 25 of 2025 — the new Civil Transactions Law — applies from 1 June 2026. Old contracts keep their formation under the 1985 Code, but ongoing obligations, remedies and unexpired limitation periods transition to the new law.
Most legislative changes in construction adjust the plumbing. This one replaces the mains. The Civil Code is the law every UAE construction contract actually sits on — the source of the muqawala overlay on FIDIC, of decennial liability, of the tribunal's power over liquidated damages. Here is what moved, and what it means for contracts old and new.
The transitional rules: why your 2022 contract is affected
The new Code does not generally reopen transactions concluded before 1 June 2026 — formation and initial validity stay with the 1985 law. But ongoing obligations, performance duties, remedies for breach and limitation periods that had not expired fall under the new law's transitional provisions. A construction contract is almost nothing but ongoing obligations. Signing before June 2026 is not insulation; it is a choice-of-law question that now needs answering clause by clause.
Decennial liability: survives, sharpened
The ten-year joint liability of contractor and supervising engineer for collapse and structural-safety defects remains in force and remains unexcludable. The new Code clarifies when the liability window commences and refines which defects qualify — the two issues that generated the most litigation under the old provisions.
The clarification with real money attached sits one level down: strict decennial liability does not extend to recovery actions against subcontractors. A main contractor held strictly liable to the employer cannot simply pass that liability down the chain — it must establish the subcontractor's fault or breach of contract. That elevates back-to-back indemnity drafting from good practice to the only reliable route: if the indemnity does not clearly cover decennial exposure on a contractual basis, the contractor may hold ten years of risk it cannot redistribute.
Latent defects: a new regime, and a doubled window
Defects that do not threaten structural integrity now have their own liability period with specific notice requirements, distinct from the decennial regime — and the limitation period for latent-defect claims has been extended from six months to one year. Employers and owners get twice the time to convert discovery into a claim; contractors get a longer post-handover tail to price and manage. Combined with Dubai's new Building Quality and Safety Law — which generates a permanent digital record of exactly when defects were discovered — the defect-claims landscape has quietly become far more claimant-friendly.
Good faith: from doctrine to cause of action
The old Code's good-faith principle coloured interpretation. The new Code makes good-faith performance and enforcement an express, mandatory obligation — one that can found a standalone cause of action where a party acts unconscionably during variations, claims or termination. Expect it to be pleaded against aggressive Engineer determinations, opportunistic time-bar reliance and tactically sequenced terminations. It cannot be excluded, alongside the decennial regime and the rules on unconscionable terms.
Delay damages: Article 340's recalibration
The tribunal's signature power to adjust agreed compensation to actual loss survives, but Article 340 reframes the exercise around foreseeability of loss at the time of contracting and the good-faith conduct of both parties during the delay. The practical drafting response: record the parties' loss expectations at signing (recitals earn their keep here), and run delay periods cleanly — conduct during the delay is now expressly part of the quantum analysis. The claims mechanics are covered in our EOT and prolongation guide.
What stays negotiable
| Mandatory — cannot be excluded | Negotiable — drafting still decides |
|---|---|
| Decennial liability regime | Delay-damages quantum methodology |
| Good-faith duty | Risk allocation for unforeseen ground conditions |
| Rules on unconscionable terms | Dispute-resolution forum — arbitration remains king |
The review checklist for live projects
- Defect clauses against the new latent-defects notice requirements and one-year window.
- LD positions against Article 340 — document foreseeability now, not in the arbitration.
- Termination playbooks against the express good-faith duty.
- Subcontract indemnities against the fault-based recovery rule — decennial flow-down must be contractual and explicit.
- Limitation diary: unexpired periods transitioned to the new law — recalculate them.
How we help
Neo Legal reviews live and template contracts against the new Code, advises on transitional questions in ongoing disputes, and drafts the amendments the changes require — within the full construction practice.
This article is general information as at July 2026 and is not legal advice. Transitional questions under Federal Decree-Law No. 25 of 2025 are fact-specific; obtain advice on your contract.
