{"id":4675,"date":"2026-05-24T22:19:41","date_gmt":"2026-05-24T22:19:41","guid":{"rendered":"https:\/\/www.insuracarelife.com\/blog\/uae-civil-code-2026-impact-on-construction-disputes-kennedys\/"},"modified":"2026-05-24T22:19:41","modified_gmt":"2026-05-24T22:19:41","slug":"uae-civil-code-2026-impact-on-construction-disputes-kennedys","status":"publish","type":"post","link":"https:\/\/www.insuracarelife.com\/blog\/uae-civil-code-2026-impact-on-construction-disputes-kennedys\/","title":{"rendered":"UAE Civil Code 2026: impact on construction disputes | Kennedys"},"content":{"rendered":"
\n

The new UAE Civil Code – Federal Decree-Law (No. 25 of 2025) – effective from 1 June 2026, represents the most wide-ranging changes in decades. This bulletin forms part of Kennedys\u2019 series analysing how selected reforms may affect insurers and those operating across the construction sector.\u00a0<\/strong><\/p>\n

The new Civil Transactions Law (CTL) replaces the 1985 Civil Code which has underpinned construction contracts for over four decades. While the reform is wide-ranging, three key themes are likely to be of particular interest to those involved in construction disputes.\u00a0<\/p>\n

The new CTL applies to contracts entered into on or after 1 June 2026. Contracts executed before that date remain governed by the 1985 Civil Code (save for certain procedural provisions that apply more broadly).<\/p>\n

Notice obligations may carry greater weight<\/strong><\/p>\n

Under the old CTL, contractual notice requirements and time-bar clauses sat in something of a grey area and were often arguable either way. Courts and arbitral tribunals exercised considerable discretion over whether to enforce them, often based on all the facts (i.e. knowledge, party engagement, prejudice etc.). The new CTL takes a firmer stance; contractors must notify employers immediately when events arise that could impede performance, with a failure to do so exposing the contractor to a liability for loss flowing from that omission.<\/p>\n

Whether this represents a significant shift in how time-bar defences are treated, or simply a statutory codification of what good practice already requires remains to be seen. No doubt, the issues, when they arise, will remain fact sensitive (i.e. knowledge, party engagement, prejudice etc.).<\/p>\n

What we likely can say with some degree of certainty is that contemporaneous project records and prompt, well-documented notifications may matter more now than ever.<\/p>\n

Delay damages are no longer a one-way street<\/strong><\/p>\n

Article 340 of the new CTL restructures the way agreed compensation clauses operate (e.g. liquidated damages) which we will review in further detail in our next bulletin.\u00a0<\/p>\n

Lump-sum certainty<\/strong><\/p>\n

Lump-sum contracts have traditionally offered price predictability, however, the new CTL introduces a statutory hardship regime. Whether this operates in any materially different way to the position under the old regime remains to be seen.\u00a0<\/p>\n

In short, where exceptional and genuinely unforeseeable circumstances arise that substantially upset the contractual balance and cause grave loss, the court or tribunal is now expressly empowered to administer the contract and it may, for example, extend time, adjust remuneration, or even terminate the contract in the interests of fairness. Notably, however, the exceptional circumstance must be of a public nature, it cannot be unique to a single party on a single project.<\/p>\n

This is arguably a departure from the more restrictive reading under the 1985 CTL which required a party to demonstrate that performance had become excessively onerous, and where the courts have almost always adopted a restrictive approach to determining what amounted to excessively onerous.<\/p>\n

Practical implications<\/strong><\/p>\n

This new regime invites the question of how exceptional will be treated in practice. If the courts and tribunals continue to scrutinise claims of hardship rigorously, we may not see any meaningful shift in the landscape, and contractors should not treat the new provisions as being a softening of the position.<\/p>\n

However, given the frequency with which force majeure and supply-chain disruption issues have impacted on major projects in the UAE in recent years, the new provisions do appear to offer a lifeline to parties and a more flexible regime to those adjudicating disputes. \u00a0<\/p>\n

We do not think it likely the new provisions will readily operate to release a party entirely from their obligations unless, for example, it has become impossible for them to perform their obligations. In that respect the new CTL continues to recognise the distinction between excessively onerous and impossible.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The new UAE Civil Code – Federal Decree-Law (No. 25 of 2025) – effective from 1 June 2026, represents the most wide-ranging changes in decades. This bulletin forms part of Kennedys\u2019 series analysing how selected reforms may affect insurers and those operating across the construction sector.\u00a0 The new Civil Transactions Law (CTL) replaces the 1985 […]<\/p>\n","protected":false},"author":1,"featured_media":4676,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[408,3564,1322,1915,189,3471,3281],"class_list":["post-4675","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-civil","tag-code","tag-construction","tag-disputes","tag-impact","tag-kennedys","tag-uae"],"_links":{"self":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4675","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/comments?post=4675"}],"version-history":[{"count":0,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/4675\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media\/4676"}],"wp:attachment":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media?parent=4675"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/categories?post=4675"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/tags?post=4675"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}