The UAE Government has issued a Federal Decree Law promulgating the Civil Transactions Law, establishing a legal framework for civil transactions in the country.
The law reorganises the foundations of rights and obligations while seeking to clarify legal rules and facilitate their application.
The legislation forms part of a national trajectory focused on modernising the legal framework. It adopts an approach that simplifies the understanding of legal provisions, unifies legal references, and eliminates duplication with special laws enacted recently.
UAE enacts new Civil Transactions Law to modernise legal framework
From a perspective related to the judiciary, the law expands the scope of reasoning and grants courts discretion when referring to the principles of Islamic Sharia in cases where a legislative provision is absent.
Where no statutory rule exists, either explicitly or implicitly, the judge may refer to the principles of Islamic Sharia and select the solution that achieves justice and public interest in accordance with the circumstances of each case, without being bound by a school of jurisprudence or one Sharia doctrine.
The law provides for the application of Sharia principles in the absence of legislation governing matters relating to persons of unknown parentage, missing persons, and absentees.
UAE Civil Transactions Law grants courts broader discretion in applying Islamic Sharia principles
The amendments introduced by the Decree Law aim to achieve integration and reinforce coherence between legal principles and frameworks, ensuring clarity and stability in legal application.
The review of the law took into account challenges faced by the judiciary, while respecting the competencies of local authorities in regulating matters, issuing licences, and supervising activities related to civil transactions and local regulations within their jurisdictions.
The Law affirms the applicability of such local legislation within the scope of each emirate’s authority, while preserving the unity and integrity of the federal framework and ensuring harmonisation between federal and local roles.
To prevent duplication, provisions overlapping with other legislation were removed. With respect to rights related to property, the law reorganised the rules governing usufructuary construction rights, requiring registration of the contract with the authority and providing for nullity in the absence of registration.
It introduced provisions governing the obligations of the holder of such rights and allowed the parties to determine the duration. The Law provides that assets located within the UAE belonging to a foreigner with no heirs shall be designated as an endowment, subject to supervision by the authority to ensure management and allocation.
The legislation introduced a framework governing assignment, including the assignment of rights, and established provisions for the protection of possession through actions aimed at halting acts of encroachment before harm occurs.
UAE reduces age of majority to 18 and lowers asset management age to 15 under new law
The Law adopts legal concepts aligned with realities related to transactions, reinforcing capacity and protecting free will in legal acts and contracts. This approach balances empowering individuals to manage their affairs with safeguarding them against exploitation or harm.
A reform concerns the age of majority, which has been reduced from twenty one lunar years to eighteen Gregorian years, aligning with legal systems used for comparison. This change unifies the legal age for capacity, ensures consistency with other legislation such as juvenile and labour laws, and harmonises civil and criminal responsibility standards, thereby enhancing clarity and coherence.
The law lowers the age at which a minor may seek authorisation to manage their assets from eighteen Hijri years to fifteen Gregorian years, in support of entrepreneurship and youth participation in activity related to the economy within a legal framework.
The Law introduces provisions addressing persons requiring assistance due to incapacity to express their will, empowering courts to appoint an assistant to support such individuals in acts serving their interests.
UAE law permits combination of blood money with additional damages for death or injury cases
The Decree Law establishes a framework governing negotiations before contracts are made, imposing an obligation to disclose information to ensure contractual decision making that is informed and conscious. This enhances trust between parties and reduces disputes before they arise.
It introduces the concept of an agreement to regulate relationships related to contracts that are recurring or for the long term by predefining terms, reducing time and cost, and ensuring reference for contracts that follow.
Regarding capacity related to contracts, acts of a discerning minor involving both benefit and detriment are deemed voidable in the minor’s interest rather than suspended, granting the guardian the right to seek annulment within one year from knowledge, and allowing the minor to seek annulment within one year after reaching majority.
The Law permits the combination of blood money or assessed compensation with damages where death or injury results in harm that is material or moral and not covered by blood money or assessed compensation. This reform addresses challenges faced by the judiciary and affirms the principle of reparation.
The Law updates provisions governing sale contracts, including regulation of sale by sample and by model, protection of persons lacking capacity in cases of inadequacy in sales related to real estate, and rules governing defects that are latent.
Buyers are granted the option to reject the goods, accept them with price reduction, or allow the seller to provide a substitute that is free from defects. The limitation period for claims relating to defects that are latent has been extended from six months to one year from delivery, unless a guarantee that is longer is agreed.
The Law introduces rules governing the sale of rights that are disputed, prohibiting acquisition by judges, prosecutors, officials working in courts, and attorneys involved in the dispute, under penalty of nullity, to safeguard integrity related to the judiciary.
New Civil Transactions Law harmonises federal and local legislation across UAE emirates
Provisions related to corporations were modernised to align the Civil Transactions Law with legislation related to commerce. The Law distinguishes between civil and companies related to commerce based on activity and form, permits companies with one person, regulates withdrawal by partners, continuation of companies, and procedures related to liquidation, and enhances stability for corporations.
A framework for companies that are non-profit was introduced, requiring reinvestment of profits into the objectives of the company, thereby supporting development that is sustainable.
The Law establishes a regime for companies that are professional, regulates ownership, naming, liability, and introduces regulation of “mudaraba contracts” outside the scope of law related to companies.
Provisions governing contracts of works were updated to clarify responsibilities, regulate termination, address circumstances that are unforeseen and affect equilibrium related to contracts, and empower courts to restore balance through adjustment or termination.
Provisions related to insurance were refined, including a framework for insurance that is takaful. Rules governing guarantees were reorganised to protect guarantors and ensure enforcement that is equitable.
