The UAE's New Civil Code Is Already Live
What Federal Decree-Law No. 25 of 2025 means for oil & gas services and equipment supply companies
Consura Legal Consultancy | July 2026
AT A GLANCE In force since 1 June 2026. Federal Decree-Law No. 25 of 2025 replaced the 1985 Civil Code. Not retroactive — except limitation periods, which apply to periods already running. Risk now starts before signature. A mandatory, non-waivable duty to disclose decisive information in negotiations reaches tenders, clarifications and bid assumptions. Defect exposure runs longer. Latent-defect claims on supplied equipment: one year from delivery, up from six months. Fraudulent concealment removes the limit. Courts gained rebalancing tools. Mandatory hardship relief (Art. 224), proportionality review of how rights are exercised (Art. 106), and power to modify arbitrary standard-form clauses. Security can lapse silently. Under Art. 1006, a guarantor may be discharged if proceedings are not issued within six months of the debt falling due. EPC scopes are the stress test. Early production facilities concentrate every change at once — classification, decennial liability, lump-sum hardship and phased handover.
When the law came into effect
The UAE's new Civil Transactions Law was issued as Federal Decree-Law No. 25 of 2025. The decree-law text is dated 1 October 2025 (9 Rabi' Al-Akhir 1447 AH), it was publicised through the UAE legislation portal at the turn of the year — some commentary cites 30 December 2025 as the date of issuance — and it came into force on 1 June 2026.
It repeals Federal Law No. 5 of 1985 in its entirety, ending forty years of continuity in the statute that has sat behind almost every onshore UAE contract. Four points on timing matter commercially:
Question | Position |
|---|---|
In force since when? | 1 June 2026. It is live now, not pending. |
Retrospective? | No. Article 4(1) confirms it is not retroactive: contracts concluded before 1 June 2026 continue to be governed by the 1985 Code. |
Any exception? | Yes — limitation periods. Periods already running on 1 June 2026 became subject to the new periods from that date. |
Geographic scope | Onshore UAE. DIFC and ADGM operate their own separate frameworks. |
Article 4 also confirms the hierarchy: specific legislation prevails over the general. The Commercial Transactions Law (Federal Decree-Law No. 50 of 2022, in force since 2 January 2023) continues to govern supply, extractive-industry, import/export and services activities carried on professionally. The new Civil Code is the background law — the layer that decides the question when the contract, the commercial law and sector custom are silent. In upstream contracting, that layer is reached more often than most contract managers assume.
The transition trap that specifically catches this sector
Most commentary on the new Code stops at "it applies to contracts signed from 1 June 2026." For oilfield services and equipment supply businesses, that clean line is anything but clean, because the sector does not contract in discrete, one-off instruments. It contracts through long-life master agreements with a continuous stream of downstream instruments: call-off orders, work orders, purchase orders, variation orders, rate revisions, term extensions, novations on asset transfers.
The unresolved question is what law governs a call-off or a variation issued after 1 June 2026 under an MSA signed before it. Reasonable arguments run both ways: that the call-off is merely performance of a pre-existing bargain, or that it is a distinct contract concluded under the new Code. This has not yet been tested by the onshore courts, and hardship claims under contracts straddling the transition are already being flagged as a likely source of dispute.
The practical response is a contract register triage, not a legal opinion. Every live UAE-law arrangement should be tagged: pre-1 June 2026 or post; whether new instruments will be issued under it; whether extension or renewal is due; and whether the parties want to state expressly which Code governs downstream instruments. Where an MSA has years left to run, the cleanest fix is often a short bilateral amendment recording the parties' intention on this point.
Separately — and regardless of contract date — every limitation period currently running should be re-checked against the new periods, because that is the one place the new Code reaches backwards.
Pre-award: tendering is no longer a consequence-free zone
This is the single most significant change for a sector where bids are prepared at speed against operator-issued information packages.
Articles 121–123 introduce statutory duties to conduct, and to terminate, negotiations in good faith, and a positive duty to disclose information of decisive importance to the other party's consent. Two features make this sharp:
The disclosure duty is mandatory and non-waivable. Any clause purporting to limit or exclude it is void. Conventional entire-agreement and non-reliance boilerplate will not do the work it was drafted to do.
Breach can ground a claim for annulment of the contract, as well as compensation for actual loss. Expected profits are excluded absent contrary agreement — so exposure is reliance-based rather than expectation-based, but annulment of an awarded contract is a serious remedy.
The duty runs in both directions, which is where it becomes interesting for contractors:
Operators and their advisers need to think hard about withheld geotechnical and subsurface data, known well conditions, existing services, interface dependencies, permit constraints, design limitations and budget ceilings. The traditional posture of issuing thin information and transferring ground and subsurface risk wholesale to the contractor is now more exposed.
Service companies and suppliers owe a mirror duty on their own financial position, technical and crewing capacity, supply-chain constraints, long-lead item availability and any known impediment to performance. A bid that stays silent on a known fabrication slot or vendor bottleneck is a different kind of risk than it was in May.
Three operational consequences follow. First, clarification logs become evidence — formal document control on the information package, formal written clarifications, no material commitments in site visits or vendor calls that are not recorded. Second, NDAs should be in place at the start of negotiation, not at award, because mandatory disclosure will push commercially sensitive information across the table earlier. Third, withdrawing a bid before expiry of its stated validity period now carries a potential claim for actual loss.
Framework agreements are now a statutory concept
Article 138 expressly recognises framework agreements and provides that their agreed essential terms are deemed to form part of subsequent call-off contracts unless otherwise stipulated.
For a sector built on MSAs, call-off contracts, rate schedules, preferred-supplier arrangements and long-term integrity and maintenance frameworks, this is a direct hit — and mostly a helpful one, because it codifies what parties intended. The risk sits in inconsistency. Where a work order, a technical scope, an HSE annex and a company standard each say something slightly different from the master terms, statutory incorporation makes the conflict louder rather than quieter. Order-of-precedence clauses should be rewritten to be genuinely operable, stating which layer prevails on which subject matter, and which master terms are automatically incorporated versus which must be separately agreed at call-off.
Sale or muqawala? The classification question that decides your defect regime
Before applying any of the substantive changes, the threshold question for equipment businesses is which regime the contract falls into — sale, or muqawala (contract for works, now at Articles 812–839).
A pure ex-works supply of tubulars or valves is a sale. A package that includes manufacture to specification, site installation, commissioning and performance testing looks considerably more like muqawala. Many upstream supply contracts are hybrids, and the classification changes the defect rules, the payment rules, the termination rules and the risk-of-loss rules that fill the contractual gaps. Contracts should be structured so the answer is deliberate rather than accidental.
Equipment supply: the latent-defect clock has doubled
Article 510 extends the default latent-defect period from six months to one year from the day following delivery, replacing the six-month rule in Article 555 of the 1985 Code. Buyer remedies are clarified: return the goods and recover the price, retain them with a proportionate price reduction, or take a defect-free replacement. Fraudulent concealment removes the time limit entirely.
For wellheads, valves, tubulars, pumps, compressors, drilling tools, control systems, pressure equipment and instrumentation, the practical points are:
The clock runs from delivery, not discovery. Handover and delivery records become the pivotal evidence, and equipment that sits in a yard for months before installation consumes its statutory protection while in storage.
A longer contractual guarantee displaces the statutory default, so warranty periods should be set deliberately rather than left to the baseline. Twelve months from delivery is now the floor, not a negotiated position.
Warranty clauses, notification procedures, inspection rights and exclusive-remedy language should be reconciled with the statutory remedy set. Contracts should state expressly whether repair or replacement is exclusive, or whether rejection, refund, price reduction and damages remain cumulative.
Because limitation changes are the exception to non-retroactivity, note the transitional quirk: latent-defect periods that were running and due to expire shortly after 1 June 2026 may have received a second wind under the longer statutory period.
Works and services: the muqawala provisions that matter upstream
Article | What it does | Why it matters for services contracts |
|---|---|---|
814–816 | Allocates responsibility for materials; where the employer supplies materials, the contractor must take reasonable care of them and promptly notify defects or factors affecting execution, failing which it becomes liable | Company-furnished items are routine upstream — casing, mud, wellsite data, operator-supplied equipment. A documented notification protocol is now a liability-management tool, not admin |
818 | Strengthens employer remedies: after a reasonable opportunity to remedy, the employer may terminate and engage a replacement contractor at the defaulting contractor’s cost; immediate termination without notice in serious cases | Raises the stakes on cure-period draftingand on how "serious" underperformance is defined and evidenced |
821–824 | Decennial liability — ten years, joint and several as between contractor and engineer, mandatory and non-excludable; recourse against subcontractors excluded from the regime; design-only engineers distinguished from supervising engineers | Main contractors on fixed onshore installations cannot pass statutory decennial exposure down the chain via the regime itself — it must be handled contractually and through insurance. Whether particular process plant and offshore structures fall within "buildings or other fixed installations" remains a live question |
827–828 | Entitlement to payment proportionate to work completed where works are divided or unitrate priced; employer withdrawal from a unit-rate contract now limited to where the excess would be burdensome | Directly relevant to day-rate and unit-rate service contracts and to milestone and progress payment structures |
836 | New express employer right to terminate for convenience, compensating the contractor for costs incurred, work completed and profit it would have earned — reducible for savings or redeployment | The statutory compensation baseline is more generous than many contractual termination-for-convenience clauses, which typically cap recovery at demobilisation and committed costs. Article 836 is also silent on return of bonds, PCGs and retention — an express gap to close in drafting |
837 | Allocates risk where works are destroyed, by reference to force majeure, handover, fault and notice to take delivery | Worth reconciling with contractual care-of-the-works and risk-transfer provisions |
Spotlight: the EPC contractor and early production facilities
If one contract type concentrates every change in the new Code at once, it is the fast-track EPC scope — and early production facilities (EPFs) are the sharpest case. EPFs are bid on compressed FEED against incomplete reservoir data, priced lump-sum or hybrid in a volatile equipment market, built from relocatable modular skids, brought online in phases with early hydrocarbons, and sometimes structured Consura Legal Consultancy | Insights | 5 as BOOT or lease-and-operate
arrangements rather than a straight sale of works. Each of those features now maps onto a specific provision.
One contract, three regimes. A typical EPF contract stacks equipment supply (sale), engineering, fabrication, installation and commissioning (muqawala), and sometimes operations or a processing-fee BOOT structure (services/lease). Which statutory regime fills each gap — defect periods, payment, termination, risk of loss — differs by element, and under a BOOT model where the contractor retains ownership and charges a tariff, the analysis differs again. The contract should
classify each scope element deliberately and state which rules the parties intend to apply, rather than leaving a court to characterise a hybrid after the fact.
Compressed FEED meets mandatory disclosure. EPF process guarantees are premised on feed assumptions — fluid composition, GOR, water cut, H2S, sand production. Under Articles 121–123, an operator that withholds known well-fluid or reservoir data of decisive importance is exposed; a contractor silent about a known module fabrication slot or vendor bottleneck is equally exposed. The drafting answer is to convert assumptions into stated, contractual feed envelopes with express
deviation and re-rating mechanisms, and to keep the FEED data room, clarification log and bid qualifications as a disclosure record.
Lump-sum pricing in a volatile market. Article 829 holds the lump-sum line — noprice increase merely because steel, equipment or wages rise — but grants relief for exceptional unforeseeable public circumstances, and, unlike Article 224, that muqawala-specific relief can be contracted out of. On a fast-track EPF, where procurement is committed early and escalation risk is real, the contractor must check whether operator standard terms have quietly excluded Article 829(3), and
both parties should decide whether a contractual escalation or rise-and-fall mechanism is the exclusive route to price adjustment.
The decennial question is sharpest here. Articles 821–824 impose ten-year mandatory liability for total or partial collapse or stability defects in buildings and fixed installations, joint and several between contractor and supervising engineer, non-excludable, and with subcontractor recourse outside the regime. Whether a skidmounted, modular EPF — designed to be demobilised and redeployed after field decline — is a "fixed installation intended to remain stable" is exactly the untested question. Piled foundations, permanent tie-ins and long design life argue one way;
engineered relocatability argues the other. Until the courts rule, EPC contractors should price the exposure conservatively: document intended design life and relocatability in the contract, verify whether decennial or inherent-defect insurance responds, and replicate the exposure in subcontracts contractually, since the statute will not do it for them.
Early hydrocarbons and risk of loss. EPFs exist to produce before the permanentfacility is ready, so hydrocarbons are introduced in phases while parts of the plant are still a construction site. Article 837 allocates the risk of destruction of the works by reference to handover, fault and force majeure — which makes sectional and phased takeover certificates load-bearing legal documents, not project-controls paperwork. Introduce hydrocarbons only against a documented sectionalhandover, and reconcile the care-of-the-works and insurance provisions (CAR into operational covers) with that phasing.
Termination for convenience cuts the contractor’s way. EPF economics are often back-loaded — mobilisation and capex recovered across the production period.Article 836’s statutory baseline compensates costs, work done and the profit the contractor would have earned, which is more
generous than the demob-andcommitted-costs formula in most operator templates. Where operator paper caps convenience-termination compensation well below the statutory measure, the
contractor now has a live argument that the cap is an arbitrary clause in a standard-form contract open to judicial adjustment. Operators should re-derive their caps deliberately; contractors should stop treating the T4C clause as boilerplate.
Performance and delay LDs. EPF contracts routinely carry both delay LDs and performance LDs or buy-down schedules against throughput and availability guarantees. Article 340 lets a court reduce agreed compensation shown to be excessive or where the obligation was partly performed — a partially completed, partially producing EPF is the paradigm case. Keep a contemporaneous record of how each LD rate was derived from genuine pre-estimated loss, and structure performance LDs as a calibrated buy-down rather than a cliff.
Owner-furnished long leads. EPF schedules often depend on operator-furnished long-lead items and free-issue materials. Under Articles 814–816 the contractor mustcare for employer-supplied materials and promptly notify defects or factors affecting execution — on pain of liability. A formal receipt-inspection-and-notification protocol for every free-issue item is now a statutory shield, not administration.
Hardship: a mandatory floor under every long-term
contract
Article 224 modernises the hardship doctrine previously found in Article 249. Where exceptional, unforeseeable circumstances of a general nature make performance excessively onerous, a court may reduce the obligation, adjust terms or rescind.Critically, Article 224 is mandatory — parties cannot contract out of it, and it can be engaged even where the contract contains its own force majeure regime.
For lump-sum muqawala, Article 829 confirms the position specifically: the price cannot be increased merely because materials, wages or expenses rise, but where exceptional unforeseeable public circumstances undermine the financial basis of the contract, the tribunal may extend time, vary the price, or dissolve the contract. Unlike Article 224, Article 829(3) is not expressed to be mandatory — parties can contract out of it, which means contractors need to check they have not inadvertently bargained away a route to relief in the operator's standard terms.
The threshold is high, and worth stating plainly to internal stakeholders: the fact that a contract has become unprofitable, more expensive or harder to perform will not be enough. The claimant must show exceptional general circumstances, unforeseeable at the time of contracting, that seriously disrupted the contractual balance.Circumstances that already existed at signature are presumed to have been priced in.
Given steel and tubular price movement, freight and logistics volatility, sanctions and export-control shifts and regional security conditions, expect counterparties on both sides of the table to reach for Article 224. The defensive discipline is contemporaneous evidence: cost baselines at bid, records of what was foreseeable and when, and a documented mitigation trail. The offensive discipline is to draft a structured contractual renegotiation mechanism — a tribunal considering an open-ended hardship claim will find it easier to work with a mechanism the parties designed than to invent one.
The fairness overlay on operator standard forms
Three provisions combine into something more than the sum of their parts, and they point in a direction that is broadly favourable to contractors negotiating against operator paper.
Article 106 expands abuse of rights into a proportionality test. A right may be exercised unlawfully not only where there is intent to harm, but where the benefit pursued is disproportionate to the harm caused, or where exercise conflicts with law, public order, morals or customary practice. Having the contractual right is no longer the end of the analysis: termination, default notices, suspension, drawdown on security and rejection of deliverables are all now open to challenge on how they were exercised.
Standard-form and adhesion provisions give courts express power to modify, or relieve a party from, arbitrary clauses in standard-form contracts, with any contrary agreement void. Terms added to a template also prevail over the template text even where the original wording is not struck through. Upstream procurement runs almost entirely on operator standard terms and conditions presented to a supply chain with limited bargaining power — that is precisely the fact pattern these provisions address.
Article 340 allows courts to reduce agreed compensation where the debtor proves the assessment was excessive or the obligation was partly performed, and to reduce or disallow it where the creditor contributed to the loss. Delay LDs on long-lead equipment and rig standby claims should be sanity-checked against a genuine pre-estimate of loss, with the reasoning recorded at the time of drafting.
None of this makes established upstream risk allocation invalid. Knock-for-knock indemnities, mutual hold-harmless regimes, consequential loss exclusions and liability caps remain the market architecture. What has changed is that a counterparty now has a structured statutory vocabulary for arguing that a particular clause is arbitrary or that a particular right was exercised disproportionately — and back-to-back flow-downs to smaller subcontractors and vendors are the most exposed part of the chain.
Guarantees: a six-month trap for anyone holding security
Article 1006 deserves separate attention because it can extinguish protection silently. Where the creditor does not commence judicial proceedings against both the debtor and the guarantor within six months of the debt falling due, the guarantor may be discharged.Demand letters and negotiations do not stop the clock, and each missed payment may start its own separate period.
Compounding this, joint and several liability is no longer presumed — it must be expressly agreed. Absent clear drafting, the beneficiary may be required to pursue the principal debtor and exhaust its assets first.
The commercial scenario writes itself in this sector: a payment default on a services contract, a commercially sensible standstill while the parties negotiate, six months elapse, and the parent company guarantee is gone. Parent-company guarantees, warranty bonds, advance-payment guarantees and retention arrangements should be reviewed now for express joint-and-several wording and for whether internal escalation procedures can produce a protective filing inside six months.Note also that independent on-demand instruments issued by banks raise a distinct analysis under the letter-of-guarantee provisions of the Commercial Transactions Law — whether Article 1006 reaches them is a question to put to counsel rather than
assume either way.
Governing law and forum
Article 19 now expressly prioritises party autonomy: contractual obligations are governed in form and substance by the law the parties agree, with common domicile and then place of performance as fallbacks. For a sector that habitually selects English law with arbitration, this is a welcome clarification of a position the onshore courts previously applied inconsistently.
The limits remain real. Articles 22 and 29 preserve the power to apply overriding provisions of UAE special laws and to disapply foreign law that conflicts with UAE public policy. Where a contract is performed onshore, mandatory provisions — Article 224 hardship and the non-waivable disclosure duty among them — should be assumed to travel with the performance regardless of the governing law clause.
Where to start
For an operator, service company or equipment supplier with a UAE portfolio, the highest-value work in the next quarter is narrow and specific:
Triage the contract register by date, and decide the transitional position on downstream instruments under legacy MSAs.
Audit live limitation periods — this is the one change that reaches back.
Rebuild the tender pack process: formal information packages, document control, clarification logs, early NDAs, and a bid-approval step that asks what must be disclosed.
Retire reliance on non-reliance clauses as a disclosure shield, and replace them with disclosure schedules that record what was, and was not, provided.
Re-cut the MSA and call-off precedence architecture in light of Article 138.
Reset warranty and latent-defect procedures to the one-year statutory baseline, with delivery-date record-keeping to match.
Review all held security for joint-and-several wording and build a six-month escalation trigger into credit control.
Draft a hardship mechanism into new long-term contracts rather than leaving Article 224 to operate at large — and, for lump-sum work, decide deliberately whether to preserve or exclude Article 829(3).
Stress-test standard terms imposed down the supply chain against the adhesion-contract and proportionality provisions.
For EPC and EPF scopes, map decennial exposure and insurance on every facility, classify each scope element (sale / muqawala / services), and paper sectional handover before hydrocarbons are introduced.
Confirm governing law and seat are consistent across the MSA, call-offs, guarantees and subcontracts, and identify which mandatory UAE provisions apply regardless.
The overall direction of the reform is a shift from strict contractual formality toward a framework that balances certainty against fairness and judicial oversight. For upstream contracting, that means process discipline and contemporaneous evidence now carry as much weight as clause drafting. The organisations that adapt fastest will be the ones that treat tender records, notification protocols and enforcement timing as governance issues rather than paperwork.
Sources
Federal Decree-Law No. 25 of 2025 promulgating the Civil Transactions Law, UAE Legislation Portal (uaelegislation.gov.ae)
Federal Decree-Law No. 50 of 2022 promulgating the Commercial Transactions Law
This Consura Insight is general commentary on legislative developments and is not legal advice. Article references follow published English translations; the Arabic text governs. Positions on transitional application, the scope of decennial liability and the reach of Article 1006 are untested before the onshore courts and should be confirmed with UAE-qualified counsel in relation to any specific contract.
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