In the United Arab Emirates (UAE), drafting a legally sound contract is not just a formality—it’s a fundamental step in protecting rights, enforcing obligations, and avoiding costly disputes. Whether you’re an entrepreneur, investor, landlord, or service provider, understanding how to draft contracts that comply with UAE law is crucial.
This article outlines key principles and practical steps to ensure your contracts are valid, enforceable, and aligned with the legal framework of the UAE.
- Understand the Governing Legal Framework
The primary source of contract law in the UAE is Federal Law No. 5 of 1985 (the UAE Civil Transactions Law). Other relevant statutes include:
- Federal Law No. 11 of 1992 (Civil Procedure Law)
- UAE Commercial Transactions Law (Federal Law No. 18 of 1993)
- UAE Labour Law (Federal Decree-Law No. 33 of 2021) for employment-related contracts
- Free Zone regulations (e.g., DIFC, ADGM) for contracts executed within those jurisdictions
Understanding the applicable law is the first step in ensuring compliance.
- Essential Elements of a Valid Contract
According to Article 129 of the UAE Civil Code, a valid contract must have:
- Mutual consent of the parties
- Lawful and possible subject matter
- A lawful cause (the legal justification behind the agreement)
- Capacity of parties (they must be of legal age and sound mind)
Failure to meet these requirements may render the contract void or voidable.
- Clarity and Specificity are Key
Legal contracts in the UAE should be:
- Clear and unambiguous in language
- Precise in defining rights, duties, timeframes, and obligations
- Bilingual (English/Arabic) if required by government entities or for submission in UAE courts
Note: In case of dispute, the Arabic version usually prevails in UAE courts unless the contract states otherwise.
- Include Standard Legal Clauses
A comprehensive UAE-compliant contract should include:
- Governing Law and Jurisdiction
Specify whether the contract is governed by UAE law or a Free Zone’s legal system (e.g., DIFC, ADGM).
Example: “This Agreement shall be governed by and construed in accordance with the laws of the United Arab Emirates.” - Dispute Resolution Clause
Indicate whether disputes will be resolved through UAE courts, arbitration (e.g., DIAC, ADCCAC), or DIFC Courts. - Force Majeure
Protects parties in events beyond their control, such as natural disasters or government restrictions. - Termination Clause
Outline the conditions under which either party can terminate the agreement. - Confidentiality, Non-compete, and Indemnity Clauses
These clauses are especially important in employment, service, and commercial contracts.
- Respect UAE’s Public Policy and Sharia Principles
Contracts that violate public morals, public order, or Sharia principles may be deemed unenforceable. For instance:
- Interest-bearing agreements should be structured carefully due to Islamic finance sensitivities.
- Clauses contradicting UAE’s mandatory labor protections may be struck down.
- Special Considerations for Certain Contracts
- Commercial Agreements
For agency, franchise, or distributorship agreements, registration with the Ministry of Economy may be required for legal enforceability.
- Employment Contracts
Must align with UAE Labour Law. Use MOHRE-compliant templates in the mainland or free zone templates in respective jurisdictions.
- Real Estate Contracts
Must comply with Emirate-specific real estate regulations (e.g., Dubai Land Department laws).
- Witnessing and Notarization
While most contracts don’t require notarization, certain contracts (like powers of attorney or real estate sale agreements) must be notarized before the UAE Notary Public to be legally valid.
- Use Legal Professionals
Although templates can be a starting point, engaging a UAE-qualified legal consultant or law firm is highly recommended. This ensures:
- Risk mitigation
- Regulatory compliance
- Tailored drafting based on specific transactions and sectors
Conclusion
Drafting legal contracts in the UAE requires more than just legal language—it demands compliance with civil law principles, respect for local customs, and awareness of the regulatory environment. Whether you’re conducting a business deal or entering into a lease, a well-drafted contract is your first line of defense in the UAE’s legal landscape.
For those unfamiliar with UAE legal intricacies, seeking professional legal advice is not just advisable—it’s essential.
