Before You Sign: How the UAE's New Civil Transactions Law is Changing Contract Negotiations.

From 1 June 2026, the new Civil Transactions Law of the UAE is operational. This law is far from a simple tweaking of legal nuances. It signifies a major change in the behaviour that parties should feature when negotiating, disclosing information, exchanging documents, and even conducting themselves, besides ending a contract. The official UAE legislation portal discloses that Federal Decree-Law No. 25 of 2025, Promulgating the Civil Transactions Law, was enacted on 1 October 2025, and it came into force on 1 June 2026. According to Lexis Middle East, this new law abrogates the old Federal Law No. 5 of 1985, and the effective date is 1 June 2026

For quite a long period, negotiation parties have mainly perceived this stage as informal: meetings, emails, WhatsApp messages, draft agreements, commercial promises, and "subject to contract" talks. However, in the light of new laws, the negotiation stage can no longer be disregarded as mere background noise. Whatever is said, hidden, promised, delayed, shared, or withdrawn prior to the signature might now have legal ramifications.

It's important to understand that disputes do not necessarily unfold after signing. Actually, most of them are rooted in the interactions before the signature.

Disputes arise when one party falsely leads the other into a belief that a deal is certain while hiding a crucial fact. They originate from situations when a developer, hotel owner, operator, investor, franchisor, franchisee, seller, buyer, landlord, or shareholder relies on statements that are later discovered to be partial or misleading. Disputes arise from situations where financial commitments are made, alternative avenues are given up, legal counsel is engaged, due diligence is carried out, business strategies are formulated, or a change of position is made because negotiation was relied upon.

The bottom-line message is that negotiation phase commitments will be considered as legally enforceable.

Good faith is a legal requirement from the start.

One of the major aspects of change is that good faith will be required in contractual negotiations before contract signing. According to some legal professionals, parties engaged in negotiations may be held liable if they display dishonesty in negotiations, deliberately keep information that is significant to the other party's decision from the other side, or secretly use for their own benefit confidential information obtained during the negotiations, despite the fact that no contract might be eventually signed.

This is not to say that every negotiation must lead to a contract. It is perfectly fine to walk away without a contract. Vigorously, respect for one's business freedom is still upheld. Nevertheless, what a party does in the negotiation, how it withdraws, and the information it discloses or decides to keep secret may all be taken very seriously now.

Actually, a party should not enter into negotiations merely to gain access to confidential information, to do away with competition, to waste the other party's time, to lead the other party on, or to hide facts that are decisive to the other party's decision. If that happens, a case might not be restricted solely to the final contract. The negotiation conduct itself could be admissible as evidence.

Making disclosures is no longer only a matter of good manners

The focus of a falling out in most commercial contracts is not the document itself. It is the failure to disclose important information pre-contractually.

For instance, in a hotel management agreement, the owner could have gotten away with not disclosing a licensing problem, lack of funds, etc. Similarly, under a franchise agreement, the franchisor might have kept the full costs involved under wraps, etc. With a real estate SPA, the seller could have hidden the true condition of the property, etc. And in a shareholders' agreement, one party may have kept secret certain matters, arrangements or conflicts of interest, etc.

Under the new rules, information that could sway a person's agreement should be given only after much consideration. Lawyers note that clauses in the agreement cannot easily elude the disclosure duty and that even provisions seeking to waive or curtail these disclosure obligations could be regarded as invalid.

This is indeed a sharp point. So many agreements have standard provisions that state that the writing is the final and complete agreement or that no party has relied on any prior statements. Sure, these clauses still count for something, but in reality, such clauses should never be viewed as completely shielding from bad faith, concealment, or non-disclosure of significant information.

WhatsApp messages, emails, draft terms, and promises may become important evidence.

Negotiations are mostly informal and often executed through several media channels in the UAE. A transaction could start with a WhatsApp voice message, then continue through emails, then a draft term sheet, then to a meeting, then to a revised agreement. In some cases, the formal contract is merely the last page of a much longer story.

Consequently, UAE business owners will have to make thorough documentation of their negotiations. For example, a short email recording the main points of a discussion could prove to be a party's shield in a subsequent dispute. A well-documented disclosure schedule might keep an allegation at bay. A well-drafted letter of intent may settle what is binding and what is not. A properly executed confidentiality agreement will protect secrets. A well-maintained Q&A process during due diligence may be compelling evidence.

Indeed, negotiating in a professionally appropriate fashion is not only about agreeing on a deal. It is also about producing a clear record.

Why is this important for hospitality agreements?

Hospitality agreements are at risk since transactions are quite long, detailed, and commercially sensitive. A hotel management agreement, franchise agreement, technical services agreement, branded residence structure, or lease arrangement might be in force for several years, involving a large investment.

Typically, parties exchange charts, brand standards, design drawings, operator's requirements, owner's obligations, renovation budgets, key money discussions, territorial protections, pre-opening cost estimates, termination rights, and performance expectations even before signing. A dispute arising years after the event may very well find its root in an element of the negotiation phase that was exaggerated, hidden, or even misunderstood.

A hotel owner must get a good record of exactly what the operator pledged. Operators must keep a record of owners' disclosures on the project, permits, financing, timeline, and legal authority. Franchisees must ascertain the costs associated with compliance. Franchisors must verify that statements are truthful and not exaggerated.

In a nutshell, in hospitality, negotiation papers could be as important as the agreement itself.

Why is this important for real estate transactions?

Pre-contractual activities may also cause real estate disputes. Buyers may be led by brochures, statements from agents, completion dates, views, rental yields, payment plans, verbal assurances, etc. Sellers or developers may think that the SPA has firmly established their position. Still, if pre-contractual conduct was misleading or concealment was involved, then the matter could become quite complicated.

This refers to off-plan properties, hotel apartments, branded residences, joint ownership structures, commercial leases, and investment properties as well. Buyers and investors should not depend solely on sales material. Sellers and developers should not rely only on broad disclaimers. Both parties should make sure that the disclosure of material information is done explicitly, correctly, and in a manner that allows full understanding.

Although it remains true that "the brochure is not the contract," the brochure, WhatsApp messages, emails, and representations that were made before signing may all be taken into account under the new law.

Why is this important for corporate and shareholder arrangements?

The sale of shares, joint ventures, investment agreements, franchise structures, and partnership arrangements requires pre-signing information exchange. Consent is influenced by factors such as financial statements, liabilities, ongoing disputes, signing authority, ownership structure, tax exposure, employee claims, supplier debts, and regulatory issues.

If a key piece of information is concealed by one party, it cannot be shrugged off as a mere commercial misunderstanding. Disclosure obligations, good faith, and pre-contractual liability issues may come up.

Conversely, due diligence should not be treated as a simple formality. Disclosure schedules should be well-organised. Warranties should be accurately drafted. Board approval and documenting authority should be checked. Records of negotiations should be kept.

Practical steps businesses should take now.

The time to act is before any potential dispute arises due to the weakness of their process being discovered. Businesses should, therefore, reassess how they negotiate in the UAE.

Before the start of serious negotiations, parties should first agree on who will be negotiating, what information will be shared, what will be kept confidential, and whether the discussions are binding or non-binding. They should keep written records of key points, consciously disclose material information, avoid making ambitious promises, and keep a record of important communications. At last, they should ensure that all essential information has been disclosed and the contract reflects the parties' commercial understanding.

For high-value transactions, these are the tools that the parties may find useful:

1. An unambiguous letter of intent or term sheet. Specify what is binding and what is not, for example, confidentiality, exclusivity, costs, governing law, and the right to withdraw.
2. An accurate disclosure schedule. This is especially important for real estate, hospitality, corporate acquisitions, and franchise arrangements.
3. A well-organised due diligence process. Record Q&A, index documents, and identify key assumptions.
4. Draft confidentiality clauses with care. Information exchanged during negotiations should not be used for other purposes.
5. Written confirmation of important commercial promises. Important factors that influence a deal should not only be the topic of a phone or WhatsApp conversation.

The commercial lesson

The new UAE Civil Transactions Law warns the business world that negotiations can be very consequential activities.

Of course, parties are under no obligation to sign all the deals they discuss or accept all the proposals made. Their commercial freedom remains intact. Nevertheless, they must approach the negotiations with sincerity, honesty, and due care.

Business owners, hotel operators, developers, investors, franchisees, and shareholders: the one takeaway is that legal risk may arise at a stage earlier than they have probably considered.

A deal does not start from the signature date. It starts with the first serious discussion.

With the new contract system in the UAE, the main point will probably change from asking "What is in the contract?" to

"How did the contract come about, and what happened prior to signing it?"