UAE Suretyship and Guarantees: Key Civil Code Changes and Practical Implications

The implementation of Federal Decree-Law No.25 of 2025 (the New Civil Code), which came into force on 1 June 2026, introduces important changes to the law governing suretyship and guarantees, with direct implications for creditors, guarantors, and debtors. For industry professionals that regularly rely on personal or corporate guarantees as part of their financing and commercial arrangements, these changes are more than minor drafting updates.

While the core concepts of suretyship remain preserved, the new provisions alter how guarantees may be structured, who may validly provide them, the circumstances in which liability may arise, and the extent to which guarantors can rely on defences available to debtors, making it essential for parties to revisit how guarantee arrangements are drafted and enforced.

This article examines the key changes introduced by the New Civil Code and considers their practical implications for parties seeking to manage risk and enforceability in guarantee and suretyship arrangements within the UAE.

Definition and Formation of Suretyship

The Old Civil Code described suretyship as attaching the surety's financial assets to the debtor's assets for fulfilling the obligation (Article 1056 Old Civil Code). The New Civil Code takes this further, defining suretyship as a contract where a third party binds themselves alongside the debtor, pledging to the creditor to fulfill the obligation should the debtor fail.

The new provision shifts focus from "joining financial assets" to "joining obligations" and emphasises a direct undertaking to the creditor, making it clear that suretyship goes beyond purely financial backing to include any performance obligation, like services or non-monetary duties.

Furthermore, where the Old Civil Code held that suretyship was formed by explicit use of the word "suretyship" or equivalent "words of guaranty" (Article 1057 Old Civil Code), the New Civil Code removes this requirement, clarifying that suretyship contracts are formed by their specific duration and the terms governing suretyship (Article 986-987).

This change means that strict language formalities for suretyship creation may no longer be applicable, and reflects the commercial reality that modern guarantee documents take a wide variety of forms.

The New Civil Code also makes sure to explicitly codify the rule that a suretyship is only valid where the primary obligation itself is also valid, meaning that if the guaranteed obligation is void, invalid, or illegal, the promise to guarantee will also be void (Article 990).

By expressly providing for this, the New Civil Code ensures that guarantors cannot be held to commitments that exist in a legal vacuum and are provided with a clear statutory basis to challenge their liability where the primary obligation is held to be invalid. For creditors, this reinforces the importance of ensuring the validity and legality of the primary obligation before seeking to rely on any associated guarantee.

Additionally, the new law explicitly stipulates that a suretyship for an amount greater than, or terms harsher than what is owed and agreed by the debtor, is not permissible (Article 1000). This provides an important protective ceiling for guarantors. Creditors should take care to structure agreements in accordance with these additions in order to avoid potential legal conflict down the line, as non-compliant agreements may be considered invalid.

Validity and Consent

Importantly, Article 988 of the New Civil Code explicitly permits suretyship on behalf of a debtor without their prior knowledge or consent, even overriding their explicit objection. This prioritises creditor protection and the freedom of third parties to assume liability over the debtor's wishes. In a commercial context, this means creditors can secure guarantees from willing third parties without needing to involve or obtain cooperation from the debtor, streamlining the process of obtaining credit support.

However, it also raises important practical considerations around the debtor's rights and remedies against the surety, and the extent to which a debtor who objected to the arrangement can challenge or limit its effect. Parties structuring financing or security arrangements in the UAE should be mindful of this provision when assessing the enforceability and scope of third-party guarantees, as this newly established law continues to develop.

Capacity Rules in Suretyship

The capacity test for suretyship is preserved, where the surety must have capacity to make gratuitous dispositions (Article 989). However, the threshold of capacity has changed fundamentally. Where under the Old Civil Code, full legal capacity was achieved at 21 Gregorian years (Article 85 Old Civil Code), the New Civil Code stipulates that a person reaches the age of majority upon completing 18 Gregorian years (Article 84).

This significant change has the potential to raise unforeseen challenges, and will have direct implications for lenders whose due diligence processes are calibrated to the old threshold. Scenarios involving family businesses where young adults could be involved may increasingly begin to arise, and lenders will have to reframe their safety precautions and risk assessments in accordance.

Prior to entering into such agreements, parties should consider any risk of whether the young adult in question may have diminished capacity (without a mental disorder or lack of discernment) by way of being considered a prodigal (spendthrift) by the court (Article 86). As such, due diligence and risk management protocols should be updated in accordance with these changes.

Guaranteeing the Obligations of Individuals with Deficient Capacity

The New Civil Code solidifies further protection for individuals with deficient capacity which may create significant risk for guarantors who knowingly back incapacitated or minor debtors (persons with deficient capacity).

The new law provides that where a surety guarantees the obligation of a person with deficient capacity, and that underlying obligation is then annulled due to the debtor's deficient capacity, the surety will then be bound to perform the obligation as an original debtor rather than as a secondary obligor (Article 993).

Furthermore, the new law stipulates that a guarantor is generally released by the discharge of the debtor and may rely on all defences available to the debtor. However where the debtor is of deficient capacity, and the surety was aware of this at the time of contracting, they cannot rely on the defence of deficient capacity (Article 1003).

Together, these provisions mean that guarantors will need to exercise even more rigorous due diligence on the capacity of those they back, as knowingly guaranteeing an incapacitated debtor carries consequences that are both severe and difficult to avoid once assumed.

Types of Suretyship

Whilst the New Civil Code maintains the rule that a suretyship can be immediate, conditional (on a valid condition), contingent (on a suitable condition), deferred, or temporary, the new law adds further detail. It stipulates that where a suretyship is contingent on a suitable condition, the surety may withdraw before the debt arises as long as the creditor is notified. Furthermore, for a future debt with no fixed term, the surety can withdraw at any time before the debt arises. If the suretyship is temporary, liability is limited only to obligations that arise during the agreed term (Article 992). These additions make the law more precise and easier to apply in practice.

Commercial v.s. Civil Suretyship

Article 994 draws a deliberate distinction between two forms of suretyship that might otherwise appear commercially similar. By classifying suretyship for commercial debts as a civil act, even if the surety is a merchant, the New Civil Code ensures that guarantors are not automatically

subjected to the more demanding standards and consequences of commercial liability simply by virtue of their commercial background or the nature of the underlying debt.

However an important exception to this rule exists; suretyship arising from the endorsement of commercial papers is always treated as a commercial act. This reflects the inherently businesslike nature of such agreements and the expectations of parties operating in that area.

This addition holds practical significance, making the nature of the suretyship a critical consideration for parties, as each classification leads to differing legal consequences including rules on burden of proof, limitation periods, and enforcement.

Debtor Bankruptcy and Insolvency

The New Civil Code maintains the rule that where a debtor is bankrupt, they must submit proof of the debt during the proceedings, as failure to do so causes their right of recourse against the guarantor to lapse to the extent that damage results from the delay. However, the new law introduces "insolvency" alongside "bankruptcy" as a triggering event, meaning that proof of debt would also have to be produced during insolvency proceedings (Article 1007). This reinforces the importance of creditors actively monitoring and participating in any formal proceedings involving their debtors.

Conclusion

The New Civil Code marks a meaningful shift in the law, replacing older formal requirements with a more structured and commercially practical framework. At the same time, it introduces stronger protections for the validity of the principal debt, the capacity of the surety, and the boundaries of liability. The cumulative effect of these changes, whether large or incremental, is significant: lenders and creditors will need to revisit guarantee documentation, due diligence procedures, and enforcement strategies to ensure continued effectiveness under the new law. Parties should also consider whether the relevant guarantee was entered into before or after 1 June 2026, as transitional and non-retrospective application issues may arise.

Guarantors should be increasingly mindful of the risks associated with assuming liability, especially where there are questions of capacity and insolvency, or where the form of the guarantee may affect enforceability. Businesses operating in the UAE should therefore review existing guarantee structures and future transactions carefully to ensure they remain aligned with the evolving legal landscape.