INTRODUCTION
For approximately four decades, construction contracts in the United Arab Emirates (“UAE”) have been governed by Federal Law No. 5 of 1985 concerning the Civil Transactions Law of the UAE (the “1985 Civil Code”). However, the 1985 Civil Code is now set to be replaced by Federal Decree Law No. 25 of 2025 concerning the Civil Transactions Law of the UAE (the “New Civil Code”), enacted on 20 September 2025 and coming into full effect on 1 June 2026 (the “Effective Date”).
From the Effective Date onwards, construction contracts across the UAE, including contracts entered into between developers, employers, contractors, subcontractors, consultants and supervising engineers (collectively, the “Construction Parties”), shall be governed by the New Civil Code.
The 1985 Civil Code has historically formed the principal legal framework governing construction contracts in the UAE, including the legal principles relating to contractual performance, liability for structural defects, termination, payment obligations and dispute resolution. While the New Civil Code preserves the underlying structure of the previous regime, it also introduces a number of material changes which are likely to have significant practical and commercial implications for Construction Parties operating within the UAE construction sector.
Accordingly, this article considers the principal construction related provisions under the New Civil Code and compares them against the position previously applicable under the 1985 Civil Code.
THE CONSTRUCTION CONTRACT: DEFINITION AND SCOPE
Under the 1985 Civil Code, a construction contract was characterised as a Muqawala, being a contract pursuant to which one party undertakes to make a thing or perform work in consideration for remuneration to be provided by the other party. The New Civil Code preserves the substance of this definition under Article 812, although the terminology adopted under the new regime differs from that previously used under the 1985 Civil Code.
While the substantive nature of the construction contract remains largely unchanged, the drafting of Article 812 under the New Civil Code reflects a more commercially precise formulation. In particular, the reference to “remuneration” in place of the broader concept of “consideration” provides greater clarity as to the underlying commercial character of the contractual relationship between the Construction Parties.
Similarly, the mandatory contractual requirements applicable to construction contracts remain substantially preserved under the New Civil Code. Both the 1985 Civil Code and the New Civil Code require construction contracts to identify, amongst other things, the subject matter of the works, the nature and quantity of the works, the method of execution, the completion period and the agreed contract price. While Article 813 of the New Civil Code adopts a clearer and more structured drafting approach than the corresponding provisions under the 1985 Civil Code, the substantive legal position remains materially unchanged.
One notable clarification introduced under Article 814 of the New Civil Code relates to the supply of materials. Under the 1985 Civil Code, the statutory wording contemplated situations in which the contractor supplied the materials required for the works, although the position in relation to partial supply arrangements was not expressly addressed.
Article 814 of the New Civil Code now expressly recognises that the contractor may supply all or part of the materials necessary for the execution of the works. This clarification reflects common commercial practice within the UAE construction industry and removes potential ambiguity surrounding mixed procurement and supply arrangements.
OBLIGATIONS OF THE CONTRACTOR
Materials and Workmanship
Under Article 875(1) of the 1985 Civil Code, where the contractor supplied the materials required for the execution of the works, the contractor was liable for the quality of such materials in accordance with the terms of the contract and prevailing practice. The New Civil Code materially strengthens this position. Article 815 now expressly provides that the contractor warrants the quality of the materials supplied to the employer.
This distinction is significant. The shift from a general obligation of liability to an express statutory warranty broadens the potential remedies available to employers in relation to defective materials and aligns the contractor’s obligations more closely with broader principles applicable to defective goods and contractual warranties.
Where materials are supplied by the employer, the substantive obligations imposed upon the contractor remain largely consistent across both the 1985 Civil Code and the New Civil Code. In both cases, the contractor remains obliged to preserve such materials with due care, utilise them in accordance with proper technical standards, and return any unused surplus upon completion of the works. The contractor also remains liable for any loss, damage or deterioration arising as a consequence of its fault or negligence.
However, Article 816 of the New Civil Code introduces two additional statutory obligations of particular practical significance. First, where employer supplied materials become unusable or unsuitable as a consequence of the contractor’s negligence or misuse, the contractor is now expressly required to refund the value of those materials. This goes beyond the position under the 1985 Civil Code, which primarily contemplated liability in damages.
Secondly, Article 816(3) introduces a new statutory notification obligation. Where defects arise in employer supplied materials, or where circumstances arise which may impede the proper execution of the works, the contractor is now required to promptly notify the employer of such matters. Failure to provide such notification exposes the contractor to liability for all resulting consequences arising from that omission.
This represents a material development under the New Civil Code and reflects concepts commonly found in international standard form construction contracts, including early warning and notification obligations typically encountered under the FIDIC suite of contracts. From a practical perspective, this provision is likely to increase the importance of contemporaneous site records, technical notices and project correspondence maintained by Construction Parties during the course of execution.
Completion and Defective Performance
Under Article 877 of the 1985 Civil Code, the contractor was required to execute and complete the works in accordance with the contractual specifications and agreed conditions. Where defects arose during the course of execution, the employer could either seek immediate termination where rectification was impossible, or require the contractor to remedy the defective works within a reasonable period, failing which the employer could seek judicial cancellation of the contract or appoint an alternative contractor at the defaulting contractor’s expense.
Article 818 of the New Civil Code preserves the overall structure of this regime but introduces several important refinements.
First, the contractor’s completion obligation now expressly incorporates a time requirement. The contractor must complete the works within the agreed contractual period, or alternatively within a reasonable period having regard to the nature of the works where no specific completion date has been agreed. While timely completion was always commercially significant under the 1985 Civil Code, the inclusion of an express statutory time obligation under Article 818 strengthens the legislative emphasis placed upon timely performance.
Secondly, the New Civil Code introduces a more structured process in relation to defective performance. Before exercising further remedies, the employer is generally required to formally place the contractor in default and provide an opportunity for rectification.
Most significantly, Article 818 now expressly identifies circumstances in which the employer may seek immediate rescission without the need to provide any cure or rectification period. These include situations where: (a) rectification is impossible or inconsistent with the contractual terms; (b) the contractor’s delay renders completion within the agreed period effectively impossible; (c) the contractor’s conduct demonstrates an intention not to perform its obligations; or (d) the contractor commits an act rendering performance impossible.
The latter two grounds are of particular significance as they effectively codify the concept of anticipatory breach within the statutory framework governing construction contracts under UAE law. Under the 1985 Civil Code, such arguments generally had to be derived from broader contractual principles rather than arising expressly from the construction provisions themselves.
The Right of Retention
Article 879 of the 1985 Civil Code granted the contractor a right of retention over property in its possession pending payment, provided that the contractor’s works had produced a beneficial effect upon such property. Article 820 of the New Civil Code preserves this right in substantially identical terms.
Accordingly, where the contractor’s works have generated a tangible benefit to the property, the contractor may continue to retain possession pending payment of its dues. Conversely, where no beneficial effect has been produced, no corresponding right of retention arises. In such circumstances, the continued retention of property may expose the contractor to liability under general legal principles.
THE TEN-YEAR STRUCTURAL DEFECT WARRANTY
The Core Warranty
The decennial liability regime remains one of the most significant and distinctive features of UAE construction law. Under Article 880 of the 1985 Civil Code, where the subject matter of the contract involved the construction of buildings or fixed installations designed by an architect and executed by a contractor under the architect’s supervision, both the architect and the contractor were jointly liable for a period of ten years from delivery of the works for any total or partial collapse of the structure, as well as for any defect threatening the stability or safety of the structure.
Importantly, such liability applied irrespective of whether the defect arose from the condition of the land itself or whether the employer had approved or consented to the defective works. The decennial liability regime under the 1985 Civil Code was therefore mandatory in nature and operated independently of contractual allocations of risk between the Construction Parties.
Article 821 of the New Civil Code substantially preserves the core framework of the decennial liability regime. However, the provision also introduces several notable clarifications and refinements. Most visibly, the terminology adopted under the New Civil Code replaces references to the “architect” with references to the “engineer”. This amendment reflects the practical and regulatory realities of the UAE construction industry, where licensed engineers frequently undertake both design and supervisory functions traditionally associated with architects.
In addition, Article 821 of the New Civil Code adopts a more structured formulation of the defects giving rise to decennial liability. In particular, defects affecting the safety, solidity or structural integrity of the works are separately addressed from circumstances involving actual collapse of the structure. This clarification is significant as it reinforces that decennial liability is not limited solely to cases involving physical collapse, but also extends to serious structural defects capable of threatening the long-term integrity or safety of the works.
Supervision Only Engineers
The 1985 Civil Code principally addressed two categories of professional responsibility. First, where the architect undertook both design and supervision responsibilities, the architect and contractor were jointly liable under the decennial liability regime. Secondly, where the architect’s role was limited solely to design, liability was generally confined to defects arising from the design itself pursuant to Article 881 of the 1985 Civil Code.
However, the 1985 Civil Code did not expressly address the position of consultants engaged solely for supervisory functions without undertaking any design obligations. The New Civil Code now expressly addresses this issue. Article 822(1) preserves the position applicable to design only engineers by confirming that liability remains limited to defects attributable to the design and does not extend to defects arising from methods of execution.
More significantly, Article 822(2) introduces an express statutory basis of liability for supervision only engineers. Under this provision, an engineer engaged solely to supervise the execution of the works may now be jointly and severally liable with the contractor for defects arising from the execution of the works occurring under that engineer’s supervision.
This represents a material development under the New Civil Code, particularly given the prevalence within the UAE construction market of projects where design and supervision responsibilities are divided between separate consultants and entities. As a practical consequence, consultants undertaking supervisory functions may need to reassess their contractual risk allocation mechanisms and professional indemnity insurance arrangements in light of this expanded statutory exposure.
Subcontractor Recourse and Limitation of Liability
Article 821(4) of the New Civil Code introduces a clarification which did not previously appear under the 1985 Civil Code. The provision expressly confirms that the decennial liability regime does not apply to rights of recourse pursued by the main contractor against subcontractors.
Accordingly, while the decennial liability regime continues to operate as a mandatory and non excludable protection in favour of employers, downstream contractual relationships between contractors and subcontractors remain governed by ordinary contractual principles. As a result, parties retain greater flexibility to negotiate and agree contractual limitations of liability within subcontract arrangements, provided such provisions remain enforceable under general principles of UAE law.
This clarification is likely to be commercially significant given the uncertainty that previously existed in relation to the extent to which subcontract arrangements could contractually allocate or limit liability arising from structural defects. The New Civil Code also omits a feature previously recognised under Article 880 of the 1985 Civil Code, namely the ability of parties to agree to extend the duration of the decennial liability period beyond ten years. No equivalent provision appears under Article 821 of the New Civil Code.
As presently drafted, the ten-year statutory period now appears intended to operate as both the minimum and maximum duration of the statutory decennial liability regime. Consequently, parties seeking to impose longer periods of structural protection may need to structure such arrangements separately through express contractual guarantees, latent defect obligations or insurance backed protections rather than through extensions of the statutory warranty itself.
Non Excludability and Limitation Periods
The mandatory nature of the decennial liability regime remains preserved under the New Civil Code. Article 823, consistent with Article 882 of the 1985 Civil Code, provides that any agreement seeking to exclude or limit the liability of the engineer or contractor arising under the decennial liability provisions shall be void.
Similarly, the applicable limitation period remains substantially unchanged. Article 824 of the New Civil Code preserves the three-year limitation period for claims arising under the decennial liability regime, commencing from the date of collapse or the discovery of the relevant defect.
One minor drafting refinement introduced under the New Civil Code is the reference to an “action for warranty” rather than a “claim for compensation”. While the practical effect of this distinction remains to be tested, the revised wording arguably adopts a broader formulation capable of encompassing remedies extending beyond purely compensatory relief.
SUBCONTRACTING
The legal framework governing subcontracting arrangements remains substantially unchanged under the New Civil Code. Article 832 of the New Civil Code preserves the position previously set out under Article 890 of the 1985 Civil Code, pursuant to which a contractor may subcontract the whole or part of the works to a subcontractor unless: (a) the contract expressly prohibits subcontracting; or (b) the nature of the works requires personal performance by the contractor itself.
Importantly, the appointment of a subcontractor does not relieve the main contractor of its contractual obligations or liabilities towards the employer. The main contractor accordingly remains fully responsible for the performance of the works notwithstanding the engagement of downstream subcontractors.
Similarly, Article 833 of the New Civil Code preserves the established position governing the relationship between subcontractors and employers. In the absence of an assignment or direct contractual arrangement, a subcontractor does not acquire any direct right of recourse against the employer in relation to sums owed by the main contractor.
However, as discussed above in relation to the decennial liability regime, the New Civil Code now expressly clarifies that rights of recourse pursued by the main contractor against subcontractors fall outside the scope of the statutory decennial liability provisions. Accordingly, liability allocation between contractors and subcontractors in relation to structural defects will continue to be governed primarily by ordinary contractual principles and the specific terms agreed between the parties.
TERMINATION OF THE CONSTRUCTION CONTRACT
General Grounds for Termination
The general principles governing termination remain largely preserved under the New Civil Code. Article 834 of the New Civil Code, consistent with Article 892 of the 1985 Civil Code, provides that a construction contract may terminate upon completion of the agreed works or through rescission, whether by mutual agreement or judicial intervention.
Similarly, Article 835 preserves the right of either party to seek rescission where supervening circumstances render performance impossible. While the substantive position remains materially unchanged, the New Civil Code adopts more precise terminology, including the use of “rescission” rather than “cancellation”.
Termination for Convenience
One of the most significant developments introduced under the New Civil Code is the employer’s express statutory right to terminate the contract for convenience.
Under Article 836, the employer may withdraw from the contract and stop execution of the works prior to completion, even where the contractor is not in breach. Under the 1985 Civil Code, such rights generally existed only where expressly incorporated into the contract, commonly through standard form construction contracts such as the FIDIC suite.
However, the exercise of this right gives rise to a corresponding compensation obligation. The employer must compensate the contractor for expenses incurred, the value of completed works and the profit which the contractor would have earned on the unperformed portion of the works.
Importantly, the court retains discretion to reduce the profit element where justified by the circumstances, including where the contractor avoided costs or secured replacement work following termination.
Force Majeure and Pre Delivery Loss
The New Civil Code also introduces a more structured framework governing destruction of the works prior to delivery. Under Article 837, where the works perish due to force majeure before delivery, the contractor is generally not entitled to remuneration or reimbursement of expenses, while the loss of materials falls upon the party which supplied them.
Where destruction occurs following the employer being placed in default for refusing delivery, or due to the employer’s fault, the risk shifts to the employer. Conversely, where destruction occurs after the contractor has been placed in default, or due to the contractor’s fault, the contractor may remain liable for compensation. This provision introduces a clearer allocation of risk than previously existed under the 1985 Civil Code.
Death or Incapacity of the Contractor
Articles 838 and 839 of the New Civil Code preserve the general position previously reflected under Article 896 of the 1985 Civil Code. Where the contractor’s personal qualifications or performance formed a material basis of the contract, the contract may terminate upon the contractor’s death or incapacity. Otherwise, the employer may seek rescission where the contractor’s heirs or successors are unable to provide sufficient assurances regarding completion of the works.
The New Civil Code additionally permits the employer, upon termination, to request delivery of prepared materials intended for incorporation into the works, subject to payment of fair compensation. This clarification is likely to be significant in projects involving prefabricated materials or bespoke project components procured specifically for the works.
THE CONTRACTOR’S PRIORITY RIGHT OVER STRUCTURES
Article 1421 of the New Civil Code preserves the statutory priority right previously recognised under Article 1527 of the 1985 Civil Code in favour of contractors and engineers in respect of structures constructed or maintained by them.
As under the previous regime, the priority right must be formally registered and takes effect from the date of such registration. However, the New Civil Code introduces two notable refinements.
First, the method for calculating the value of the priority right has been simplified. Under the 1985 Civil Code, the calculation depended upon the extent to which the value of the works exceeded the value of the land at the time of sale. Article 1421 of the New Civil Code instead adopts a more direct approach based upon the increase in value attributable to the works themselves.
Secondly, the New Civil Code expands the categories of qualifying works to expressly include “restoration” alongside construction, reconstruction, repair and maintenance works. This clarification potentially extends the scope of the statutory protection to significant restoration and renovation projects which may not previously have fallen clearly within the scope of the 1985 Civil Code.
BUILDING CUSTODIAN LIABILITY
The New Civil Code introduces a more structured statutory framework governing liability arising from unsafe or defective buildings. Article 270 provides that the custodian of a building may be liable for damage resulting from the total or partial collapse of that building. Importantly, the concept of “custodian” is not limited to the legal owner of the property and may extend to lessees, managers or other parties exercising effective control over the building.
Under Article 270, the custodian may avoid liability only by establishing either: (a) the existence of a foreign cause beyond its control; or (b) the absence of negligence in maintenance together with the absence of any defect or excessive age affecting the building. In practical terms, this provision effectively reverses the burden of proof, requiring the custodian to positively disprove liability once collapse and resulting damage are established.
Article 272 supplements this framework by granting persons threatened by an unsafe building the right to require the custodian or owner to undertake preventative measures. Where such measures are not implemented within a reasonable period, the affected party may seek judicial authorisation to undertake those measures at the custodian’s expense. In emergency situations, such measures may be implemented immediately without prior court approval, subject to subsequent recovery of the associated costs.
These provisions are likely to be of particular significance to property managers, facilities management companies and long-term occupiers exercising day-to-day operational control over buildings, particularly from a risk management and insurance perspective.
CONCLUSION
The New Civil Code preserves the fundamental structure of UAE construction law established under the 1985 Civil Code, including the continued application of the mandatory decennial liability regime, the contractor’s statutory priority rights and the core framework governing the respective obligations of Construction Parties.
However, the New Civil Code also introduces several material developments which are likely to have significant practical and commercial implications across the UAE construction sector. These include, amongst other things, the employer’s statutory right to terminate for convenience, the introduction of a statutory entitlement to progress payments in certain projects, expanded liability for supervision only engineers and enhanced notification obligations imposed upon contractors.
The New Civil Code also adopts a more structured approach in several areas, including anticipatory breach, allocation of force majeure risk and liability arising from unsafe buildings. Collectively, these changes reflect a broader legislative movement towards greater commercial clarity, enhanced risk allocation and a more modernised statutory framework governing construction relationships within the UAE.
Accordingly, Construction Parties should carefully review their existing contractual frameworks, procurement structures, insurance arrangements and risk allocation mechanisms prior to the Effective Date to ensure compliance with, and adequate protection under, the New Civil Code.