The Impact of the 2025 Civil Code Provisions

UAE Civil Code 1985 – Articles 257-266

Articles 257-266 of the UAE Civil Code 1985 formed the prior statutory framework for contractual interpretation. The law began from the parties’ consent and contractual undertakings, and provided two linked rules: first, contractual interpretation should focus on intentions and meanings, not merely words and form; second, words should ordinarily be given their true or literal meaning, and a figurative meaning should not be adopted unless the literal meaning cannot be applied. It also recognised commercial custom, contextual interpretation where wording was unclear, protective rules resolving doubt in favour of the debtor, and protecting adhering parties in standard-form contracts.

This framework provided the foundation for contractual interpretation under the Civil Code 2025, which largely consolidates these principles while expanding on them with more express references to good faith, justice, pre-contractual negotiations, and protection of the weaker party or the party bearing the obligation under a contract, inter alia.

UAE Civil Code 2025 – Articles 119-123

Article 119 of the UAE Civil Code 2025 preserves the core interpretive rule carried over from the 1985 Code: where the wording of a contract is clear, it should not be departed from by interpretation in order to ascertain the parties’ common intention. Where there is room for interpretation, however, the court must seek the parties’ common intention, taking guidance from the nature of the transaction and the honesty and trust that should prevail between the parties in accordance with prevailing custom.

Article 120 then develops this framework by setting out a broader and more detailed set of interpretative rules. It confirms, among other things, the primacy of party consent, the relevance of intention and meaning, the importance of literal wording, the preference for express terms over implication, the role of merchant custom, and the requirement that contracts be interpreted in a manner that achieves justice and good faith between the parties.

In practice, this means that a Court must have regard not only to the text of the contract, but also to fairness, good faith, and the surrounding legal and commercial context. For readers more familiar with English law, this is a notable contrast, because English law does not generally recognise an overarching duty of good faith in the same way.

In a significant development from the 1985 Code, Article 121 of the 2025 Code expressly provides that the initiation, conduct, and termination of pre-contractual negotiations must comply with good faith. While negotiations do not themselves oblige the parties to conclude a contract, a party that negotiates or terminates negotiations in bad faith may be liable for the actual loss suffered by the other party.

Together, Articles 121–123 create a balanced pre-contractual regime. They preserve commercial freedom to negotiate and withdraw, but impose duties of good faith, material disclosure, and confidentiality. They clarify that deliberate non-disclosure can constitute bad faith; decisive information affecting consent must be disclosed and this duty cannot be contractually excluded; a breach of this duty may support damages and, in appropriate cases, annulment of the contract. Moreover, confidential information obtained during negotiations remains protected.

In addition, the 2025 Code directs courts to take account of the surrounding factual circumstances existing at the time the contract was concluded, while also recognising that merchant custom may operate as an agreed contractual condition between commercial parties. It will be interesting to see how the courts apply these contextual tools in practice, and how they balance them against the continued primacy of clear contractual wording.

Article 138 of the 2025 Code expressly recognises framework agreements as a distinct contractual mechanism, giving statutory effect to common commercial arrangements—such as master services, supply, and distribution agreements—and aligning the law with modern transactional practice.

Conclusion

Overall, the 2025 Code preserves the core foundations of contractual interpretation under UAE law while articulating them in a more modern and detailed form. Compared with the 1985 Code, it places greater express emphasis on good faith, pre-contractual conduct, surrounding circumstances, and the protection of weaker or burdened parties, while still maintaining the central importance of the contractual text. For transactional lawyers and dispute practitioners alike, the result is a more structured interpretive framework that is likely to encourage closer scrutiny of both drafting and negotiating conduct in contracts governed by UAE law.