Business Contract Drafting in the UAE — What Every Company Must Include

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DIRECT ANSWER Under UAE law, a valid business contract must include offer, acceptance, consideration, and legal capacity of the parties; it should also specify governing law, dispute resolution mechanism, and payment terms in AED or agreed currency. Contracts drafted in Arabic are given precedence in UAE courts if a dispute arises, so bilingual drafting is strongly recommended for any high-value commercial agreement.

 

A contract in the UAE is governed primarily by the UAE Civil Code (Federal Law No. 5 of 1985) and the UAE Commercial Transactions Law. For a contract to be legally enforceable, four elements must be present:

•       Offer and acceptance — one party makes a clear proposal, the other accepts without material changes

•       Consideration — something of value is exchanged (money, services, or goods)

•       Legal capacity — both parties must be of legal age and sound mind, and authorised to sign on behalf of their company

•       Lawful purpose — the contract cannot require either party to do something illegal under UAE law

If any of these elements is missing, a UAE court may declare the contract void or voidable.

 

Can verbal agreements be enforced in the UAE?

Technically, yes — verbal contracts can be legally binding in the UAE. In practice, proving the terms of a verbal agreement in court is extremely difficult. Without written evidence, WhatsApp messages, or witness testimony, your position is weak. For any commercial relationship involving money, services, or property, always get it in writing.

A well-drafted UAE business contract goes beyond the basics. These are the clauses that protect you when things go wrong.

 

Governing law and jurisdiction

Specify which law governs the contract — UAE law, DIFC law, or ADGM law — and which court or tribunal has jurisdiction over disputes. Without this clause, the default is UAE mainland courts, which may not suit both parties. If your counterpart is international, a DIFC or ADGM governing law clause is often preferred as both are common law jurisdictions operating in English.

 

Payment terms and late payment penalties

State the exact payment schedule, currency (AED is standard), invoicing process, and what happens if payment is late. UAE law does not automatically award interest on unpaid debts unless it is expressly included in the contract. Leaving this out means you may recover the principal but nothing for the delay.

 

Confidentiality and non-disclosure

If either party is sharing sensitive business information — pricing, client lists, or proprietary processes — a confidentiality clause is essential. A standalone NDA offers stronger protection, but at minimum the obligation should appear within the contract itself.

 

Dispute resolution — UAE courts or arbitration?

This is one of the most consequential clauses in any UAE business contract. You have two main options:

•       UAE Courts — cost-effective for smaller disputes; proceedings are in Arabic

•       Arbitration (DIAC, ICC, LCIA) — faster, private, and enforceable internationally under the New York Convention; better suited to cross-border contracts

If you trade with international partners, arbitration is almost always preferable. If your contracts are domestic and lower in value, UAE courts work well. Either way, the clause must be clear — ambiguous dispute resolution clauses are regularly challenged.

 

Force majeure

A force majeure clause releases both parties from liability if an extraordinary, unforeseeable event makes performance impossible — pandemics, natural disasters, government actions. UAE courts do recognise force majeure under Articles 249 and 893 of the Civil Code, but a well-drafted clause gives you far more control over how it applies to your specific contract.

No — contracts in English (or any language) are valid in the UAE. However, if a dispute goes to a UAE mainland court, Arabic is the official language of proceedings. If your contract is only in English, the court will appoint a translator — and translation errors can change the meaning of critical clauses.

 

What happens if there is a conflict between the Arabic and English versions?

If your contract has both versions but does not specify which takes precedence, UAE courts will default to the Arabic version. Always include a governing language clause that clearly states which version controls in case of conflict. For contracts with significant financial exposure — lease agreements, service agreements above AED 50,000, partnership agreements — bilingual drafting with a qualified UAE legal translator is worth the investment.

Based on disputes handled by Legal Cover's lawyers, these are the mistakes that appear most often:

 

1.  No jurisdiction clause.

Parties assume UAE courts apply by default — but which court? Dubai Courts, Abu Dhabi Courts, DIFC Courts, and ADGM Courts are all separate systems with different rules.

 

2.  Vague payment terms.

"Payment within a reasonable time" is not enforceable. State exact dates, currencies, and late payment consequences.

 

3.  Automatic renewal clauses buried in the fine print.

Common in software, service, and lease agreements. Many UAE businesses are locked into contracts they thought had ended.

 

4.  No termination clause.

If you cannot terminate the contract early, you may be liable for the full contract value even if the other party has failed to perform.

 

5.  Signing without authority.

In the UAE, only authorised signatories — listed in the trade licence or a board resolution — can bind a company. A contract signed by an employee without a Power of Attorney may not be enforceable.

 

If you are unsure whether your existing contracts cover these risks, Legal Cover offers contract review as part of its business legal subscription. Explore our plans at:

legalcover.ae/b2b_plans

 

When should you get a contract reviewed before signing?

Always, if the contract involves any of the following:

•       Payments above AED 25,000

•       Ongoing obligations lasting more than 6 months

•       Intellectual property, exclusivity, or non-compete clauses

•       A counterparty based outside the UAE

•       A business partnership or shareholding arrangement

The cost of a legal review is almost always lower than the cost of a dispute. Legal Cover's contract drafting and review service gives UAE businesses access to qualified lawyers without the unpredictability of hourly billing:

legalcover.ae/contract-drafting-and-review

 

What does a contract review typically cost in the UAE?

At a traditional law firm, contract review in the UAE typically starts at AED 1,500–3,000 per document and can rise significantly for complex agreements. Legal Cover's subscription model gives businesses unlimited contract queries and reviews within their plan — making it practical to review every contract, not just the high-stakes ones.

 

What is the UAE Courts process for a contract breach?

If a party breaches a commercial contract, the other party can file a civil claim with the relevant UAE court. The process generally follows these stages:

1.    Filing a statement of claim with supporting documents

2.    The defendant is notified and given time to respond

3.    Mediation is attempted before the case proceeds to a judge

4.    The judge issues a ruling; the losing party can appeal

For mainland contracts, proceedings are in Arabic. Judgments are enforceable against the losing party's assets in the UAE.

 

When is arbitration better than going to court?

Arbitration is preferable when:

•       Your counterparty is based outside the UAE and you need international enforceability

•       The dispute involves technical or commercial complexity that benefits from a specialist arbitrator

•       You want proceedings to remain private

•       Speed matters — arbitration through DIAC typically resolves in 6–12 months versus 18–36 months in UAE courts

 

If your contracts do not yet include a clear dispute resolution clause, Legal Cover can help you add one. Review your options below:

Contract drafting & review: legalcover.ae/contract-drafting-and-review

B2B subscription plans: legalcover.ae/b2b_plans

Entity & Schema Checklist UAE Civil Code (Federal Law No. 5 of 1985) · offer and acceptance · consideration · governing law · jurisdiction clause · DIFC Courts · ADGM Courts · arbitration · DIAC (Dubai International Arbitration Centre) · MOU · NDA (non-disclosure agreement) · force majeure · breach of contract · penalty clause · liquidated damages · bilingual contract · Arabic language requirement · UAE Commercial Transactions Law · contract review · LOI (letter of intent) · Power of Attorney · trade licence · authorised signatory